Labour market mobility: Geographic mobility Within a country International Job mobility

1. Labour mobility and immigration(Borjas ch. 8 + Schröder)not 8.3, 8.4and 8.7of 8.5 only the methodological idea Labour market mobility: • Geographic mobility • Within a country • International • Job mobility • Intrafirm mobility (change of position) • Interfirm mobility (change of employer)

2. The basic economic approach to all kinds of mobility: • The worker moves if and only if the PV of life-time utility is increased by mobility.  • The worker moves if and only of the (discounted) costs of moving are smaller than the (discounted) gains.

3. Cost and gains • Costs and gains involve BOTH economic and social or psychological ones – the place where one wants to live, relations with people in a work-place or location. • We do expect economic gains and losses to increase/decrease the probability of moving. • We don’t expect each individual to move so as to maximise (PV of) life-time money income. (See ex. in Borjas pp. 322-324)

4. Job-turnover • Voluntary (quits) and involuntary (layoffs) • Young people are more likely to do both • Layoffs because of • ”Last-in-first-out” • Older workers have acquired more firm-specific human capital • Quits because • They are looking for a better match • They have not yet acquired so much firm-specific human capital • There is a selection – those who do not like to move/find a good match early/are wanted by the employer will stay long. This gives a negative relation between probability of separation and tenure. (There are movers and stayers.) • Neither employers nor job-seekers have perfect information about each other. Job changes can be part of a processes of ”trial-and-error” to get a better match.

5. Jobturnover in Sweden • Eachyear from the mid-60s to the late 1970s 10-12 percent of the labour force changedplace of work and employer. Slightdownward trend. • Mobilitydecreased at the end of the 1970s butincreasedagain in the 1980s to about 10%. • Dropped to 6-7% during the 1990s. • From 2007-2008 just over 10 % of the employedchangedplace of work and employer. • There is moremobilitywhenthere are morevacancies.

6. Effects of job-change • Studies indicate that the wages of job-changers grow faster. • They also seem to gain a better work environment • But a study which separates voluntary and involuntary separation finds that only those who quit increase their wages, not those who are laid off.

7. Tenure in firms of different size 1st semester 2003 Years in firm (tenure) Years with present tasks Source: Statistics Sweden, SM UF 39 SM 0302

8. Internalmobility (withinfirm) • Increased from  3 to 4 percent in the late 1970s, was relatively stable but fell back to about 3% in the 1990s. • Is not correlated with vacancies. • Over a long period, the share of mobility which is internal has increased.

9. Geographicalmobility • Probability of moving from A to B • increases if economic opportunities improve at B • decreases if economic opportunities increase at A • increases if the costs of moving decrease. • Not only wages matter but also chances of getting a job.

10. US evidence (from Borjas) • The larger the distance between states, the less migration between them. • With larger wage differentials between states there is more migration. • With increased employment opportunities in the state of origin, there is less out-migration. • Older workers move less than young. • More educated workers move more than less educated.

11. Does return migration contradict the theory? Partly only. • Experience and skills acquired during the period of migration can improve prospects after returning. • Information is imperfect.

12. Swedish evidence(Björklund, Edin, Holmlund, Wadensjö: Arbetsmarknaden) • Very high mobility across parishes just after WWII. (Maximum of 10% in one year.) • Lower (about 7%) in the 1950s and early 60s. • Increase (to 8-9%) in the late 60s and the first part of the 70s. Mainly from ”forest counties” (Värmland, Dalarna, the North of Sweden) to those with the largest cities (Sthlm, Gbg, Malmö). • Back to 7% in the late 70s and 1980s, then a gradual increase to 8-8 ½ .

13. Determinants of mobility (Sweden) • The unemployment rate in a region is an important determinant of migration in all studies. • Differences in regional wage rates also have an impact but the results vary more between studies. • Nearly half of those who move are 20-34 years old. A large share 20-24. • About equal mobility among women and men. • Less mobility of dual-earner households.

14. Effects of mobility • Sample surveys show that those who have moved earn more. • But panel studies that follow the same individual find much smaller effects, on average. • Those who moved earned more before moving too. • For some groups, particularly the younger, there is an effect on earnings. For dual earner households, the effect is almost zero.

15. International migration Two ”immigration regimes” • Settlement (US, Canada, Australia) • ”Continental” (Germany, Switzerland) • Sweden doesn’t fit either model. • More restricted labour market immigration than ”settlement” countries • More equal rights and security for immigrants than”continental” countries.

16. Immigration regulations • Basic rules as of 2004 (simplified) • Nordic citizens – no restrictions or permit required to live and work in Sweden. • Citizens of EU/EES – no permits required to live, work or study for 3 months. After 3 months, have to apply for residence permit but not for work permit. • Others – work permit must be arranged before arrival and requires written job offer in Sweden. If more than 3 months, residence permit also required. Students have to be accepted and to have means of support.

17. Exceptions: • Familyre-unification– close relatives (spouse, child under 18 and others who lived in the household) canjoin a person with permanent right of residence. (A little less strict for EU/EES citizens). New marriages – a ”test period” of 2 years. • Refugees – according to UN conventionsasylumseekershave the right to havetheirapplicationtried. Reasons for asylum is well-foundedfear of persecution. In Sweden, residencemayalso be granted for otherhumanitarianreasons on an individual basis.

18. History • Until the 1930s, Sweden had large emigration. (1 million to the US.) • In 1950s & 60s, labour market immigration dominated. Swedish employers invited workers, from different parts of Europe. Many from Italy and Yugoslavia but the largest group was Nordic citiziens. • From the 1980s, most immigrants have been refugees or family members. Immigrants from outside Europe increased from 10% to 50% in 1990. The proportion decreased in the early 90s and then increased.

19. Immigration to Sweden 2008 • 90 000 individuals received residence permits • 26 000 Labour immigrants or students • 19 000 EU- or EES-citizens • 11 000 refugess • 34 000 family or related reasons (re-unification, marriage, adoption) • Of these: 11 000 relatives of refugees.

20. Proportion born outside Sweden: • 13 % of the population • 17 % of the population of age 20-49 • 14 % of the employed aged 16-64 (2006, Source: Statistics Sweden) Average income of immigrants is lower than that of natives. There is an employment gap and an earnings gap.

21. The employment gap Labour market status 2006, ages 16-64

22. But both employment levels, skill level of job and earnings varies a lot depending on: • Country of origin • Length of time in Sweden • Time of arrival in Sweden (labour market conditions)

23. Percent employed in population and percentunemployed or in labour market programme. Age 25-55Source:Migrationsverket, Rapport Immigration 2003

24. Earnings and full-timemonthlywages 2002(Source Björklund, et al Arbetsmarknaden) Earnings % of Sw. Wage % of Sw. Women EU/EES 149 200 94 20300 101 Other Europe 109700 69 18700 93 Outside Europe 85400 54 17900 85 Sweden 158500 20100 Men EU/EES 194800 88 24300 100 Other Europe 143400 65 21000 86 Outside Europe 115100 52 20200 88 Sweden 221400 24400

25. Why the earnings gap: • Most important : The employment gap. • But there is an ethnic wage differential among the employed too. The difference between Swedish-born and those born in Northern and Western Europe is negligable but not non-Europeans have lower wages.

26. Hypothesis to explain the gaps: Possible explanations that have been given: • It takes time to settle in a new country and make a ”match” on the labour market • Human capital differences (education) • Selection effects in migration and return migration • Lack of ”Sweden-specific human capital” • Statistical discrimination • Taste discrimination • Slow and clumsy integration policies (some will be discussed in connection with chapter 10)

27. Time in Sweden is correlated with employment and earnings Median yearly earnings Born in Sweden=231

28. But time in Sweden does not measure ”the effect of time” • If we compare the earnings/the employment rate of immigrants with different length of time in the country we confuse • The effect of time • Differences between immigration cohorts (education, ability, risk of discrimination) • Differences in labour market conditions at the time of arrival Example; Immigrants to the US, Borjas pp 332-35 (wages)

29. c Assume we observe wages at time T Newly arrived immigrants earn X. Immigrants arrived at T-10 earn Y It seems that after 10 years earnings have increased by Y-X But if those arrived earlier earned Z at time T-10 the real change over time is only Y-Z Y Z X T-10 T

30. Division into immigration cohorts shows that time of arrival is much more important than • time in Sweden.

31. Education levels Men

32. Educationdifferencesbetweenthoseborn in Sweden and immigrants are on averagevery small butdifferaccording to country and gender. Women

33. ”Swedish specific human capital” • Language skills are important but a study which included grades in Swedish found that children of immigrants still earned less. Makes better functioning of Swedish as second language training extremely important. • ”Cultural skills” are hard to define and measure and to distinguish from discrimination. Can partly consists of contacts.

38. Poor integration policies • Difficult to validate skills and degrees • Ineffcient language training • ”shuffling” of responsibility between authorities • Concentration of immigrants in poor neighbourhoods • Discrimination

39. Selectioneffects: • Are people who migrate those with the highest or lowest skills? • Are the people who return migrate those with the highest or lowest skills? • The Roy selection model.

40. If the returns to skill are different in the twocountries • Workers with skills lower than S more likely to emigrate from ”Orange” to ”Purple” (dashed) • Workers with skills higher than S more likely to emigrate from ”Orange” to ”Purple” w w S S Skill level Skill level