Market for Labor

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Market for Labor
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Labor Market Topics

• Immigration
• Population growth
• Others
• Effect on Labor Markets

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Immigration before 1860.

• Immigration was unrestricted until after Civil
  War.
• unrestricted meant anyone could come from
  anyplace and become a US citizen.
• Open Door Policy.
• No restrictions based on education, parentage,
  criminal record, etc.
• There was no support for the idea of restricting
  immigration.
• Before 1830, immigration was a minor source of
  population increase.
• Most of increase in population was due to balance
  of births over deaths.
• After 1830, immigration increased and built up
  steadily.
• In 1845, series of poor harvests and the
  failure of the potato harvest in northern Europe
  produced the first deluge of immigrants-Irish
  Immigration.

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Major Features of First Wave of Immigration

• First Wave of immigrants from Northern Europe.
  (Example of push phenomena)
• First upsurge came from the British Isles as a
  result of the potato famine-economics of a potato
  economy.
• Potato a wonder vegetable.
• Potato allows the greatest level of population
  density.
• When the potato crop failed, suddenly, the land
  could not support the existing population.
• More than 1 million died in late 1840s in
  Ireland-life expectancy at birth dropped to
  around 21.
• In Ireland, 1/3rd of the population emigrated or
  dropped dead in a short period in the 1840s.
• By 1914 the population in Ireland was 1/2 of what
  it was before the potato famine.
• 1846-55, 1.3 mil. Irish immigrated to US.
• Germany produced another 1 mil. immigrants.
  Mainly the result of political upheavals.

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Immigration, 1845-60 by origin, ( 1000's of
persons)
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Proportional Immigration, 1845-60
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Explanation of Immigration

• Insight into the size and timing of immigration
  flows into the U.S. can be understood with a
  push-pull theory.
• Adverse conditions in various parts of the world
  push people out of their native countries.
• War-Nicaragua, Cuba, Guatemala and Vietnam.
• Famine-Irish.
• Political turmoil and religious persecution-Iran,
  religious or ethnic minorities--Jews
• General Poverty-India, Central Africa
• Favorable conditions in the U.S. pull people from
  poorer areas of the world.
• Actors, artists, and athletes-Jackie Chan and
  baseball players.
• Better market conditions for women-Japan and
  Korea.
• Business Cycle in the U.S.-HB1 Visas
• Most of the immigrants went to the northern
  states.
• 3.6 mil. immigrants in NE and E-Central, 391,000
  in South, 144,000 in West (Chinese).

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Second Wave of Immigration

• 2nd major wave of immigrants came began around
  1900.
• 2nd wave of immigrants originated in southern and
  central Europe.
• First wave of immigrants from England and
  Northern Europe were protestant and were much
  like the existing inhabitants and therefore
  provoked little resistance from population.
• Beginning with the Irish and Germans in 1840s
  and 50s and accelerating in the 1900s with the
  immigrants from southern and central Europe,
  immigrants began to be viewed as really
  different.
• Rise of anti-immigration sentiment and
  legislation.
• Chinese example.
• Immigration produced a continuing rise in the
  population in urban areas.
• The country continued spreading out
  geographically but immigrants were concentrated
  in large urban areas.

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Annual Combined Immigration from European Areas

• Starting in the late 19th and early 20th century,
  the source of immigration shifted from Northern
  to Southern Europe.
• Difference in religion caused ethnic tension.
• Catholic vs. Protestant. Wave of unwashed
  newcomers, with strange accents, worshipping
  strange religion.
• Rise of anti-immigrant societies-proposed 21 year
  residence requirement.
• Same anti-immigrant feeling arose in the late
  18th cent. when immigrants were Italians. Greeks,
  and southern slavs.
• 1921 saw the first law to generally restrict
  immigration

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Immigrant Origins by Percentage of Total
From 1821 to 1890, the majority of immigrants
came from Northern and Western Europe. From 1891
to 1920, the source of immigrants had shifted to
East, Central, and Southern Europe.
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Native White Population of Foreign or Mixed
Parentage by Country of Origin, 1930
The first and second big waves of immigrants came
mostly across the Atlantic
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Immigrants per 1000 population, 1820-1951
Although immigration was important in driving the
growth of population, even during the peak years,
immigrants never composed a significant portion
of total U.S. population. This was not true in
urban areas where immigrants concentrated.
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U.S. Immigration, 1865-1914
Push Pull explanations of immigration?
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Economics of Immigration

• Can understand immigration by understanding a few
  simple economic principles.
• Effect of immigration will be to lower the
  price/cost of goods in which immigrants have a
  comparative advantage.
• In most historical episodes, this in the
  production of goods with high unskilled/manual
  labor.
• Immigrant tend to cluster in certain industries
• Irish in manual labor/construction, Japanese in
  gardening and landscaping, Chinese in
  railroads/restaurants, Cambodians in donut shops,
  Korean's in convenience stores etc.
• Comparative Advantage and or information
• Immigration and the redistribution of income.
• Effect of immigration will be to lower the
  cost/price of labor intensive goods--benefiting
  all society generally.
• Labor which competes against immigrants will be
  hurt (permanently) by being driven to other
  occupations.

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The Politics of Immigration.

• Anti-immigrant feelings concentrated in groups
  with similar comparative advantage as immigrants.
• Politics of anti-immigration laws and special
  interest laws
• Benefits of immigration are large but widely
  dispersed.
• Everybody receives a small benefit.
• Costs of immigration are small but narrowly
  concentrated.
• Immigrants, one of the prime beneficiaries of
  immigration, do not vote.
• Anti-immigration legislation is usually the
  result of a small group of highly motivated
  people.
• Special interest politics.

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US Population
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Trends in the Birth Rate

• Since 1800, the rate of fertility declined
  steadily.
• Decline in fertility due to a decline in the
  number of large families.
• Interesting statistics.
• 7 children times 3/4 year5.25 years pregnant.
• given 2 year intervals between children, the
  average women spent her whole adult life in
  childbearing- 39 year life expectancy, 14 yrs
  pregnant.
• Large decrease in births occurred in the absence
  of modern birth control and in a male dominated
  society.

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What factors brought about so persistent a
decline in large families and a drop in the crude
birth rate?

• Grab bag of explanations not completely sorted
  out.
• Children as an inferior good.
• Families and women choose fewer children and more
  all other goods as income rises.
• Alternative forms of entertainment at higher
  levels of income.
• Quality vs. Quantity.
• As the decades passed, parents began to choose
  higher quality rather that higher quantity
• Children and automobiles.
• Typical parents wanted to spend more on their
  first child (or children) rather than having more
  children.
• Prior to Civil War, typical child had no shoes,
• Clothing, housing etc. were equally scanty.
• Few children went beyond a few months of
  schooling a year.
• Risk aversion argument.
• Every increase in life expectancy meant that
  children would live longer.
• In 1800, parents could expect a baby to live 39
  years.
• By 1900, life expectancy at birth of 47 years
• By 1979, life expectancy had increased to 74
  years.
• Hence, one birth in 1977 could provide parents
  with almost as many years of cheer (in their
  older years) as two births in 1777.

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Explaining the Decline in the Birth Rate.

• The value of children as producer goods steadily
  declined.
• On family farms, children were valued for
  themselves and as a vital source of labor.
• As population density increased the rate of
  population decreased.
• When the supply of land is limited, the value of
  children as earning assets is low, hence the
  demand for children may not be as great a where
  there is plenty of open land nearby.
• Inheritance motive
• If parents desire to leave a farm of certain
  size, may reduce number of children as population
  density increases.

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Explaining the drop in mortality
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Possible Explanations.

• Cause of decline remains a puzzle.
• Potential explanations
• Improvements in medical technology not the cause
  of the decrease because the fall in the death
  rate occurred before the advent of modern medical
  technology.
• reduction in the virulence of pathogens.
• human acquisition of immunity through natural
  selection.
• Improvements in
• personal hygiene
• public sanitation

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• Both birth and death rate decline and population
  growth slows
• Population becomes more urbanized

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Changes in employment patterns
ectoral Distribution of the Labor Force, 1800-1999

    Share in Share in Share in Share in Share in Share in
        Non-Agriculture Non-Agriculture Non-Agriculture Non-Agriculture
Year Total Labor Force (1000s) Agriculture Agriculture Total Manufacturing Manufacturing Services
1800 1,658 76.2 76.2 23.8      
1850 8,199 53.6 53.6 46.4      
1900 29,031 37.5 37.5 59.4 35.8 35.8 23.6
1950 57,860 11.9 11.9 88.1 41.0 41.0 47.1
1999 133,489 2.3 2.3 97.7 24.7 24.7 73.0
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Labor markets

• Were labor markets integrated?
• How do we tell?
• Table shows annual rate of nominal wages
  1820-1856

NEast Midwest S Atlantic S Central
Artesian .8 .8 .5 .4
Clerk 1.5 1.9 .9 1.6
Labor 1.1 1.1 .1 1.7
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• If markets are integrated labor should be paid
  the same.
• Difficult to get data before the Civil War
• Margo uses data from army quartermasters.

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Relative Regional Real Wage Rates in the United
States, 1825-1984 (Northeast100)
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• Shows convergence of North central and North
  East.
• Wages North central region start out 30 higher,
  close to 100 in 1900.
• Much slower convergence between South and North
  East
• Not much migration until WWI

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Unionization
Industry 1880 1910 1930
Agriculture Forestry Fishing 0.0 0.1 0.4
Mining 11.2 37.7 19.8
Construction 2.8 25.2 29.8
Manufacturing 3.4 10.3 7.3
Transportation Communication Utilities 3.7 20.0 18.3
Private Services 0.1 3.3 1.8
Public Employment 0.3 4.0 9.6
       
All Private 1.7 8.7 7.0
All 1.7 8.5 7.1