Labor market analysis

1. The following table summarizes the market for labor in an occupation. “Demand” is the number (in thousands) of employees firms would be interested in hiring at particular wages. “Domestic supply” is the number (in thousands) of native workers who are interested in working in the occupation at particular wages, and “immigrant supply” is the number (in thousands) of immigrants who are interested in working at particular wages.

a. Graph the following curves for this labor market: demand for labor, domestic supply, supply of immigrant workers, and total supply of workers.

b. What is the equilibrium wage rate before immigration? How many workers would be hired?

c. What is the equilibrium wage rate after immigration? How many workers would be hired? 
 How many domestic workers would be hired? How many immigrant workers would be hired?

d. Comparing your answers in Parts b and c, has immigration caused a change in the number of domestic workers hired? What was the change, if any? Why did the change, if any, occur?

2. a. What is the human capital view of mobility? Write out the Present Value of Net Benefits formula and use it in answering the following question. b. Use two variables in the present value of migration equation to cite at least two

reasons why it may be rational for a family to migrate from one part of the country to another, even though the hypothetical move produces a decline in family earnings in the first year of work following the move.

Wage Demand Domestic Supply Immigrant Supply

$3 30 22 4

$4 29 23 4

$5 28 24 4

$6 27 25 4

$7 26 26 4

$8 25 27 4

$9 24 28 4

$10 23 29 4

c. Use this model to explain why younger workers are more likely to migrate. Explain why migrants from other countries/immigrants to the U.S. typically earn more than native U.S. workers when the reach 35 years of age or so.