Suppose initially that immigrant labor and native-born labor...

Key Concepts

Complementary Resources

This concept refers to inputs in the production process that work together such that an increase in one input enhances the productivity of another. In a labor market context, when immigrant labor and native-born labor are complementary, an increase in immigrant labor boosts the effectiveness and productivity of native-born workers. This heightened efficiency raises the overall demand for native-born workers, potentially increasing their wages as firms seek to capitalize on the productivity gains from the complementary inputs.

Substitute Resources

This concept deals with inputs that can replace each other in production. When two types of labor, such as new immigrant labor and previous immigrant labor, are substitutes, an increase in one type might decrease the demand for the other because firms can replace one resource with the other without significantly affecting output. Consequently, if a substantial immigration surge brings in a lot of new workers, the increased supply can reduce the demand for existing immigrant labor, leading to downward pressure on their wages.

Labor Demand and Wage Determination

Underlying these scenarios is the broader concept of labor demand, which is derived from a firm's need for productive inputs. Changes in the composition or availability of labor inputs can shift the demand curve, affecting equilibrium wages. In both complementary and substitute scenarios, changes in one labor group's supply alter the productivity or availability of another, thereby influencing wage levels in a competitive labor market.

Transcript

00:01 So in this problem, we are looking at the difference between complementary resources and resources that are substitutes in terms of the immigration into a country and the specific markets that immigrants may go to.

00:15 Now, starting off with compliments, we're thinking of immigrants complementing the native -born workers.

00:21 And i have an example of the industry here that you can see this applied to.

00:26 And i have construction, so immigrants are arriving and going to construction.

00:31 Specifically, we're going to look at construction of houses and then natives, the native borne's are working in the home appliances industry, just a pretty broad industry that complements construction really well because you have more houses being built.

00:46 Home appliances are also going to be needed for those houses.

00:49 So looking at our graphs here, we have the same graph showing wage on the y -axis and the quantity of labor on the x -axis and right where the supply of labor and the demand of labor, interstate sec that gives us our wage and this is going to be before immigration now as we have immigrants arrive into a country we're going to have the i'm going to make this blue we're going to have the supply increase so supply increasing means it's going out to the right so we're going to have this new supply of labor because you have more people to hire so this is what it means when the supply of labor is increasing and right now we have a new intersection of the supply of labor is increasing and right now we have a demand so following this along to the axis you're going to see that the wages have actually decreased as more people arrive so you have more people higher you can pay a little bit less and that's what is happening here the wages have gone from here to here so thinking about how this complements home appliances as people are essentially cheaper that mean their labor is cheaper that means that the factors going into producing home appliances are also cheaper.

02:04 So when you have houses being built, you now have home appliances that are needed.

02:11 So because when you have this supply of labor increase, you can produce more houses because it's cheaper.

02:18 So the factors of production are cheaper, which means you can produce more houses.

02:22 And then when you produce more houses, more people are going to want home appliances.

02:27 And that's what i have here, which is where the natives are working.

02:30 So so here we're not going to move supply, we're actually going to move the demand of labor because when you have to, when the home appliances demand increases, you have more of a demand for labor because you want to produce more because more people are wanting it.

02:45 So to do that, we're just going to increase demand, shifting demand to the right.

02:51 And now, as you can see here, we have our old intersection here where wages were, but now we have this new one where demand and supply meet and following along this to the axis.

03:01 You can see the new wage rate has actually gone up.

03:05 Now, what makes this compliments is the fact that the immigrants arriving in the construction industry complement the natives in the home appliances industry by increasing their wages.

03:21 So this would be a major benefit for native workers in these sorts of industries that complement the immigrants because their wages are being increased...

Please give Ace some feedback