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Suppose an economy with two types of skilled laborers, A-Skilled and B-Skilled. These two types of...

Suppose an economy with two types of skilled laborers, A-Skilled and B-Skilled. These two types of laborers are substitutes for each other. Suppose the country relaxes immigration laws and allows immigrants into the country that are the same as the B-Skilled laborers. What will happen in the labor market for B-skilled laborers? What will happen in the labor market for A-Skilled laborers?

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Answer #1

Relaxed immigration rules will increase the supply of labor in B-skilled labor market, shifting the labor supply curve rightward, thus lowering wage rate and increasing employment in this market.

When B-skilled labor market offers relatively lower wage rate, workers will want to work in A-skilled market where wage rate is relatively high, which will increase supply of labor in A-skilled market, shifting labor supply curve rightward, thus lowering wage rate and increasing employment in this market.

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