In today's world of innovation and rapidly evolving technological landscape, business conversations often gravitate towards automation and its potential to reshape industries and job markets through improved productivity. However, Lant Pritchett, in his insightful article "People Over Robots: The Global Economy Needs Immigration Before Automation," presents a compelling case for why the global economy would benefit more from increased immigration than from further automation. Here, we delve into two of his main arguments: the impact of barriers to migration on technological investment and the flawed assumption that these barriers protect the wages of current citizens.

The Misguided Push Towards Automation

One of Pritchett's key arguments centers around the notion that automation is often a response to artificial labor shortages created by restrictive immigration policies, rather than a natural or inevitable progression.

The Bracero Program provides a historical example to illustrate this argument.

To illustrate this point, Pritchett highlights the mid-20th century Bracero Program, which allowed seasonal agricultural workers from Mexico to work in the United States. When the program was eventually halted in 1964, it did not lead to increased employment of native workers in the agricultural sector, as some might have expected. Instead, farmers turned to technological solutions as a substitute for the available, but unattainable, human labo. They began relying more on machines and technological advancements, such as genetically modified crops that could be harvested by machines, shifting away from labor-intensive crops like asparagus and strawberries.

This historical example underscores a broader issue: when businesses cannot hire the labor they need due to immigration restrictions, they are forced to innovate and invest in automation and other technological solutions as a substitute 

The misdirection of resources can lead to unnecessary and sometimes inefficient technological innovations, driven more by the constraints of labor mobility than a genuine necessity. It is arguable that if businesses had access to one of the world's most abundant resources, a global labor pool, they would likely invest less in automation and more in human resources. This in turn could be more beneficial both economically and socially.

The Myth of Protecting Domestic Wages

Another significant argument Pritchett makes is against the common belief that immigration restrictions are necessary to protect the wages of current citizens.

Economic Evidence

Contrary to the belief that immigration restriction is required to protect the wages of current citizens, economic research shows that the net impact of immigration on the average wages of domestic workers is either neutral or slightly positive. Pritchett recounts a 2017 review by the National Academy of Sciences which found no substantial evidence that immigration negatively affects the overall wages of native workers. In fact, migrants often complement native workers rather than replace them, particularly in roles that allow skilled native workers to focus on tasks that require their expertise. This complementary dynamic not only fosters a more efficient allocation of labor but also enhances productivity and economic growth. Pritchett's analysis underscores the potential for a more inclusive immigration policy to create synergies within the labor market, benefiting both immigrants and native workers alike.

Complementary Workforce

Having more assistants and support staff can actually complement local jobs by freeing up professionals like nurses and doctors to perform more specialized tasks, thereby increasing overall productivity and wages. Migrants fill essential roles that might otherwise go unfilled, contributing to the economy without undercutting the wages of domestic workers.

Supporting Disadvantaged Workers

While it is true that some disadvantaged native workers may compete directly with migrants, Pritchett argues that migration restrictions are neither an effective nor efficient way to support these workers. Instead, local Government programs like an Earned Income Tax Credit (EITC) could offer a more cost-effective solution. Pritchett's calculations in his example demonstrates that a modest increase in the EITC could fully offset any potential wage losses for these workers, costing a fraction of the economic loss that would result from banning migrants altogether.

Rethinking Immigration Policies and Innovation Driven by Artificial Scarcity

The arguments highlighted in the article highlights a need to rethink immigration policies in the context of global economic needs, which I feel is a fair argument. By easing immigration restrictions, countries can address labor shortages more effectively and avoid the unnecessary push towards automation driven by artificial labor scarcities. Moreover, allowing more migration can have a positive impact on the wages of native workers, debunking the myth that immigration harms domestic employment. Immigration can also benefit by offsetting a decrease in the birthrate across many countries, which has the long-term impact of reducing the available labor pool. 

My take away from this insightful article is that the global economy stands to gain significantly more from embracing immigration than from continuing on a path heavily reliant on automation. By recognizing the value of human labor and addressing the real barriers to labor mobility, we can foster a more dynamic, inclusive, and prosperous global economy.

While I acknowledge that issues such as integration, social tension, political resistance, and national sovereignty need to be addressed, I believe it's crucial to reflect on whether the problems that innovations aim to solve are genuinely being resolved. It is important we consider if, instead, these solutions might be exacerbating the issues further.

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Photo by Katie Moum on Unsplash