In this blog post, I am going to look at and compare the theory of immigration in comparison to 'robots' or essentially new technology. Although data and theory on new technology is still a rather fresh concept, I am going to make my views and assumptions based off of immigration theory, however, the assumption that technology is fixed and identical will be adjusted for.
With immigration, we assume that labor and capital are mobile across countries and that all factors are mobile across sectors. As well as this, there is one country that is abundant in labor and one that is abundant in capital, with the capital abundant country having lower wages than the labor abundant. The final assumption is that there is no trade-in good and services, to prevent wages equalizing without factor movements.
With immigration enhancing the spectrum of the population, the production of the factors across the economy increase as there are a larger workforce and a larger range of low to high skilled workers. This impacts the economy in the short and long run. The theory would essentially be supply and demand with low skilled labor, as all sectors and countries are mobile, workers moving from one country to another to work has a simple supply and demand effect. In the short run, we see a decrease in low skilled labor wages as the supply increases and in the long run, we see don't see a great effect on wage and it remains relatively similar.
Now, as we looked at in the test, how can this compare to increases in technology and the replacement of human labor to robots. We have to rule out the Heckscher-Ohlin model for this as that assumes all technology is the same between the countries. So, if we see a development in technology whereby human labor is replaced, the negative effects of immigration would be multiplied. The influx of robots into our economy would cause a significant change to the employment and wages of low skilled workers.
The marginal productivity of a robot has to be greater than that of the low skilled worker, an automatic, systematic, repetitive type of production that is replaceable. This means that one robot is not going to just replace workers at a one to one ratio, it would more likely be a one to three or so ratio, whereby we will see wages and employment decline even more rapid than we would see if low skilled migration increased significantly. So this leaves the question of, is it worth producing technology to replace low skilled labor given the negative effects it will have on the economy?
Sam, I think you make some great points here. It is true that immigration of labor can help an economy grow and does not have as much negative effects in the long run like some think it does. However, it is very interesting to compare this to the effects of improved technology on the labor force. Automation is becoming a huge game changer in the manufacturing and production sectors. Will the short-term negative effects on employment continue to the long-run, or will the human workforce begin to move to more skilled positions with the increase in automated labor?
ReplyDeleteAs Matt states, you make great points that really make you think. Immigration, in terms of the economy, is great and doesn't have very many negative effects in the long run. The way you compared immigration to the continuous advancements of technology is very interesting. Do you think that immigration decreases with the implementation of technology in low-skilled jobs or will businesses continue to hire people? I think that simple, repetitive jobs could be replaced by robots but anything that takes thought and decision-making should be saved for humans.
ReplyDelete