A Looming Demographic Crisis: Will Robots Replace Humans?
As migration reaches unprecedented levels globally, a critical debate is brewing among economists. The crux of the issue: are some industries becoming overly reliant on foreign labor, potentially hindering long-term economic growth? This conundrum arises against the backdrop of an aging population in developed countries, creating a shrinking workforce and an urgent need for solutions.
John Rosenow, a dairy farmer in Wisconsin, exemplifies this dependence. He relies on 13 Mexican immigrants to manage his vast 1,000-acre farm, a significant increase from the 8-10 workers he employed a decade ago. This influx has allowed him to avoid costly investments in robotic milking equipment, a path some of his peers have taken. "We get excellent workers," he asserts, confident that he could double his workforce within a week if needed.
However, this dependence raises concerns. Some economists warn of the potential dangers of excessive reliance on imported workers. They argue that it can stifle productivity growth by discouraging businesses from seeking more sustainable solutions, such as automation and industry restructuring. Martin Ruhs, a migration specialist, emphasizes the potential drawbacks: "Once an industry is organized in a specific way, and its structure encourages employers to recruit migrants, it can be very difficult to reverse course."
This debate intensifies as Western societies face a looming demographic crisis. For the first time since World War II, the working-age population in advanced economies is shrinking. According to Allianz, a German insurer, the European Union's working-age population is projected to shrink by one-fifth by 2050.
While measures like encouraging delayed retirement can mitigate this trend, importing foreign labor often appears to be the quickest solution. This is especially true considering the readily available supply from regions like Latin America and Africa. Additionally, immigration serves as a catalyst for economic growth by boosting population and consumer spending. However, it often faces resistance from conservative groups, as seen in the US and Europe.
Immigration levels across major destination countries like Canada, Germany, and the UK have doubled or even tripled compared to pre-pandemic times. In the US alone, 3.3 million more migrants arrived than left in 2023, a stark contrast to the average of 900,000 observed in the 2010s. Today, immigrants constitute a significant portion of workforces in key sectors: three-quarters in farmwork, 30% in construction and mining, and 18% overall in the US.
Despite its pledge to curb immigration for years, the UK has witnessed a surge following its exit from the EU as businesses grapple with labor shortages. Over a quarter of its National Health Service nurses are now foreign-born, compared to just 14% in 2013. Similarly, Germany's slaughterhouses reportedly rely on migrant workers for around 80% of their workforce.
However, some economic research suggests that excessive reliance on low-skilled migrant labor can hinder productivity growth, ultimately impacting economic expansion. This concern is supported by the sluggish productivity observed in recent years across advanced economies like the US and the UK, where farm sector productivity has plateaued for over a decade. Conversely, Japan and South Korea, with stricter immigration policies, witnessed annual productivity increases of roughly 1.5%, according to OECD data.
Striking the right balance between allowing necessary immigration and avoiding overdependence remains a delicate task. Abruptly ending reliance on migrant labor could push prices for products heavily dependent on them higher and leave people in developing nations with fewer opportunities for a better life. Anna Boucher, a migration expert, acknowledges the short-term necessity of some low-skilled migration, emphasizing its crucial role in preventing the closure of childcare services and ensuring food security.
Research suggests that high-skilled migrants, such as scientists and engineers, can actually boost firm productivity and benefit local workers through increased wages and employment opportunities. However, the impact of low-skilled migrants remains a subject of debate.
Interestingly, automation is emerging as a potential alternative in some sectors. The Czech Republic is employing AI-powered robots for strawberry monitoring and harvesting, while Israeli and UK companies are developing fruit-picking drones and raspberry-picking robots.
Despite the potential of automation, implementing broad-scale industry overhauls and allowing weaker firms to fail is often politically challenging for governments. As Dan Andrews, a productivity expert at the OECD, notes, opting for increased immigration can be seen as the easier route compared to pursuing overhauls that boost productivity and allow weaker firms to fail. This highlights the complex interplay between economic concerns and political realities.
The UK government is pouring resources into agricultural technology in hopes of accelerating automation in the sector. Additionally, they are considering abolishing rules that allow companies to pay migrant workers less than the going rate for jobs, a move that has sparked protests from farmer's lobby groups who argue that while farmers readily adopt new technologies, robots are currently not suitable for delicate tasks like picking fruits and vegetables.
Germany is another nation grappling with this issue. Businesses, including butcher shops, are increasingly reliant on imported labor due to a lack of interest among young people in pursuing these professions, which are often seen as unglamorous and low-paying. To address this, Handirk von Ungern-Sternberg, an official at the local chamber of handicrafts, launched a pilot project to recruit butchers' apprentices from India. This initiative has been successful, with plans to bring in a significantly larger number of workers this year. However, opposition to immigration is also rising in Germany, casting doubt on the long-term sustainability of this approach.
The dairy farming industry offers a contrasting perspective. Onan Whitcomb, a Vermont farmer, invested in robotic milking machines instead of hiring more workers. This decision resulted in a significant increase in milk production and a decrease in disease, ultimately justifying the initial investment.
The migrant labor conundrum presents a multifaceted challenge with no easy answers. Striking a balance between meeting labor needs, fostering innovation and productivity growth, and ensuring social cohesion requires careful consideration of various factors, including long-term economic viability, ethical implications, and potential societal impacts.
