I think this assumes a lot of efficiency and rapid equilibration in the reallocation of labor. There are real costs and inefficiencies in the job search process

I think this assumes a lot of efficiency and rapid equilibration in the reallocation of labor. There are real costs and inefficiencies in the job search process and constraints limiting which new jobs these now-displaced workers can actually end up at, and I don't think you can just treat a worker as a value-making widget that pumps out as much value in one job as another. I'd also add it's not clear to me that labor reduction must lead to better productivity - can't you have a situation where labor reduction (and or wage suppression) actually reduce downstream demand / productivity?