Taxing Automation – can we make losing our jobs to robots work for us?

Taxing Automation

What humans can do, computers can do better – or so it would seem given the breathtaking advances in machine learning and robotics. Increasingly efficient, safe, and reliable robots are replacing human labour in factory floors and along production lines. Across the world, this shift from labour to robots is having an impact on job markets, economies, lifestyles, and societies. This shift has already begun to create scenarios which were considered unlikely only a few decades ago. For instance, driving and warehouse work are jobs Bill Gates thinks will be done mostly by robots as early as within the next two decades a scenario few of us took seriously only two decades ago, and for which none of us is really prepared today.

At first glance automation might seem like a trend peculiar to developed economies, yet to gain strength in developing economies with large pools of cheap labour and a huge unregulated sector. This would be a gross misconception. As early as the 1960s the coming of technologically advanced looms displaced a staggering number of textile mill workers, transforming the textile mills of Mumbai, triggering mass unemployment and irreversibly changing the economic and commercial landscape of the city. The coming of automation and its impact on human labour (especially unskilled labour) and society has been a reality to contend with for decades, if not centuries (some would say that questions about automation and its impact on labour began to arise with the advent of the industrial revolution itself). Thus, with an eye on the decades past and the decades to come, industry leaders, governments and labour representatives must face the questions posed by automation head-on. Governments such as that of the European Union and South Korea have already begun to debate policies to regulate and streamline automation, while industry leaders the world over are contemplating how to optimally leverage automation for their businesses.

Can levying a tax on employing robots make automation work for us? Proponents of the idea include Bill Gates and Elon Musk, while leading experts on ethics, law, and economics are amongst those who oppose the idea.

The pros;

  1. Tax revenues are maintained – Part of the government’s income comes from taxes levied on employed persons. When robots replace labour, there are fewer taxable persons and the government’s tax revenues shrink. A ‘robot tax’ would maintain governments’ tax nets in such a scenario. With the revenue collected through this tax governments will be able to invest in training displaced workers to do jobs for which humans are particularly suited, such as teaching, caregiving, and, supervising, quality checking and maintaining the very robots which have taken their place on the
  2. production line.
  1. Slows down and optimises automation – Apart from the increased productivity, accuracy, and safety of robots, there are added advantages of automation from a business’s point of view; employees are seen as bearing the burden of inflation, and accordingly, their salaries and other benefits must be raised from time to time. Automation does away with this need to increase salaries while often increasing output in terms of quantity and quality. In addition, at a policy level, governments either leave industries free to automate or actively incentivise them to do so. Thus, even where human labour might be a better option than automation, companies might choose to automate due to the attractive tax breaks and incentives they get in the process. Levying a tax on robots would even-out the playing field, encouraging companies to choose labour where it is the more efficient option, and tempering the rate of automation, bringing it to a more manageable level.

The cons;

  1. Penalising innovation – Opponents of a robot tax say that this would amount to penalising innovation and stifling progress towards faster and better ways of accomplishing the same tasks
  2. Discouraging investment – Several economies across the world are still recovering from the effects of the 2008 economic crisis. While markets are once more resurgent, shortfalls in investment persist. Levying a robot tax would further shrink investment in an already capital starved market.
  3. When does a machine become a robot? – this is perhaps the most interesting difficulty posed by a hypothetical robot tax. To implement such a tax, we would have to determine the attributes of a robot, and clearly demarcate when a machine becomes a robot. Tax authorities already struggle with defining categories and categorising goods and services. The question about when a machine becomes a robot is still being debated by scientists and industry leaders. Tax authorities and governments are unlikely to have the requisite know-how to make this important decision – one which will have long-term consequence

So, where does this leave us? As businesses what can we do to make automation work for us and our employees? How can we train our employees to work with ever increasing levels of automation? Perhaps some of our answers are already present in the arguments in favour of automation – diverting tax savings towards employee training and welfare will be the first step towards ensuring that automation yields concrete benefits for our businesses and for the most important element in our businesses – our employees.

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