Do we need a tax for Robots?

 As automation starts to take over more complex tasks previously done by humans, workers are becoming increasingly worried about losing their jobs to robots and algorithms. Although the consensus from economists is that automation will bring new and better-paid jobs, it is interesting to understand the current scenario.

Last week Amazon, the e-commerce giant announced their plans to spend $700 million to retrain about a third of its American workers to do more high-tech tasks. It will apply across the company, from corporate employees to warehouse workers, retraining about 100,000 by 2025. Amazon has approximately 300,000 employees in the United States and 500,000 worldwide. The company already uses 100.000 robots in their warehouses, and despite the don't seem possible at this point to replace humans, they expect fully automated warehouses in 10 more years.

The argument for taxing Robots

There are two main arguments for taxing robots. The most relevant is that most governments are funded by workers money. For most countries, income taxes account for 30-50% of the total government revenue services. Moreover, if millions of employees are displaced by Robots, governments will need to increase their social welfare spending and start a massive retraining program to handle this transition.

The second argument is related to the current subsidies Robots, and automation enjoys compared to humans. Robots don't pay taxes, companies can accelerate depreciation on robots to deduct costs faster, and there are no indirect taxes on robots. This situation could lead to many companies to accelerate automation in areas where humans are still better but comparatively more expensive than machines just because of the taxation situation.

Are robots taking our jobs? Not yet

There is historical evidence that technology, automation, and robots create new employment sectors but also dramatically shifts in the workplace. Most jobs that people used to have one century ago have disappeared or change in nature. (e.g., a Horse-Drawn driver vs. Uber driver). Nevertheless, there is no historical evidence of a shrinking job market due to automation.

One hundred years ago, 40% of USA workers worked on farms. The development of various agriculture technologies has made it possible that only 1% of workers can produce food for all.

A century ago, there were millions of jobs related to horse-drawn transportation. All of those jobs building carriages, manufacturing buggy whips, raising horses and scooping up their excrement off the city streets. Again, progress and technology have all but eliminated these jobs, but create opportunities for taxi drivers, Uber drivers, truck companies, among others.

Despite a large number of workers displaced from farms, railroads, and mines, new technologies created additional job categories with the development of the automotive industry, transportation, telecommunications, manufacturing, among others. Between 1920 to 2010, more than 100 million jobs were created in the USA economy.

Contrary to popular perceptions, the labor market is not experiencing unprecedented technological disruption. Occupational churn in the United States is at a historic low

How to deal with Technology disruption in the era of AI

Although technology tends to broaden job markets in the long term by adding new categories, it is widely accepted that automation creates technology unemployment in the short term. At speed on how technologies like AI, Machine learning, Cloud computing are moving, it is clear that many jobs will be displaced in the short term by Robots. 

The scale of job loss displacement in this fourth industrial revolution is likely to be at least as large as that of the first three industrial revolutions. An influential Oxford University found that about 47% of jobs in the US in 2010 and 35% in the UK were at high risk of being automated over the following 20 years. OECD put a more conservative figure at about 10% in the US and the 12% UK, although it did suggest many more workers would see their tasks changing significantly. It is clear that the next decade, government and companies need to take definite measures to facilitate the transition to this new reality.

Is a tax to Robots the best option?

The main concern about taxing robots is that it might stop innovation. Growth in rich countries has been slow in the past decade, suggesting that it’s getting harder and harder to find more productive ways of doing things. Stagnant productivity, combined with falling business investment, suggests that adoption of new technology is currently too slow rather than too fast. The most significant problem today isn’t too many robots    ; it is how to make robots enhance workers productivity.

We need to start thinking ahead of time about how to use policy to mitigate the disruptions of automation, but not at the cost of innovation itself.

Several policies could be explored in this respect. One idea is a wage subsidy for low-income or "high risk" workers to level up the playfield between Robots vs. Humans.

Another idea is to redistribute capital income more broadly. Income from capital gains, land rents, and dividends now are highly concentrated among the wealthy. However, the policy could change that.

One idea, suggested by economist Miles Kimball, is a sovereign-wealth fund. The government could use tax revenue to buy stocks and real estate, and distribute the profits to the populace. This model would fundamentally redistribute some of the income produced by the robots, giving every citizen a stake in the new automation economy. The wealth fund could be split into many smaller funds, each with different managers, to prevent the concentration of ownership.

Another option would be to restrict accelerated depreciation for investments in automation. Businesses with high levels of worker automation could have their tax depreciation automatically reduced beyond a certain threshold.

Also, businesses that use robots to replace workers could be required to cover the payroll taxes of workers displaced by automation. A tax calibrated, according to the ratio of a company’s profit to its employee compensation, could match the wage taxes avoided by automation. Companies deploying robots could also be required to pay some fee, just as employers that remove workers for the unemployment insurance system.

Overall, it is essential to start working on different policies to protect workers and make a more smooth transition for the next decade.