Thanks to the Internet, information spreads quickly these days and once an idea is in the world, it’s likely to stay for a while. This is even more so if it promises to offer a solution to a yet unsolved social challenge such as automation. Policy makers around the world are alarmed by what the dawn of technological advances might mean for the future of the labour market and with which policies they might possibly come up in order to tackle this challenge.
In this context, Benoît Hamon, the socialist candidate in the French presidential election, is proposing to introduce a tax on robots in order to distribute the gains of technology to the many instead of just the few. „Automation will destroy jobs, that’s what all the studies show. There’s not even one that predicts the opposite. Even the most optimistic scenario estimates that at least 9 % of jobs in France will be destroyed due to automation“ said the socialist frontrunner. Without taxing robots, there would be no way for the French welfare state to persist in the future to come.
Also Bill Gates, the founder of Microsoft has recently made headlines with the idea to tax robots in order to prevent a disaster from happening on the labour market. „Right now, the human worker who does, say, $50,000 worth of work in a factory, that income is taxed and you get income tax, social security tax, all those things. If a robot comes in to do the same thing, you’d think that we’d tax the robot at a similar level“ said the founder of Microsoft in a recent interview with Quartz.
But is it really a good idea? Here is a pro- and contra by Kevin Locoh-Donou and Maximilian Nominacher.
Let’s talk about trucks
In the aftermath of the US presidential election, a certain map has been widely shared on social media. I believe it may help us understand the urgency which motivates the introduction of a tax on robots:
Based on data from the Census Bureau, this interactive graph designed by NPR shows that in 2014, “truck driver” was the most common job in roughly 60% of US-American states. More than an occupation, it’s safe to say that truck driving constitutes one of the most distinctive faces of the modern American laboring class. It is, also, one of the most endangered, in light of the recent advances in self-driving technology, pioneered by Tesla and Uber among others. The legitimate concern raised by many is the following: shouldn’t we await tremendous social unrest if entire classes are to be affected by mass unemployment within a decade?
These are the kind of concerns which motivate the introduction of a tax on robots, imperfect though it may be. In its most radical form, the aim of the tax is to foster a major paradigm shift in the economies of modern society. The idea would be not only to compensate technology-induced job destruction, but to further finance a social safety net of a new kind, suited to the XXIst century. Indeed, the tax on robots is often envisioned as a potential source of financing for an universal basic income (UBI), which would allow everyone to live with a minimum standard of living. In this sense, it would fulfill a social (maintaining social cohesiveness) as much as an economic role.
In its more diluted form, the aim of the tax is to finance professional reconversion. Job destruction would not constitute a problem if the newly unemployed were able to obtain different jobs. The classical problem which would arise in such a case is that of qualification. Most newly-created jobs require a high amount of skills, while most destroyed jobs are often less qualified. In both cases, tax on robots could only succeed as part of a wider shift in society.
Why “robots”, though?
It sounds like a brilliant idea. If robots are taking our jobs why don’t we just tax them in the very same manner as we do tax human labour today? Unfortunately, as with many big ideas, its appeal increasingly shrinks the more you think about it. In this sense, the proposition of Bill Gates and Benoît Hamon sheds light to some of the more tricky aspects that automation poses for today’s policy makers.
First of all, what are robots? According to Oxford dictionary, a robot is “a machine capable of carrying out a complex series of actions automatically, especially one programmable by a computer“. Yet, as Izabella Kaminska has pointed out, it is rather misleading to anthropomorphize robots as the proposal to tax them does. As evident as it may seem, it are machine owners, not the machines themselves that have to pay taxes. Following from this, a proposal to introduce a tax on robots is in fact just a hidden call for more taxes on corporations and / or a tax on wealth.
Yet, while a tax on robots is basically just a form of corporate tax, it is nevertheless a very special one. It’s important to highlight that there are very good arguments for widening the tax base for companies again, especially from a historical perspective as corporate taxes used to be much higher in the past. Nevertheless, in contrast to a general form of corporate tax, a tax on robots is specifically designed to set a disincentive for firms to innovate their mode of production and thus can prevent an increase in firms productivity. Especially in a time of crisis, in which economists speak of „secular stagnation“, this could make the social problems we face even bigger if we significantly reduce the possibilities for economic growth. Should policymakers decide to introduce higher taxation on corporate profits in order to tackle social inequality, they can easily do so without the need of linking this corporate tax to the introduction of automation.
Adding to this, it is also rather unclear how to decide for the state whether the use of robots actually reduces jobs of workers or finally enables them to do their work it in a much better way. We know from historical evidence that our species is quite bad at predicting the potential societal impact of technological revolutions. This does not mean that we should not care about the potential risks of technology. Nevertheless, as long as we only have suboptimal solutions such as the tax on robots at hand, we might better act with great caution and think twice before we end up with actually make things worse. The tax on robots might look good at first sight but it is a bit like perfume: it might smell good in the first place, but this doesn’t mean that you should also drink it.
Conclusion
In the end, the only certainty we have at the moment on the subject is, paradoxically, our uncertainty.
In 1930, Keynes predicted that with automation, “three-hour shifts or a fifteen-hour week” would soon be inevitable. We had better found out before then how to think of a society organised without work. As it turns out, his prediction hasn’t been fulfilled yet, and the three-hour shift seems rather distant to all of us. We could argue that it is only through a tax on robots that productivity gains would have been redistributed fairly to workers. We could also posit that with such a tax, widespread automation in the industry would not have occurred in the first place.
Time will tell, with the development of further automation, who was right. In the meantime,this should serve as a reminder of how unpredictable technology’s influence on society will be.
Kevin and Max
