Taxing robots to slow down worker displacement

Last February, the European Parliament rejected a tax on robots, but took the first steps to regulate their development and deployment. The legislation also aims to establish liability for the actions of robots including self-driving vehicles.

Europe’s governing body, while rejecting the tax to be dedicated to worker training, overwhelmingly passed a resolution to study regulating robots.

In an interview with Quartz.com, Microsoft co-founder Bill Gates said he believes that the government should tax companies’ use of robots. That would temporarily slow down the spread of automation and fund other jobs such as caring for the elderly or working with children.

To justify the robot tax, Gates said that if a worker earns $50,000 working in a factory, he or she pays income, social security and a variety of federal, state and local taxes. The employer also is charged for that person’s unemployment and workers compensation coverage.

Owners do not pay those same taxes for robots’ production. “If a robot comes in to do the same thing, you’d think that we’d tax the robot at a similar level,” Gates added.

The International Federation of Robotics (IFR) argues the robot tax would have a negative impact on competitiveness and employment and that automation and robots create new jobs by increasing productivity. Its members believe there is a correlation between robot density and employment in advanced industrial nations.

The German-based trade group believes “a robot tax would not address factors such as trade, globalization of supply chains, demographics and the changing nature of employment contracts which play a significant role in job and wage development.”

Part of what is driving concern over robots displacing workers is a March report by researchers at the Massachusetts Institute of Technology and Boston University. They found automation had a large negative impact on jobs and wages between 1990 and 2007.

They report that each new robot replaced six workers, but when productivity improvements were factored in, that actual employment cut was three people.

Price Waterhouse Cooper believes American workers are most vulnerable, with 38 percent percent of their jobs at high risk of being replaced by robots and artificial intelligence over the next 15 years. Meanwhile, 30 percent of jobs in the U.K. and 21 percent of the positions in Japan are similarly endangered.

IFR estimates that between 2015 and 2018 about 1.3 million new industrial robots will be installed in factories around the world. Asia will continue to dominate the ramp-up, with China being the primary contributor.

“It’s a global race against rising labor costs, an aging workforce, and greater demands for productivity and quality,” Tanya Anandan wrote in the Robotics Industry Association newsletter in May 2016. “For many manufacturers, it’s become a do-or-die scenario.”

Interestingly, last year Pew Research Center found that a majority of American predict that within 50 years, robots and computers will do much of the work people currently do, but few workers believe their own jobs will experience substantial impacts.

IFR believes that while automation, more specifically robotics, has had a positive impact on jobs, the future role of government is yet to be determined.

“Government may need to assess the means of generating revenues to cover social payments due to a large number of structural factors—but there is no valid foundation for taxing capital; or, investments that improves productivity, creates more jobs than it replaces, and leads to workers moving up their skills.”

IFR has a point.

America’s elected officials need to be cautious in their approach to regulating and taxing automation. However, our collective task is to find and train workers to operate and repair robots.