Mayor de Blasio Calls for a Tax on Economic Growth and Progress
New York City Mayor Bill de Blasio is the latest to call for a tax on robots. One may as well call for a tax on economic growth and progress.
Under de Blasio’s proposed tax, companies that do not provide “adequate replacement employment” would be required to make an upfront payment of five years payroll taxes for every job eliminated. If the goal is to “protect jobs” this is a counterproductive way to go about it. If you make it harder to fire, you also make it less likely that anyone will hire. Few want to take on an obligation into perpetuity.
One problem with taxing robots is trying to determine what is and is not a robot. They don’t all look like Rosie the Maid from the Jetsons. When people talk about “job-stealing robots," does that include virtual assistants Alex and Siri? A mechanical arm used in auto plants and other forms of manufacturing? Self-driving cars?
Is a robot any kind of mechanical device that helps us get our work done? If it is used in commerce, should it be taxed? If so, does that include dishwashing machines in restaurants? How about computer operating systems? For that matter, what about smart phones and tablets?
But the bigger problem is that a tax on robots is ultimately a tax on economic growth. Any time anything is taxed, people are discouraged from using it. Taxing robots would discourage their use, impeding innovation. Taxing robots is a particularly bad idea in a time of low productivity growth. Since robots boost the growth of productivity, taxing them would limit it.
The value of robots in boosting productivity can be seen by the economic performance of the countries with the heaviest use of robots. In 2017, South Korea had over 700 installed robots for every 10,000 employees, largely because of the high volume of robots in the electronics sector. Singapore, with a similarly rate of robotics in the electronics industry, comes second with an installed density of 658 robots per 10,000 employees. Germany and Japan, renowned for their automotive industries, have density levels of just over 300 robots per 10,000 employees.
The unemployment rates in those countries counter the notion that robots take the jobs of humans. In Singapore, the unemployment rate is just 4 percent. In Japan, it is just 2.4 percent. It is 3.3 percent in Germany. All three countries have lower unemployment rates than the less robotized United States.
While many expect the robots will take their jobs, the impact of robotics is in fact much more nuanced. In the United States, when robot density went up, unemployment actually declined. The path to prosperity is paved with automation.
Increased use of robots forces a shift from manually intensive labor to jobs that require skills that robots just can’t replicate. Increased automation can allow human beings to manage more complex roles. People with robotics and AI skills are desperately needed; the skills gap could grow from about a half-million to 2.4 million people by 2028, according to a study last year by Deloitte and The Manufacturing Institute.
In fact, competition is stiff for companies looking for people who can manage or engage in robotics. Amazon, Apple, Facebook, Google and Microsoft, all have gone to great lengths to recruit people, with well-established hiring pipelines and lots of perks.
Companies like this have replaced old-fashioned jobs with jobs in robotics. Robots aren’t actually reducing jobs from plants in the United States, they are just shifting them. Instead of intensive manual labor, usually in the industrial Midwest, we now see highly trained workers in Silicon Valley employing more elaborate skills. Jobs aren’t disappearing; they are simply moving, primarily from the Rust Belt to the Sun Belt.
Taxing robots makes a great deal of sense if we wanted fewer robots. But, as a society, would we have preferred fewer tractors and other technologies that modernized farming? Until then, about half the population worked the farm. Would we have liked to continue using the kerosene lights that kept lamp-lighters working - or do we prefer the efficiency of computerized, electric street lights?
Tractors and computerized street lights are a couple of the ways we have progressed over the years, even while shedding no jobs. Robotics is another.