Should Robots Taking Over Jobs Be Taxed

Bill Gates ran into a firestorm of controversy when he commented that governments should tax companies’ use of robots. The billionaire co-founder of Microsoft, and one of the world’s richest people, said taxing robots would help slow their rapid adoption, giving the world time to address their impact on employment.

It’s an interesting suggestion, and one that is supported by Nobel laureate Robert J. Schiller, Sterling Professor of Economics at Yale University. Like Gates, Schiller is concerned that replacing human workers with robots could result in mass unemployment. “A tax on robots . . .  might slow down the process, at least temporarily, and provide revenues to finance adjustment, like retraining programs for displaced workers,” Schiller wrote in The Guardian.

When two of the most highly regarded people in the world believe future automation poses economic dangers, it tends to attract attention. And in this case, much of the reaction has been critical. The International Federation of Robotics (IFR), for instance, stated that a robot tax would produce “a very negative impact on competitiveness and employment.”

Does Automation Kill Jobs or Create Them?

The IFR argues that robots create new jobs by increasing company productivity—this has been the case with robot density and employment in the German car manufacturing industry, the federation explained. A 2015 study by Boston Consulting Group (BCG) appears to affirm its stance, indicating that while intelligent automation would eliminate 610,000 factory jobs in Germany, it would create 960,000 new positions, many of them higher paying. BCG explained that the productivity enhancements provided by robots are an inducement for companies to increase wages.

Gates and Schiller don’t entirely share this opinion. Gates points out the social currency of taxation—human workers paid a salary are taxed on the amount, which helps fund government programs benefitting the broader populace. Robots doing the same work should be taxed at the same levels, he believes.

Schiller also rejects the idea that companies will be able to continuously develop new jobs for people replaced by technology. “As the robot revolution accelerates, doubts about how well this will work out continue to grow,” he said.

Automation Is Already Underway

The debate is timely, considering the rapid deployment of robots by businesses. Deloitte’s 2017 Global Human Capital Trends report indicates that 38 percent of 10,400 survey respondents from 140 countries believe that robotics and artificial intelligence will be “fully implemented” in their companies within five years.

This could be a good thing for business: Robots can be more accurate, reliable, inexpensive, safe and productive than people. And much of the human work that robots replace is manual, rote, repetitive and dangerous.

The potential downside, of course, is that as more robots replace human jobs, more people may have difficulty finding work. That’s the conclusion of a recent report by PwC, which stated that robots would result in the elimination of nearly four in ten jobs (38 percent) in the U.S.

A case in point is ride-hailing drivers, who are likely to be displaced in a future of self-driving autonomous vehicles. In New York City alone, Uber employs 160,000 drivers. Younger drivers might want to start thinking now about what they might do if and when this day arrives.

What Does It Mean for Your Business?

If Gates and Schiller have their way, the autonomous cars of the future will be taxed just as the ride-hailing drivers of today. But is this the right solution—effectively penalizing companies for pursuing enhanced productivity?

As robotic automation becomes more affordable, it could potentially give small and midsize businesses a way to compete with larger companies, leveling the playing field. But smaller companies may be unable to capitalize on the opportunity if the tax bite offsets the value. And even larger manufacturers could be dissuaded from continuing to invest in job automation.

Then again, that might be the whole point—slowing down industrial automation so we can contemplate its implications. There’s nothing inherently wrong with taking stock of what's happening today and thinking about what it means for the future. But let's start that conversation now, so businesses can have confidence as they train the next generation of workers and invest in the next generation of technology.

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