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Robot tax

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At first blush, it seems a good idea. The suggestion by Bill Gates to tax robots appears to have merit. Such a tax would help offset the falling revenues that will flow into public coffers as robots increasingly replace jobs held by humans. But on closer examination, the logic of a robot income tax turns out to be misguided.

The first problem you encounter is defining exactly what a robot is. Is an ATM a robotic worker? Are commercial washing machines robot employees? What about self-service petrol bowsers - are they job killers? If robotics is about automation, then virtually every machine in use today - from farm tractors to speed cameras - is a robot.

Of course, automation isn’t new nor is our fear of it. In the early 19th century, English textile workers and weavers protested against the changes ushered in by the Industrial Revolution. These “Luddites” smashed mechanized knitting machines as they believed the new labour-saving devices would steal their jobs.

However, by the end of the 19th century, there were - according to James Bessen, author of Learning by Doing: The Real Connection between Innovation, Wages, and Wealth - four times as many factory weavers as there had been in 1830. Automation reduced labour costs for factory owners. This, in turn, enabled the price of garments to be lowered. This, in turn again, increased product demand leading to the need for more workers.

Retail behemoth, Amazon, provides a contemporary example of this phenomenon. A 2015 article by digital news site, Quartz, explained Amazon’s hybrid workforce of people and robots this way:

The company has over the last three years increased the number of robots working in its warehouses from 1,400 to 45,000. Over the same period, the rate at which it hires workers hasn’t changed. …robots help Amazon keep prices low, which means people buy more stuff, which means the company needs more people to man its warehouses even though it needs fewer human hours of labor per package.

Automation allows workers to deliver better, faster, and cheaper services and that’s good for growth and therefore good for the economy. If you tax automation, you are financially penalising companies for being technically innovative and that ends up hurting the economy. In the words of The Economist magazine:

A robot is a capital investment, like a blast furnace or a computer. Economists typically advise against taxing such things, which allow an economy to produce more. Taxation that deters investment is thought to make people poorer without raising much money.

Most of us erroneously believe that our robotic co-workers will look like the humanoid, C-3PO, of Star Wars fame. Yet our factories and offices are already replete with robots - we just can’t physically see many of them as they are in the form of automated systems. Robotic software is everywhere and is used to perform autonomous tasks.

Examples include expert systems (eg, email spam filters), virtual assistants (eg, Apple’s Siri), and chatbots (eg, Facebook’s Messenger service). Other examples include the navigation system in our cars, the credit card fraud prevention processes run by banks and the surgical robots that assist doctors perform more accurate and less evasive procedures.

Should all of these non-human helpers be included in any proposed robot tax? Or should just some kinds of robotic automation be taxed? My belief is that no robot should be taxed because, as Forbes Magazine has asserted: “…computer automation is actually increasing employment in most industries, so taxing robots would just slow job growth and limit economic opportunity for millions”.

Forbes notes that bar code scanners, which were widely adopted in the 1980s, automated much of the work of cashiers, but the number of cashiers increased. Also, ATMs took over cash handling tasks from bank tellers, but bank teller employment has continued to grow in the US. Similarly, speed cameras have not resulted in fewer policemen.

The central premise of Bill Gates’ provocative suggestion is that robots should be taxed if they take people’s jobs. But it’s virtually impossible to categorically prove a direct correlation between the implementation of automation technology and job losses. Certainly, I have never encountered the situation where an organisation installs new technology on one day and then makes workers’ roles redundant the next day.

While Mr. Gates is a wise and astute businessman, the general consensus is that he has got it wrong on this occasion. Each new wave of technology brings disruption and this creates winners as well as losers. But overall, history shows that automation brings more prosperity - and there’s no reason to think that this time is any different.

Regards
Paul J. Thomas, CEO

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CEO Paul Thomas