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Should Robots Pay Their Fair Share?

Daniel Gross

Daniel Gross is executive editor of strategy+business.

 

What a strange moment. In the U.S., there were about 5.5 million unfilled jobs in December, according to the Bureau of Labor Statistics. Industries such as construction, nursing, manufacturing, and trucking are reporting shortages. At the same time, thinkers, authors, and businesspeople — including some of those who sparked the technological revolution — are raising increasingly dire predictions about the imminent prospects of machines and robots obviating the need for human labor entirely.

The big question, of course, is what to do about it. Reflexively arguing against the rollout of technology marks you as a Luddite, opposed to efficiency and progress. Just imagine what we would have lost as a society in gains to productivity had we pushed back stronger against cars to protect the jobs of buggy manufacturers, or against ATMs to protect the jobs of bank tellers. If you can’t beat technology, history tells us, either join it or get out of the way.

Or, you could figure out how to mitigate some of the social costs and economic losses that many people will suffer by devising mechanisms through which the disruptors can help fund our social needs. No less a figure than Bill Gates, the founder of Microsoft, a leading philanthropist, and an oracle on social trends, recently suggested that we start taxing robots.

It’s an interesting idea. To a degree, the concept of such a tax is simply a recognition of the altered reality in which we live. With artificial intelligence, machine learning, digital assistants, bots, and recommendation engines, our machines (including robots) are already assuming more human characteristics. We may not have reached the singularity, but people and computers are merging in some ways. If robots are going to do the work of humans — and hence earn the income of humans — then it makes sense to have them pay taxes. “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,” as Gates put it. “If a robot comes in to do the same thing, you’d think that we’d tax the robot at a similar level.”

There’s a second economic principle at work here. Economic theory holds that taxes can act as disincentives for certain types of behavior. If you want less of a certain type of activity, make the cost artificially higher by attaching a fee to it. That’s the idea behind efforts to raise levies on cigarettes, or sugary drinks, or fast food, or carbon emissions. Conversely, one of the arguments for not imposing state sales taxes on e-commerce retail from out of state was that it would hinder the development of an important new industry.

Given time, society can adjust to technological displacement: Over a period of several decades in the 19th and 20th centuries, millions of agricultural workers displaced by mechanism found more productive work in manufacturing and services. But technology and scale have compressed the time frame. There are legitimate concerns that we lack the capacity to deal with the social consequences of, say, eliminating hundreds of thousands of trucking or warehouse jobs in the span of a couple of years. And here, too, a tax would perform a function as a sort of brake. By making it more expensive to automate quickly, it would “slow down the speed of that adoption,” as Gates put it, and give society more time to figure out how to cope with the transition.

If you want less of a certain type of activity, make the cost artificially higher by attaching a fee to it.

I find the first argument more compelling than the second. We have chosen to fund government activities and the social insurance on which everybody largely relies via taxes on labor and income. Even if fewer people are working in the future, the need to fund healthcare and retirement income won’t dissipate. And so it makes sense to have the entities performing the profitable work — in this case, robots — fund government operations.

But I’m not sure that imposing higher costs on the deployment of robots (or software that can automate processes and work) will act as a countervailing force. Vinnie Mirchandani, an analyst who writes about disruptive technologies, argued in a recent s+b article that society has historically built up circuit breakers that inhibit the spread of new technology — e.g., regulation, incumbents fighting back. But given the speed at which technology companies are able to (1) reduce the costs of production and distribution and (2) take innovation to scale, simply making the technology marginally more expensive would do little to hinder its growth.

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Should Robots Pay Their Fair Share?