Remedies for Automation Part 2: Taxation and Regulation

By James Dail (CMC ’20)

In the first article in this series, it was established that in the future, widespread worker automation is a highly probable phenomenon, barring an intervening legislative fix. It was also established that adopting a universal basic income for displaced workers would be an insufficient fix for this problem. The next two proposals to be examined will taxing corporations that automate their workforces, and regulating corporations to prevent them from doing so. While both proposals are superior in approach to a universal basic income, ultimately, the regulatory approach does the most to reap automation’s benefits while minimizing the number of displaced workers.

Proponents of the taxation approach vouch for it because it is built on efficiency and it achieves the largest productivity gains possible. While there is some variation with the specifics, the basic reasoning for the proposal is as follows: once a corporation automates its workforce, tax revenue from income and payroll taxes (a key resource for the government), will be taken away. To make up for this revenue shortfall, the government should place an additional tax on the corporation based on an estimate of what its workers were paying in income and payroll taxes before automation took place. The government will then use the revenue from this tax to begin a program that would help displaced workers retrain for jobs that are not likely to be automated. Any potential revenue loss would be short-term, as many of the displaced workers would be funneled into new jobs where they would once again be paying income and payroll taxes after a year or two of technical training.

The upside of  this proposal is that it would allow society to reap all of the productivity gains that would come from with worker automation: corporations that manufacture goods would have fewer expenses, potentially opening the door for an abundance of cheap goods. Such a proposal would have an impact in the service industry as well. The disruption of the taxi industry and the advent of driverless cars, for example, could mean that 30,000 lives could be saved per year. We should encourage such automation while helping displaced workers. At the same time, workers whose jobs have been automated will begin working in fields that rely less on repetitive tasks and more on variability and human interaction. Importantly, these workers would have an opportunity for self-advancement, and could avoid the despair of having a subsistence income that comes along with a universal basic income program.

The tax plan comes with several drawbacks that make its adoption quite risky, however. To begin with, the results of most job retraining programs have been mixed. An analysis of the Labor Department’s Trade Adjustment Assistance program found that while 85 percent of those who entered the training eventually ended up with a certificate, or a degree, only 37 percent of those surveyed were working in the field that they trained for four years later. Even if job retraining proves to be moderately effective, it is still highly likely that there will be masses of unemployed people. Roughly 30 million people in the United States are employed in routine, low-skill jobs that can easily be automated. Many of the jobs that will become available post-automation will be medium to high skill. Even with massive government backing for job retraining programs, the fact of the matter is that not everyone will be able to retrain for a different industry. There will be people who lack either the education or motivation to complete any technical training, and are only interested in the types of low-skill, routine work that will have been automated.

A far better solution to this problem would be to prevent automation through regulation. The idea is a simple one. Worker automation would be prevented by making it against the law to automate jobs. The key advantage to this approach lies in the fact that regulation can be applied selectively. If there is a specific industry where automation will bring some form of societal benefit with it, instead of only increased efficiency and a larger profit margin for businesses, then the government could choose to let automation proceed within that industry. Allowing disruption in the taxi industry is the most prominent example of this. If it is decided that an industry will do nothing for society other than cut expenses for businesses and increase day to day efficiency, then automation could be prevented in that industry, and workers will be allowed to retain their jobs.

One might object to the fact that the former taxi drivers would still lose their jobs, and that they will have to be accommodated until they can find work. This is a fair criticism. The regulation approach is not a panacea, and all three of these approaches have their own distinctive upsides and downsides. With that being said, the regulatory approach is still the best of the three. The number of workers who would be displaced by it are comparatively much fewer than those who would be displaced by the taxation approach or by a universal basic income. Importantly, there is still room for some of the most promising benefits that automation will bring with it. Consumers might have to wait a little longer in the checkout aisle, but that is a small price to pay for maintaining current American livelihood.

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )


Connecting to %s