A ‘robot tax’ is not the way to save jobs

When two diametrically opposed figures such as Microsoft founder Bill Gates and Benoît Hamon, the Socialist candidate in the French presidential election, both come out in favor of a “robot tax,” that should set the alarm bells ringing.

The tax is supposed to restore the balance between man and machine. However, there are better paths we can go down than this.

Unemployment

The two gentlemen are right to be concerned. In their famous 2013 study, Michael Osborne and Carl Frey of Oxford University concluded that “about 47 percent of total US employment is at risk from automation.”

Later estimates have produced a much lower figure, though. For example, the Organization for Economic Cooperation and Development (OECD) reckons that around 9 percent of all work tasks can be automated and a further 25 percent partially automated.

The optimists point out, moreover, that the unemployment rate never reached such heights during previous industrial revolutions. The jobs that disappeared were offset by the demand for new services and the emergence of new occupations.

But who knows? In the long run, everything might well work out just fine, though a sharp disruption on the employment market in the short-term is rather more likely. The main difference from previous industrial revolutions is the speed of change. A gradual transition was made over generations from an agricultural to an industrial society.

The current digital revolution, however, is changing work requirements radically within a single generation of workers, even within just a decade. Progress is today no longer linear, but exponential.

{mosads}The threat that people will be replaced by machines is therefore very real. Moreover, in that kind of society, those who own the robots will benefit from most of the productivity gains they bring. There then arises the threat that inequality, which can have such side-effects as Brexit and the election of a President Trump, may further increase. Inequality in the U.S. is now at the same level as in the 1930s.

Global corporation tax

A tax on robots is not a desirable solution. You could equally levy a tax on the use of a tractor to harvest potatoes. At a stroke, you will have thus created jobs for 20 extra workers! And Malthus, who predicted that the sharp rise in world population would lead to severe food shortages, would finally be proved posthumously right.

A higher corporation tax on those businesses that make exceptional profits from digitization could be envisaged, but is perhaps not necessary. Ensuring proper payment of the corporation taxes in place today would already be a gigantic step forward. Levying a global corporation tax would go a long way toward closing off tax havens.

This could be combined with the idea of Belgian Fintech guru Jurgen Ingels to finance growth companies with a small percentage of the national tax take. The government would then distribute the shares acquired in those companies among the working population so that they can also enjoy the fruits of those productivity gains.

Transformation map

The best line of defense, just as it was in the past, is education and (re)training. Lifelong learning is becoming more important than ever. Government, companies and trade unions must all work hand-in-hand to make the workforce aware of the realities and provide them with appropriate training. Together, they should draw up a “transformation map” showing jobs in existence today, those jobs that are in jeopardy and where the jobs of the future lie.

Now, you are not going to be able to turn a truck driver or cashier into an information technology specialist. But retraining and permanent additional training will help them to make the step up on that day when the self-driving truck and the Amazon store with an automated payment system become a reality.

So why should companies invest in training? We need to realize that companies that lay off workers are offloading a huge negative externality, an external cost, onto society. So a decision might reasonably be taken, just as is the case for carbon dioxide emissions, to levy a corresponding tax.

Companies able to demonstrate that they have been providing their employees with constant retraining would receive a tax cut, while those firms that are burdening society with mass layoffs of undertrained people would have to make an extra contribution.

The motto should be: “We cannot guarantee jobs for life, but we do ensure ongoing employability.”

Skills bottlenecks

Apart from being a must for employees, continuous training is also vital for companies. Specialized courses designed to teach the required skills for new jobs should be developed in conjunction with colleges and universities. This will mean that skill shortages which are creating productivity bottlenecks can be filled much faster, helping to boost growth.

The higher the level of welfare we achieve, the easier it will be to mitigate disruption when it comes.

Conclusion

We are now on the brink of the fourth industrial revolution. Trying to slow the revolution down with a robot tax does not seem very sensible. However, it is feasible to introduce a package of measures designed to turn the revolution into a process of evolution in which as many people as possible are able to take part.

The sooner we start to think seriously about this and introduce appropriate measures, the less disruption we will face during the next few decades. 

Koen De Leus is the chief economist at BNP Paribas Fortis. He is the author of “De Winnaarseconomie” (“The Winners’ Economy”), scheduled for publication in May. Follow him on Twitter @KoenDeLeus.

The views of contributors are their own and not the views of The Hill.