Bill Gates claims that we should tax robots in the future, as they will take American jobs and we’ll need the tax revenue to support the unemployed. Yale economics professor Robert Shiller agrees. I’m no billionaire or Yale professor, but I couldn’t disagree more.
The idea that robots will cause widespread unemployment seems farfetched to me. After all, what is a robot? It’s something that automates tasks, like a smart phone, calculator or personal computer. These are just a few examples of the hundreds of productivity-improving technical advances of the last 25 years. My mom says that the dishwasher is an early form of robot, which I agree with. So, why didn’t we tax any of those?
I think the reason that people want to tax robots in particular is that they look somewhat like humans, with moving arms, camera eyes and even speech in some circumstances, making them more recognizable and therefore threatening. But they are really just an advancement in the steady drumbeat of technological improvement over the last 150 years, none of which lowered employment or tax income (see chart above to see how per capita tax has increased markedly over the last 15 years while much of the technological change has occurred).
Now, it is true that technology can cause loss of jobs. Let’s look at a few examples of some advancements and consider the unemployment they caused.
Automobiles – Put blacksmiths and stable owners out of business.
Electricity – Bad for candle makers, kerosene producers, and chimney sweeps.
Tractors and chainsaws – In 1870, 50 % of population was employed in agriculture. As of 2017, less than 2%.
Automatic elevators – So long elevator operators.
Calculators – Put adding machine and slide rule manufacturers out of business.
Dishwashers, washing machines – No more need for domestic help.
Desktop publishing – Goodbye typesetters, lead type makers, and copy boys.
Excel spreadsheets – No more need for ledger and binder makers or low level bookkeepers.
What happened to all those jobs? They disappeared, but new ones sprang up to replace them. Jobs like Programmer, App Developer, Database Administrator, Cloud Computing Expert, Uber Driver, Chief Experience Officer, User Interface Manager and Social Media Manager. Someone looking at that list just 25 years ago wouldn’t even understand what most of those titles mean. And that will happen again; jobs will exist 10 or 20 years from now that aren’t imaginable today.
Funny story: Someone in our office told me yesterday that she’d just seen Minority Report again and commented on how accurate it was in predicting the future. Except for the characters whose job was to run around with disks and memory sticks putting new content on the various devices. Even a movie that forward-looking couldn’t imagine the reach of the internet and the invention of cloud computing.
My overall point here is that predictions about robots and AI replacing jobs are accurate, but it’s only half the story. The other half is what always happens, that is the constant reinvention of our economy, the birth of new ideas and companies – and the jobs that come along with it.
After all, if similar dire projections over the past century were true, we should have all-time high unemployment. But that just hasn’t happened. The current unemployment rate of 4.3% is right about where it was in 1960.
So no, we shouldn’t tax robots. Higher taxes have always meant more government spending (see increasing U.S. deficit spending for the last 20 years, as per capita tax rates also increase, in the chart above). We should stop trying to manage society via the tax code and free innovation to do its thing.