Friday, January 30, 2015

Maybe we need an Automation Tax

Imagine this situation. A large company decides to significantly increase the level of automation at one of its facilities. A facility that currently employs a substantial number of men and women doing relatively low-skill tasks, which can now be done by a new generation of robots. Most of the workers get laid off which, for them and their families, leads to real hardship. The company was the only large employer in the area, which is economically depressed (one of the reasons perhaps that the company built the facility there in the first place), so finding alternative work is really difficult. And because most of those jobs were minimum wage, with little or no job security, redundancy payouts are small or non-existent and this of course means that the laid-off workers have no financial buffer to help them re-skill or relocate.

Now I am not anti-automation. Absolutely not. But I believe very strongly that the benefits of robotics and automation should be shared by all. And not just the shareholders of a relatively small number of very large companies. After all, the technology that such companies benefit from was developed by publicly funded research in university research labs. In other words research that you and I funded through our taxes. Ok, you might say, but companies pay tax too, aren't those taxes also contributing to that research? Yes, that's true. But large companies are very good at reducing their tax bill, multinationals especially. Our imaginary company may, in reality, pay most of its tax in a different country entirely from the one hosting the facility.

And of course it is we, through local and national taxation, who - as best we can - pick up the pieces to support the laid off workers and their families, through family tax credits, employment and support allowance, and so on.

Maybe we need an Automation Tax?

It would be a tax levied nationally, whenever a company introduces robotics and automation to one of its facilities in that country. But the tax would only be payable under certain conditions, so for instance:

  • If the new robotics and automation causes no-one to be laid off, then no tax is due.
  • If the automation does result in jobs becoming redundant, but the company re-trains and re-deploys those workers within its organisation, then no tax is due.
  • If the company does lay off workers but makes a tax-free redundancy payment to those workers - regardless of their contract status - sufficient to cover the full costs of retraining, upskilling, and - with all reasonable efforts - finding work elsewhere, then no tax is due.

Only if none of these conditions are met, would the automation tax be due. The idea is not to discourage automation, but to encourage companies to accept a high degree of responsibility to workers laid off as a result of automation, and more widely their social responsibility to the communities in which they are located. The tax would enforce the social contract between companies and society.

Of course this automation tax doesn't go anywhere near far enough. I think the best way of sharing the wealth created by robotics and automation is through a universal Basic Income, but until that utopian condition can be reached, perhaps an automation tax is a start.


  1. I’ve been thinking about these issues lately, and I think your proposal in general form is very just and worth pushing at the political level. However, the way you’ve cast it makes it look as though workers are incapable of anticipating automation for themselves in a way that might lead them to ‘jump before they’re pushed’, minimizing costs all round. In particular, I was struck by the costs that might be incurred by companies who went down your third bullet point. However, at least in principle, these could be avoided if clear signals were given about the tendency toward automation in certain industries and services, which in turn workers would read as an increase in the precariousness of their own employment – long before they are actually made redundant. Indeed, this would enhance the pace of automation and minimize civil unrest.

    I propose this because, as you say, you’re pro-automation. So it would seem to follow that automation needs not only a tax regime, which is likely to appear punitive, but also a public information programme that flags the onset of automation in various areas so that workers get a heads-up that it’s time to change fields. (And here lies the argument for robust public support for mid-life retraining programmes -- more people are going to need it.)

    1. Many thanks Steve, very interesting comments.

      In response to your first point, the very people I have in mind are those least able to anticipate and prepare themselves, the minimum-waged already struggling to get by. People we used to proudly call working class, but are now more often (and aptly) described as the precariat. But your point is very well made.

      Re public information. Couldn't agree more: we need more honesty and openness. The mantra is that new technology creates jobs, and wealth. Which is true in the long run! But that's no comfort at all to those low-skilled individuals who's jobs are lost short-term, and who lack the resources to retrain.

  2. Very interesting thoughts. As automation becomes more advanced, people are starting to ask if their jobs will be taken over by robots.

  3. Perhaps we should encourage workers to automate their work themselves, e.g. subsidize workers that buy/develop a robot to replace themselves. The robot's pay goes to the workers.

  4. I've actually been thinking a lot about this very issue and seriously entertaining this very concept. I've worked in local government, involved in providing economic development incentives to companies, some of which actually ended up reducing the beneficiaries workforce. There are often provisions for a workforce laid off because of a major employer closing, but the issue of employees' made redundant due to automation isn't addressed at all.

  5. Intresting thoughts. I wish it was brought up by our purported future "leaders" at the last debate. If I'm not mistaken our current tax code actually encourages technology that eliminates jobs.