the flaw in your reasoning i think is that there will be zero-sum fight to have the limited number of companies in your country so that you can tax those companies and support the massive number of unemployed people. there will be a race to the bottom in the automation regulation that you describe because companies will just move if they are not allowed to lower costs through more automation... thus i think the result is that some countries will have very high employment rates because all the high-skilled, unautomatable jobs are located there (e.g. the US) and some countries (e.g. spain?) will have really high unemployment... this will lead to extreme tensions internationally followed by god knows what..
That sounds like a recipe for crippling the competitiveness of the US relative to other countries. It's not like China is going to slow down on the inevitable march towards automation.
The absolute best scenario is for a country to automate as much as possible as quickly as possible to capture the productivity gains available on the global scale and then figure out how to tax gains (from automation or otherwise) domestically after the fact to support those in its population that have been displaced.
If you think instability from unemployment is bad, it's certainly worse if you also have the problem of not having the resources to even try and address it.
At some time in the future the drive to increase profits by automation will increase unemployment in ways that will lead to the biggest recession we'll ever see if we don't have basic income.
Can you see a capitalistic world working with 30% unemployment? How about 80%?
The problem with this rosy picture as all other rosy pictures about automation is that depending on the speed of technological change any automation will potentially destroy the livelihood of a lot of people before they are able to re-adjust to a new economic reality. People can't typically change their skill-set as fast as technology can be introduced.
This doesn't have to be a problem if a country has welfare system mechanism to cope with redundant workers, giving them a line to hold onto until they can re-adjust to the new reality.
The problem is when you combine rapid technological progress with small government dogma. That creates a toxic combination where the only winners are the rich.
This is unfortunate because when you setup a society this way it causes large fractions of the population to fight technological advancement, free trade and immigration.
I think the %1 have to to realize that if people are going to buy into their desired free trade and technological upgrades, then you got to offer something in return. Taxes stuffed away in Panama isn't an acceptable answer to most people ;-)
It is foolish to think that this won't result in unemployment. We live in a time in which higher labor costs for marginal work can be eliminated through automation and these higher labor costs will only accelerate that transition. You may not like that fact, but that's what will happen. You don't a free ride on planet earth and no foolish government policy can change that.
Strictly looking at everyone's selfish interests we will head to destruction of jobs which can be automated because it's the companies that decide which people to employ. If a law is passed that people must be employed, automation will happen elsewhere and companies from abroad will be more successful.
The problem, if there ends up being one, is the speed of displacement. People worry that too much downward pressure on so called 'middle class' jobs will create another 30 year stretch of zero wage growth for a big part of the population, which in turn puts a lot of political pressure on the system to 'do something'.
Very hard to say if that will come true though, if automation dramatically speeds up, we would see a surge in productivity. Yet in recent years, we are seeing slower, rather than faster productivity growth relative to the long term trend. Take note that the doomsday jobs predictions implicitly forecast that we'll be making more stuff, using less effort, meaning society will be richer.
From a tax policy perspective, a VAT addresses Gate's concerns pretty well.
1. Automation is lowering amount of available jobs at lower skill levels.
2. New markets created by automation no longer manage to suck lower skilled level workers back in before those markets themselves get automated.
3. Government can't allow for high unemployment as it causes civil unrest due to jobs being most common way people get money to fulfill their basic needs. Government then makes up some jobs and finds pathological ways to provide food and shelter for some people. Lots of new government entities were created or strengthened over recent years. Prison population is as always growing.
My conclusion:
We need to deal better, more honestly with inflow of unemployed that will not subside. 50% (or higher) unemployment is perfectly fine and eventual inevitability. But we shouldn't lock half of these people up and pay some of the rest to guard them and the rest of the rest to do some fake paper-pushing or citizen groping government jobs. I think basic income guarantee is good solution especially implemented together with sponsored, high quality education that can help some unemployed (those who can and are able) to make the jump into future highly skilled workforce that will architect, manufacture and implement further automation.
I expect automation to replace most human jobs. At some point in the future we'll move to a universal basic income funded by the work robots do. I think we'll be forced to.
Automation is already displacing massive numbers of workers. The Economist argues[1] that the current rise of populist leaders is partially a result of this. People in poorer areas are angry at offshoring and trade for the lack of jobs, and vote for Trump and Brexit to fix it.
That's assuming that the vast majority of employment can be automated away at a low cost at this point in time. Which isn't true. Even if it can be in the US or other developed countries, that in no way applies to everywhere.
There's another way to look at this. As automation increases, the costs of running businesses decreases, making it easier for new entrants to compete (assuming the computing hardware and software is easily accessible). So as the workforce becomes increasingly computerised, you could see an increase in company owners (a job that is unlikely to be ever computerised).
There are two main drawbacks to this alternative view. Firstly, there will still be restrictions in place of physical resources (not everyone would be able to setup a mining company, for example), which will govern who can compete. Secondly, there would be limits on how many companies in a certain sector could be sustained. At some point I hope we resolve these issues by moving beyond personal greed.
On one hand few companies which will own autonomy tech will get all profits, while a lot of ppl will lose job. So the transportation cost instead of going to labour will mostly go to capital owners or decrease.
In long run we should be fine, but in short it may cause a lot of friction.
The problem seems to be rooted in automation replacing jobs faster than it creates new ones. The solution, then, may be to limit automation so that we have close to full employment.
The best (economically) way to limit automation is to tax it. You set the level of the tax, and basic economics does the rest. The jobs that are more economically done by humans (after the tax on automation) get done by humans. If there are still too many people unemployed, raise the tax. If the job market gets tight, lower it.
What could go wrong? Plenty:
The tax might not cover all forms of automation.
The tax might be set at levels that are politically determined, rather than for the effect on employment.
Raising and lowering this tax could react in unfortunate ways with the business cycle.
Foreign countries using automation could eat our lunch. We could to some degree handle that with tariffs, but they might respond with tariffs of their own and kill our exports.
I'm sure there are more possible problems that I haven't thought of. Never the less, in theory, this might be a decent solution.
This is based on the false premise that productivity growth is limited and we do not have sufficient means of production to feed a country if somebody is working in entrepreneurship instead of working. The whole point of automation is to free up labour. The additional labour has to go somewhere. Do you expect every English major to work in an Amazon warehouse or become Starbucks baristas?
Can you cite a source? Every generation for the last 200 years has felt this way, and I was taught from an econ degree years ago that historic averages turned out to be ~1.2 jobs created for every job lost to automation. Economies also tends to be self balancing which further lends credance to the idea that it’s really hard not have an employed work force. I think the bigger problem isn’t automation, it’s the way we treat capex vs opex in corporate accounting. We’d go a long way to make paying someone more tax beneficial than to go the ludite route.
(I also don’t mean to downplay the pain if displacement from automation, it’s a very real problem and a reason I’m a big fan of social safety nets)
Automation leads to higher productivity, so those fewer people can earn more and spend more.
The economy will do just fine.
I think it'll be a rocky time though, we're facing a new Industrial Revolution - where the existing capitalists would prefer to drive down wages and destroy trade unions via mass immigration, and ordinary workers want to reverse their worsening standard of living. Brexit was just the start of this, but I think we'll see more radical movements until this is resolved.
Ambivalently, this is the reality of things, unless you restrict globalization and implement domestic laws against automation, economic pressure is going to provoke automation in many areas, first in the most automatable and later on in higher value added areas...
the flaw in your reasoning i think is that there will be zero-sum fight to have the limited number of companies in your country so that you can tax those companies and support the massive number of unemployed people. there will be a race to the bottom in the automation regulation that you describe because companies will just move if they are not allowed to lower costs through more automation... thus i think the result is that some countries will have very high employment rates because all the high-skilled, unautomatable jobs are located there (e.g. the US) and some countries (e.g. spain?) will have really high unemployment... this will lead to extreme tensions internationally followed by god knows what..
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