Sunday, March 5, 2017

Robots Should Pay Income Taxes?


Right now, the human worker who does, say, $50,000 worth of work in a factory, that income is taxed and you get income tax, social security tax, all those things. If a robot comes in to do the same thing, you’d think that we’d tax the robot at a similar level.”

Those were part of the comments made just two weeks ago by Bill Gates during an interview with the Seattle Times.  It did raise some eyebrows but he was serious. Does he have a point?

From a Wall Street Journal article (By STU WOO Feb. 27, 2017):

 “Within 30 years, artificial intelligence will be smarter than the human brainaccording to  Masayoshi Son, chief executive of SoftBank Group Corp., who says that supersmart robots will outnumber humans and more than a trillion objects will be connected to the internet within three decades”.

More and more production jobs are now done by robots. The auto industry is a good example where robots do a variety of jobs that require repetitive but critically accurate and consistent results. More importantly, they can sustain that same level of performance throughout the entire 8-10 hour shift without taking coffee or bathroom breaks. They paint to the thickness of thousandths of an inch specification without a respirator or goggles; weld to the prescribed thickness uniformly with unerring accuracy without missing a joint or seam.

There is no question robots will outperform humans in all repetitive tasks. Sustained productivity with very little downtime saves corporations a lot of money from robots that cannot/will not file grievance, let alone form unions, or ask for paid vacation or take sick leave. What Mr. Gates was referring to, if I understood his comments, was that for every job a human is replaced by a robot, the country loses a tax payer.  In cases where a single robot replaces the job of three or more people, the tax base loss is not only visibly exacerbated, the revenue loss is compounded.

Automation is going to replace a lot of menial and service jobs.  Wendy’s, the latest among fast food chains to do so, just announced a nationwide plan to set up self-order kiosks to save on rising labor costs.  Customers are already filling their own drinks and putting away their trash before leaving; is it too farfetched that someday they may have to flip their own burgers or grill their own chicken?

Speaking of chicken, high tech poultry management is such that eggs go straight from hens to the grocery store untouched by human hands. The consumer is likely the first to touch the eggs if he or she bothers to cursorily inspect the eggs in their cardboard or Styrofoam containers before placing them into the shopping cart.   Often, the first time the egg is ever touched is right at the moment before it is cracked into the frying pan or dipped into boiling water to the prescribed time for hard or soft boiled. Even hatching eggs that are sold to commercial and retail outlets are automated to the point where eggs go from the hatchery to temperature controlled incubating rooms, monitored, then hatched devoid of the hen’s attention.  The only time they’re touched by a human is when a worker quickly inspects them for their gender for about three seconds who then unceremoniously toss them into separate chutes that take the unsteadily flapping chicks onto conveyor belts, after which an electronic counter segregates them for packaging.  Their first feeding will not occur until they reached either a commercial poultry or retail outlet (where chicks are sold individually to small farmers or rural homeowners).  The chicks will have reached their destinations after hatching and processing within 24-48 hours.

Economic globalization aside, technology still accounts for much of the differences in how businesses are conducted around the world.  Businesses in the developing countries are coping a little differently from those in advanced areas.  Last December at a party I had an interesting conversation with a Filipino businessman whose privately held corporation was engaged in poultry.  It is still a labor intensive business there.  So, what they lack in automation is made up for by streamlining the workers’ activities with time and motion studies, believe it or not, as they go about replenishing feed and water, cleaning the coop, processing of the meat, etc.  Apparently they were able to optimize productivity to the extent that they could without relying on machines and computer controls. There are no automated feed and water dispensers, or computer controls for humidity and temperature.  Analog data processing is still practiced as far as keeping tab on the number of days it takes to get the chicken to the target weight, how much feed is needed per pound of meat after so many days, mortality rate, etc. It is a huge business that requires a staff of veterinarians attending to the welfare of the birds. They recognize that monitoring for avian disease, prevention and immediate quarantine are crucial to their success on any given year.  Cost-saving ideas are always discussed, including considering at one time the idea to do away with security guards. There is a fixed cost to maintaining 6-8 security guards, plus a supervisor, so they weighed that against the variable costs due to losses from pilferage and theft.  After careful analysis they figured it a wash so they opted to keep the guards. The businessman confessed that the decision was made more out of humanitarian consideration.  He reminded me that automation and robotics constitute a small slice of how things get made and processed in much of the world, outside of the industrialized countries. He may be right because what we observe here in the U.S., for example, is not quite widely practiced (and prohibitively costly to businesses) in Asia and Africa which account for 70% of the global population; the remaining 30% is split between Europe, the Americas and Oceania. Where labor cost is still cheap automation is not so easily justifiable; except perhaps on exportable goods that demand consistency in quality.

Let’s get back to what Bill Gates is concerned about. Trade imbalances aside, Europe and the U.S. need to automate to compete and produce higher quality goods, but China have automated already for much of the merchandise they export, thanks to U.S. and European companies that moved their production there.  And Chinese labor cost is way comparably low {for repairing and maintaining the machines}.  So, jobs have been lost here while automation is lowering the tax base.  Bill Gates is perhaps correct to lament on the issue but corporations will push back because paying income taxes for the robots negates the whole idea of cost savings from automation.  Besides, the companies say they spend a lot of money in research towards designing and building the robots. And how much does it cost to raise and educate a human worker?  The Department of Agriculture’s recent estimate on the cost of raising a child up to the age of 17 is $233,600. That does not include what taxpayers pay for their public high school education and if we add college costs to that, a human worker does cost so much; however, labor unions and college-educated workers can claim that corporations do not shoulder those costs. Does the corporation have grounds to bring up the cost of a robot?

It is undeniable that indeed the rise in automation and robots doing work that humans used to do will result in lowering the number of people paying income taxes.  Consumers benefit but the government will have less to provide for infrastructure and services? I plead ignorance on this one and let the economists debate it.

What about Masayoshi Son’s prediction? It only compounds everything, doesn’t it?  Some serious folks take it to an even hyper-concern only science fiction writers used to think about. Take the latest from Bloomberg, below:

Bloomberg Technology’s Dina Bass (March 2, 2017, 5:00 AM CST) published recently: “AI Scientists Gather to Plot Doomsday Scenarios (and Solutions)”

“Researchers, cyber-security experts and policy wonks ask themselves: What could possibly go wrong?”

“Artificial intelligence boosters predict a brave new world of flying cars and cancer cures. Detractors worry about a future where humans are enslaved to an evil race of robot overlords. Veteran AI scientist Eric Horvitz and Doomsday Clock guru Lawrence Krauss, seeking a middle ground, gathered a group of experts in the Arizona desert to discuss the worst that could possibly happen -- and how to stop it”.

Suddenly Bill Gates’ concern about robots eroding the tax base is nothing compared to “an evil race of robot overlords”.  How did we go from robots taking over our jobs to super-intelligent cyborgs. Where this word used to come from combining the word cybernetics and organism, thus giving us the image of a half-robot, half human, an alternatively accepted definition is as follows:

“Cyborg, a compound word derived from cybernetics and organism, is a term coined by Manfred Clynes in 1960 to describe the need for mankind to artificially enhance biological functions in order to survive in the hostile environment of Space. Originally, a cyborg referred to a human being with bodily functions aided or controlled by technological devices, such as an oxygen tank, artificial heart valve or insulin pump. Over the years, the term has acquired a more general meaning, describing the dependence of human beings on technology. In this sense, cyborg can be used to characterize anyone who relies on a computer to complete their daily work”.

Now, just like that, modern society is populated by cyborgs.  In fact, one would have to be a Masai cattle herder in Kenya and Tanzania, or someone from the jungles of Papua, New Guinea, or from remote rainforests in Brazil to not be associated with cyborgs.  Henceforth, earth’s population will be split into two main categories of cyborgs and plain homo sapiens.  Next time you order fast food or apply for a driver’s license, remember you are being served by a cyborg.

We’ll talk about the robot overlords on the next blog…


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