May 28, 2014

Bill Gates says robots and automation will take jobs but suggests shifting to consumption tax and subsidizing work

Bill Gates says automation will reduce the total jobs that will be available in the future.

As part of a Q&A session at the American Enterprise Institute, Bill Gates talked about how public policy can help workers, particularly in jobs subject to greater automation, better cope with technological change. Gates favors (a) taxing consumption rather than labor, and (b) subsidizing work rather than a wage floor through a higher minimum wage.

“Software substitution, whether it’s for drivers or waiters or nurses… it’s progressing,” Gates said. “Technology over time will reduce demand for jobs, particularly at the lower end of skill set… 20 years from now, labor demand for lots of skill sets will be substantially lower. I don’t think people have that in their mental model.”

And it’s not just “low-skilled” workers who will have to worry about automation. As Business Insider points out, The Economist earlier this year predicted that high-paying jobs such as accountants, real estate sales agents and commercial pilots would all lose their jobs to software within the next 20 years.

Gates (about 46 minutes in):

[Bill Gates] thinks tax structures will have to move away from taxing payroll. … Technology in general will make capital more attractive than labor over time. Software substitution — whether it’s for drivers or waiters, nurses … it’s progressing. And that’s going to force us to rethink how these tax structures work in order to maximize employment given that capitalism in general over time will create more inequality, and technology over time will reduce demand for jobs, particularly at the lower end of the skill set. We have to adjust, and these things are coming fast. Twenty years from now, labor demand for lots of skill sets will be substantially lower, and I don’t think people have that in their mental model. … Economists would have said a progressive consumption tax is a better construct at any point in history. But what I am saying is that it’s even more important as we go forward because … I want to distort in the favor of labor. …When people say we should raise the minimum wage — I know some economists disagree — but I worry about what that does to job creation. The idea that through the Earned Income Tax Credit you would end up with a certain minimum wage that you would receive, that I understand better than intentionally dampening demand in the part of the labor spectrum that I’m most worried about.

The greatest antipoverty achievement in human history is unfolding before our eyes. The percentage of people living in extreme poverty has plummeted by 80 percent in the past four decades alone. Child mortality has fallen to record lows. Whole societies where deprivation and hopelessness seemed inevitable just a generation ago now rank among the world's fastest-growing economies.

What brought about this remarkable transformation? How can we build on its success? AEI's Philanthropic Freedom Project welcomes Bill Gates for an exclusive event at AEI. In conversation with AEI President Arthur Brooks, Gates will describe philanthropy's role in reshaping the landscape of global poverty, dispel myths about development that prevent the poor from rising, and discuss his prediction that almost no countries will still be poor by 2035

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