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Tax reform, job creation and the ‘droid revolution.

November 29, 2017

Although lost amongst all the hater verbiage, a report by McKinsey Research on the effect of automation in employment did manage to make it into some news feeds yesterday,

The report stated that by 2030, 30% of work tasks in at least 60% of all U.S. occupations will be either partially or fully automated.

That might make any gains in employment projected to accrue from tax reform very short term indeed.

Although the idea of the world being taken over by machines has been around in sci-fi works forever, this seems to simply be another case of imagination being prescient to reality.

What has that got to do with tax reform? Well for one thing, it isn’t just tax rates that impact job availability. For another, it makes the value of allowing immediate write-offs of new equipment costs more important than you might think.

A number of skeptics have already pointed out that the low unemployment figures politicians like to tout could mean that the people to fill those traditional jobs might not be there.

Typically that is used to advance the case for unlimited immigration. After all, why would a business choose to relocate back to the States, if its workforce has to remain overseas due to a lack of supply?

Where are all those workers?

One problem currently with people re-entering the workforce is that a much larger percentage of the traditional workforce than is usually recognized is already working, but not for an employer.

Various think tanks and researchers note that some 15-45% of the pre-recession workforce are now working in the so-called gig economy.  In short, they are freelancers/independent contractors. Furthermore,  a good share of them plan to stay in that sector, and millennials are the largest demographic within that group.

Government figures are all but useless in identifying the actual number since they lump together agency controlled temporary workers, the person who works for Uber or Lyft two or three times a month for a little extra pocket money, and the committed freelancers, or ICs (independent contractors)  whose entire livelihood is derived from marketing their own skills or niche expertise to clients on a contract basis rather than working for a traditional employer.

They will not be showing up in employment offices any time soon.

Make no mistake, employers are going to find a way to produce the goods and services they sell as efficiently and cheaply as possible.

For some, that means learning to cultivate a new business model that incorporates what one report calls “the blended workforce”  that utilizes both traditional employees and on-demand contractors. That will  primarily affect jobs that can’t be easily automated, i.e. those where human interaction is still an asset.

For others, it will mean automating every last possible task that can be performed by a robot or it’s more sophisticated cousin, the AI-equipped “android” worker.

The recent liberal outcry for a $15 minimum wage only accelerated that trend,  as Musings has previously observed.

The future is already here.

Recent  Black Friday news stories inadvertently highlighted the drawbacks of human employees vs. automation.

Several stations ran a story showing employees at an Amazon fulfillment center doing some sort of low-impact stretching exercises before going to work as well as robotic material handlers.

There are already lots of companies manufacturing and marketing  mechanized auto-programmed human replacements.

The story tried to emphasize that Amazon was integrating mechanization with human employees, but in reality, it was a modern look into a similar time when tractors and trucks replaced horses in the early 20th century.

Robots don’t get back injuries, nor do they sue, and they were working while the humans were stretching their hammies.  Robots also don’t strike for vacations, draw unemployment insurance or require workman’s comp payments, a selling point that both ICs and robot salesmen point out to great advantage

Again, what has all this to do with tax reform?

Well, for one thing, maybe it’s time to take whatever you can get now, because by 2050 or so, revenue from income tax will be replaced or at least augmented by some sort of annual Federal use tax on those ‘droids.

For another, it’s not if but when this will all have to be done over.

If a freelancer (like me) can figure out that the permanence of all this is illusory, what makes you think those folks in Washington haven’t looked into the future  too?

From → op-ed

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