New York City mayor and floundering 2020 presidential candidate Bill de Blasio’s latest act of desperation has been to propose a “robot tax” as part of a plan to fight rising automation. But if he’s really concerned about the trend, one thing he should take a look at is his support for a $15 minimum wage.
In an opinion piece at Wired, de Blasio writes ominously about the threat posed by robots replacing human workers and naturally concludes that the solution is for government to tax, spend, and regulate the problem away:
Recommended Stories
FAWPA would create a permitting process for any company seeking to increase automation that would displace workers. Approval of those plans would be conditioned on protecting workers; if their jobs are eliminated through automation, the company would be required to offer their workers new jobs with equal pay, or a severance package in line with their tenure at the company.
Additionally, my plan would close tax loopholes worth hundreds of billions of dollars for corporations that invest in automation and then often deduct it on their taxes, even if they know that their “investment” will likely destroy their employees’ jobs.
Lastly, my proposal would institute a “robot tax” on large companies that eliminate jobs through increased automation and fail to provide adequate replacement jobs. They’d be required to pay five years of payroll taxes up front for each employee eliminated. That revenue would go right into a new generation of labor-intensive, high-employment infrastructure projects and new jobs in areas such as health care and green energy that would provide new employment. Displaced workers would be guaranteed new jobs created in these fields at comparable salaries.
As it is, de Blasio’s plan is an economically destructive one that would impose more costs on businesses unless they operate in a more inefficient way. But what’s especially amazing is his lack of self awareness. De Blasio has been a major advocate of a $15 minimum wage, which has been associated with increasing automation.
To be clear, the trend in automation is an economic development that’s broader than any single government policy. In many cases, the trend would be happening regardless of minimum wage policies. Nonetheless, in a number of industries, raising the price of labor through a higher minimum wage makes the economics of automating a lot better, essentially making sure that the capital investment in a machine pays for itself a loot sooner than if wages were set at market rates. Thus, higher minimum wages can accelerate the trend toward automation.
A 2017/2018 paper by economists Grace Lordan and David Newmark took a close look at the effect of minimum wage hikes on employment in jobs that are “automatable.” According to the study: “Based on CPS data from 1980-2015, we find that increasing the minimum wage decreases significantly the share of automatable employment held by low-skilled workers, and increases the likelihood that low-skilled workers in automatable jobs become non-employed or employed in worse jobs.”
Payroll processing firm ADP also noted that “federal and state mandated minimum-wage hikes could accelerate the migration toward replacing low-skilled workers with automation.” Many of the largest minimum wage or near-minimum wage professions (such as the food service industry and grocery cashiers) are among the easiest to replace with automation.
Wendy’s cited labor cost savings when moving toward kiosks for ordering.
The disruption that rising automation could have on lower-skilled laborers is a legitimate subject for debate, but before racing to implement a raft of destructive economic policies, de Blasio should reconsider how some of his own policies are contributing to problem he’s identified.
