Tech Displacement Levy: Shaping Future Labour

By Nivakan SritharanThe upcoming fourth industrial revolution (IR 4.0) such as automation, robotics, artificial intelligence, machine-to-machine (M2M) and the Internet of Things (IoT) is being actively used to shape the world of tomorrow.According to the World Economic Forum, IR 4.0 …

Tech Displacement Levy: Shaping Future Labour

By Nivakan Sritharan

The upcoming fourth industrial revolution (IR 4.0) such as automation, robotics, artificial intelligence, machine-to-machine (M2M) and the Internet of Things (IoT) is being actively used to shape the world of tomorrow.
SWINSays Swinburne Sarawak

According to the World Economic Forum, IR 4.0 will change the way people live, the way they are connected, and the way they work; particularly, this change will transform the nature of work and require continuous skill development.

This transformation is consistent with the United Nations’ 9th Sustainable Development Goal, “Industry, Innovation and Infrastructure,” and challenges the 8th Sustainable Development Goal, “Decent Work and Economic Growth”.”

This article discusses how the Technological Displacement Levy controls the displacement of human labour by automation

IR 4.0: Reshaping the Future

IR 4.0 is the next phase of digitization that commenced in the manufacturing sector around the mid-2010s. It is expected to revolutionize the global economy through automation, human-machine interaction, and advancements in robotics. 

This has impelled the manufacturing industry to ensure that its workforce is ready to adapt to the new situation, and being equipped accordingly. Ensuring the sustainability of human labour while addressing technological advances in the industry, has become an essential component of policymaking.

One of the confirming approaches adopted is to penalise an invention that causes negative externalities. For instance, the UK government imposes taxes on carbon emissions, which produce adverse effects on the community.

In a similar vein, a Tech Displacement Levy is a fine levied applied to technological advancements that have negative externalities, displacing human labour from jobs.

Introducing the Tech Displacement Levy 

In this age of technological advancement, the concept of a Tech Displacement Levy has become a central and much-debated issue on the global stage.

The Tech Displacement Levy, often discussed under various names such as robotics tax or AI tax, refers to the imposition of taxes or fiscal measures on the use of automated systems for its use, highlighting the potential displacement of human workers by automation and the need to address the consequences.

As the world navigates this complex landscape, policymakers, businesses, and individuals alike need to understand the dynamics and implications of the Tech Displacement Levy.

South Korea’s Pioneering Robot Tax

In light of this, South Korea became the first country in the world to implement a robot tax to curb automation and displacement of human workers.

The application of the robot tax is simple, and applied to all types of robots, regardless of their purpose. The robot tax does not assess whether the use of robots supports or replaces human labour, but imposes a fixed tax rate.

However, the levy could be used to assess and measure how automation is used in industries that replace human labour, and the levy rate is applied to how automation is used in industries

The introduction of the Tech Displacement Levy can provide governments with a new revenue stream that can be used to fund social programmes, retraining, and other initiatives to help those affected by automation-induced job displacement. It can encourage investment in skills development and workforce training programmes, ensuring that workers remain competitive in the labour market.

These policies can include incentives for industr
ies to create jobs or maintain a certain level of human employment. By taxing automation, a government can redistribute wealth and reduce income inequality

Challenges and Considerations

However, the implementation and enforcement of the Technological Displacement Levy can become complex. It results in a heavy administrative burden that makes compliance costly for businesses. This leads to businesses, responding to this tax policy, by cutting jobs or relocating them to areas with lower taxes, which could exacerbate job displacement.

An excessive Technological Displacement Levy could discourage businesses from investing in automation technologies that could increase productivity and competitiveness.

The Tech Displacement Levy may not be equally effective in all industries and regions, and it has unequal impacts on workers and businesses.

Promoting Responsible Automation 

To assess the extent of automation in different industries, the government may need to re-consider how human labour is used for automation. Automation technologies that replace human workers can lead to a high-tech Displacement Levy. 

Taxing automation, along with the associated tax burdens, discourages companies from investing in new technologies. The Tech Displacement Levy can provide incentives for the industry to retain human workers while integrating automation technologies.

By using the Tech Displacement Levy as a complementary tax policy tool, the government can offset the potential negative impacts of automation. By providing favourable tax treatment for automation, the government can create a fairer tax environment for businesses.

In summary, a Tech Displacement Levy could be the right tool to mitigate the displacement of workers caused by automation and achieve UN sustainable goals.