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Saturday, 05 May 2018 00:00
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A higher tax on the rich to fund those losing jobs of no use


Few doubt that a very large number of job-types will disappear with faster developments in robotics and artificial intelligence, but while it is important we prepare for this—by re-educating and re-skilling the workforce—it is important to keep a perspective, if only because every wave of technology in the past has created jobs while destroying others. The McKinsey Global Institute (MGI) report which, last year, talked of automation destroying 400-800 million jobs globally by 2030, also spoke of new opportunities for 390-590 million jobs in the normal course; it also spoke of new jobs arising from the 0.8-1.4ppt rise in annual productivity and another 165-300 million jobs if fresh investments were made in areas like infrastructure. In the case of India, similarly, while MGI’s mid-point job-destruction estimate was a loss of 57 million due to robots and AI, it estimated 114 million new jobs for India in just the baseline scenario due to greater demand arising from higher incomes and productivity hikes; additional infrastructure investment, it estimated, could create another 98 million jobs. In other words, it is not quite the doomsday scenario most paint. Between 1910 and 1950, MGI estimated, cars destroyed 0.6 million jobs in the US but created 7.5 million new ones.

This is why the Asian Development Bank’s recent proposal to tax the rich more to help create a fund to help those losing jobs to AI makes little sense. For one, instead of assuming people will not be able to find jobs, the emphasis has to be on what kind of education and retraining will be required to ensure they do get jobs, and to invest in areas such as infrastructure or healthcare or education to make sure they do. In the case of India, for instance, MGI had estimated that around 100 million more jobs that will be created by 2030 will require at least secondary-level education; in such a case, the policy response has to be to fix schooling and college education. Also, while it is true that governments will need more money to spend on education or healthcare or infrastructure, there is a theory of optimum taxation—tax the rich beyond a point and, chances are, they will start working less or find ways to avoid the tax. Creating a class of people permanently living on dole, in any case, creates its own set of problems. Hopefully, policymakers gathered in Manila to discuss the ADB report won’t fall for such populist posturing but will search for more practical solutions.


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