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Why the UK Needs a Tax on Job-Stealing Robots Now

by John Brian Shannon

Q: Why does the UK need a tax on job-stealing robots?
A: To pay Universal Credit to millions of soon-to-be-replaced workers.

And why do we need Universal Credit in one of the richest countries on the planet?

Because unemployment skyrocketed due to the recession in the 1980’s, it skyrocketed again when millions of UK jobs began to be offshored in 1990, and again when millions of immigrants arrived in Britain looking for work.

And because automation and robotics are about to change the world more than all of the above combined!

Bye Bye UK Jobs (Offshoring)

Since 1990, but beginning in earnest around 2000, UK businesses began outsourcing much of their manufacturing to Asian and non-Asian countries that offer low-cost labour.

This had an immediate and positive effect on company profits in Britain and resulted in just as immediate job losses in the UK as millions of ‘man-hours’ shifted to Asia. Consequently, the unemployment rate shot up, and eventually, many of those formerly employed people ended up on some kind of social assistance, or moved back home to Mom and Dad’s house, or they lived a precarious life staying with friends until they could land a job.

Those who didn’t find a job or who weren’t able to stay at Mom and Dad’s house, or weren’t able to mooch off their circle of friends any longer, ended up homeless; either on social assistance or not.

And as some of you already know unemployment insurance benefits only last for so long.

A sad thing about homelessness is that it causes a dramatic rise in crimes like theft, vandalism, hooliganism and other social ills as the homeless watch those fortunate enough to have a job/a home/a warm bed, etc., and resent their success. It’s not evil you’re seeing, it’s human nature.

You’d feel the same way if your company terminated your employment and by the time you got out looking for work there were millions more job applicants than jobs available.

But for UK companies, offshoring jobs scored a solid 6 out of 10 as a means to improve profit.

Enter, The Immigrant Workforce

Some UK companies decided to hire the immigrant workers that arrived on Britain’s shores by the millions and were willing to work for a lower hourly rate than native Britons.

For many companies, this was an even better solution than offshoring jobs which sometimes resulted in questionable quality or problems related to timely delivery of products that were produced offshore and then shipped to Britain.

Some British companies were able to lay-off hundreds of workers on a Friday and have their immigrant counterparts start work on the following Monday without skipping a beat. Of course, there may have been language barriers or quality control issues at first, but on the main cutting their labour costs by one-half (or more) worked wonders for profitability, if not always productivity.

For UK companies, hiring low-cost immigrant workers, probably scores around 8 out of 10 as a means to improve profit.

Rise of the Machines (Job-Stealing Robots)

In the corporate world, the quest to lower costs and increase profits never fades.

That is why cars replaced horses, ships were fitted with powerful engines instead of sails, it’s why jobs were (and still are) offshored to countries that can manufacture items at the lowest cost, and it’s why jobs were taken from British workers and given to low-cost immigrant workers in the UK.

But the big daddy of them all is just around the corner as human workers are replaced by machines.

For companies, this cost savings/quality improvement represents the greatest business opportunity to arise since the Neolithic Period when Trog first sold Grok a bag of salt he’d dug out of the ground.

Once Human Labour Becomes Redundant, Then What?

In robotized factories, labour costs are almost microscopic when compared to the other costs of doing business. Quality can improve by orders of magnitude and companies can devote even more time, money, and effort to sales and marketing to keep all those machines busy 24-hours per day, 365-days per year, without sick days, arguments with superiors, or paid holidays.

Almost any job can be done by robots, even policing can be done via millions of cameras set up around the country and monitored by small groups of people in a control room hundreds of miles away. In the case of a stolen car for example, as soon as the theft is reported to a website, the website programme can then steer the stolen vehicle to the side of the road and shut off the engine, and an automated tow truck could go out to recover the vehicle. We’re almost there now…

And robots never go on strike for better wages.

Companies that replace most of their workers with automation represent the best way yet to improve build quality, to lower costs, to operate 24-hour production runs that last 365-days of the year, and to increase profits.

Hey, who needs a large Human Resources department when only 5 employees work in a 5 million square foot factory and all executive positions are hired via a points-based website?

For UK companies, hiring robots scores a perfect 10 out of 10 as a means to improve profit.

Almost HALF of all UK Jobs Lost to Automation by 2033 (PwC Report)

This is a lot closer to happening than most people think.

“A 2017 report from PricewaterhouseCooper predicted that 30 percent of jobs across the nation will be automated in the next 15 years.

Predictions for outside of the U.K. aren’t any better. In the U.S., job loss estimates range from 33 percent of jobs by 2030 to 47 percent of jobs by 2033. Around 137 million workers in Southeast Asia could lose their jobs to automation within the same period.” — Futurism.com

Shall We Prepare For That Eventuality or Wait for Something Magical to Happen?

Waiting until then to do something about it isn’t responsible leadership. Neither is hoping that something magical will occur to solve our self-made problems.

If the 1% own all the automated factories and services but nobody except the kids of the 1%’ers have jobs, to whom will those companies sell their goods?

As more and more people are replaced by machines and as their unemployment insurance runs out and as fewer and fewer humans are required to operate a company, more and more people will find themselves on Universal Credit in the UK — so we better start NOW to make it sustainable!

The benefits for companies to automate are such that automation is coming no matter what, therefore, taxing job-stealing robots to support people on Universal Credit is the only relevant option.

Yes, the Protestant work ethic; A truly great thing.

But if machines are doing all the work, humans will become largely redundant insofar as work is concerned and companies will still need people to purchase their wares — otherwise what’s the point of all that automation?

Avoiding a Societal Crash Bigger Than the 1929 Stock Market Implosion

It’s almost too late to address this looming crash. But if politicians got energized this societal catastrophe could be managed, if not quite averted.

Automation WILL happen, it’s not something that can be ignored. Change is coming. And we’d better be ready.

For now, it’s a relatively simple fix;

Theresa May’s government needs to increase Universal Credit payments to (the anti-poverty standard metric of) £1088 per month, to include full medical and dental coverage, and provide full prescription medicine coverage — with no barriers to enter the Universal Credit system other than applicants must be adults who reside in the UK and earn less than £1088 per month.

This monthly amount and the healthcare benefits that go along with Universal Credit should also automatically apply to the country’s senior citizens to ‘top-up’ their pension to that amount, if they report less than £13,056 (from all sources) on their annual tax return.

In this way, every automated vegetable farm can sell its produce, every automated dairy can sell its milk, every rancher can raise their livestock, and every automated delivery company can get paid for their investment in all that amazing technology, because, well, at the end of the day, people need to eat and producers need to get paid.

And the UK can pay for it all without changing the existing tax regime other than adding a 5% tax on the daily output of every robot and automated system in the country.

Will companies go for it? You know they will.

How to Pay For It

Once people see they can exist without starving to death courtesy of their £1088 per month+benefits, people may decide they can earn a (taxable) living from their own home-based business — hand-painting landscapes on canvas, or running (taxable) Airbnb accommodations from their home, or becoming a (taxpaying) tour guide. Who knows. But artists, lodgers, public speakers, or those who create anything desirable or those who sing or play a musical instrument (well) may become well-rewarded for their unique and creative talents and pay taxes once again.

A 5% tax on robots and other automation devices or systems that work 24-hours per day, 7-days per week, 365-days per year without labour strife, without complicated accounting, without employer contributions to pension plans etc., without sick days and so much more — or pay a number of humans to fulfill that task?

It’s really a no-brainer. Humans can’t begin to compete with automation. What matters is keeping all those consumers alive and purchasing which after all, is what makes the economy function.

Companies will make so much more profit they won’t mind paying a 5% tax on the daily output of every robot and other automated device. Quality will improve, production and productivity will go through the roof, and companies and countries that get on it first will find the largest possible benefit.

Here’s to automation and to artistic endeavors!

Why Britain Needs an Optional Private Unemployment Insurance Scheme

by John Brian Shannon | January 1, 2017

Like all developed nations, Britain has a government-backed unemployment insurance scheme where workers pay fractional amounts of every pound sterling they earn to a national unemployment insurance fund during their working years.

Consequently, whenever a British worker becomes unemployed due to lay-off, that worker begins to collect unemployment insurance which pays them a portion of the wage they earned while they were employed, as a weekly benefit.

It’s a system that prevents millions of workers from experiencing the worst financial duress during periods of unemployment, or from spending their life savings during extended periods of unemployment.

In the interests of helping British workers, were the British government to pass legislation requiring the national unemployment insurance scheme to pay British workers a full 90% of a worker’s normal wage during his/her unemployment, there would be howls of protest from various quarters and the present unemployment insurance premiums paid by British workers would rise dramatically.

Though such legislation would benefit hundreds of thousands or even millions of British workers (at any given time there are likely to be 1.1 to 2.0 million unemployed people in the UK) many more millions of citizens would rail against such a plan — even though (unbeknownst to them) their own employer might be writing out their pink slip at this very moment. Which is to say, you never know what the future holds.

Almost everyone becomes unemployed at some point in their life. For seasonal workers it can be a few weeks to a few months every year. And it can occur suddenly, to anyone.

But none of the foregoing precludes the British government from passing legislation allowing private insurance companies to sell optional, additional, private unemployment insurance coverage to workers — over and above the national unemployment insurance scheme which pays only a small portion of a worker’s wage as benefits during times of unemployment.

In the interests of writing ‘a simple blog’ instead of ‘a large book’ I have dramatically simplified the Swedish example below, as it could be a complicated explanation, as different plans are offered by different companies over and above the legal minimums required by Swedish labour law (2007)

In Sweden, beyond what is mandated by Swedish law to be paid to workers during periods of unemployment (80% of the worker’s previous employment income) workers can buy any amount of optional, additional, private unemployment insurance for any amount of coverage (up to 99% of their normal wage) and as the insurance premiums are automatically deducted from their monthly wage, there’s no need for them to worry about forgetting to pay their private unemployment insurance premium payments.

  • To provide a hypothetical example, Swedes can opt to pay the equivalent of one cent per dollar while employed to the private unemployment insurance provider, allowing them to receive up to 90% of their normal pay during unemployment
  • Again, (a hypothetical example) to move up to 99% coverage, Swedes can choose to pay the equivalent of two cents per dollar.

It should be noted that actuaries for each private insurance company choose their particular factors, meaning that these things are never calculated by the equivalent of exactly one or two cents, etc. but rather by fractions of cents.

NOTE: In Sweden, the private insurers pay on a weekly schedule due to decades-long tradition there. Also, the Swedish government don’t care where private insurers are investing unemployment insurance premium revenues, as long as every unemployed worker gets his/her payments on time.

In Canada, a simple to understand and administer unemployment insurance system (called EI) provides government unemployment insurance that pays workers some 66% of their previous wage after getting laid-off (but not fired) from their job.

In Canada, both employers and employees contribute to the EU scheme and the per dollar contributions are set at a high enough rate to allow the entire scheme to earn a small profit for the government. In fact, Canada has again revised the rate downward as the scheme was too profitable! (It’s the second time in recent years that the rate has been revised downward as the entire EI scheme was embarrassingly profitable for the Canadian government)

It would be so easy for private companies in North America to offer optional, additional unemployment insurance coverage for only pennies on the dollar.

In fact, there has been some baby-steps toward that goal in the U.S. However, in the United States, optional, additional, private unemployment insurance coverage is a new thing, consequently, insurance companies are extremely cautious, are charging high rates, and have few applicants. At least until they get some experience with the new-ish business model.

For Canadian and U.S. insurance companies, it would be simple to add optional, additional, private unemployment insurance coverage (on top of the government unemployment insurance scheme that usually calculates benefits based on 66% of the worker’s previous wage) thereby allowing workers to top-up their unemployment insurance coverage at their discretion — to 80%, 90%, or even 99% of their previous wage. As each worker’s financial situation is different it must be the workers’ decision how much additional insurance coverage they purchase.

It might cost 1 or 2 cents on the dollar for each worker to obtain such additional coverage for themselves during periods of unemployment. But in an era when it seems everyone is spending every dollar they earn just to stay afloat, it makes sense to boost unemployment insurance benefits up to 99% of a worker’s previous wage when combined with the government benefit, and to do so via private insurers so that governments don’t need to spend more on unemployed workers. And all of that for only pennies on the dollar.

At first blush, workers might ask; ‘Why would a company want to sell additional unemployment insurance to workers over and above the national unemployment insurance plan?’

And the answer is; It’s profitable for them for two reasons.

One, the worker premiums (payments) allow the insurance company to make a small, but respectable profit.
Two, all the money paid to the private insurer by workers is invested in the stock market where the private insurance companies can make very significant profits.

It’s a business that allows private insurers to ‘have their cake and eat it too’ — the cake is the revenue generated via the normal payroll deductions of workers enrolled in the private insurance plan — and the icing is the revenue that private insurers earn by investing that huge pool of money in the markets. Which adds up to a great business model.

To Build a Better Britain, it behooves the UK government to allow private insurers to sell optional, additional private unemployment insurance over and above the government unemployment insurance plan, as it would allow workers (who have no control over the unemployment rate, nor of the overall economy) to continue to pay their bills on time, to live their lives normally, and to continue with their particular life plan — with much less personal upset and financial distress during periods of unemployment.

Building a Better Britain means strengthening worker supports during times of unemployment without it costing the government a single pence.

It signifies responsible government that places the needs of workers and their families at a higher level, while concomitantly creating a new, useful, and valuable product for British insurers to sell, thereby adding billions of pounds sterling every month to the London financial sector.

See, it really is ‘Win-Win’ when government places the needs of workers and their families first.

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