America needs more robots. But are we ready for them?

If Americans want their living standards to rise, then the US economy and its workers must become more productive. And technology is obviously a big part of that. So it’s a bit worrisome that a new analysis from the Information Technology and Innovation Foundation finds that the US “lags significantly behind” many other economies when it comes to robot adoption — that, particularly when you consider the US is a high-wage nation and thus one would expect it to employ lots of robots. The research finds that out of 27 nations, the US ranks 16th with adoption rates, 49 percent below expected.

Source: ITIF

One possible reason, offered by economist Daron Acemoglu in Chris Mims’ excellent summary of the ITIF study, is that the “US hasn’t had the same demographic pressures as Germany and Japan.” For its part, ITIF focuses on America’s lack of national strategies to boost robot adoption, such as by offering various subsidies, tax breaks, and so forth. Culture may also play a role. The report notes that many of the high-adoption nations “have distinctly positive views of robots (e.g., Japan has an annual ‘Robot Award’); while many of the societies that are lagging in their relative rates of robot adoption appear to have significant portions of their populations, or at least significant shares of their elites, who view robots as unsafe job killers.”

It would be bad news if American elites soured on technological advances just as they seem to have soured on trade. At the same time, pro-tech policymakers shouldn’t undersell the extent to which robots and AI can disrupt labor markets. Acemoglu has written that while “labor will not permanently disappear as a major factor of production, the future level of employment and labor share may be lower in the future than the past.”

And how should public policy help the transition to the AI/robot era? Again, Acemoglu, this time from my podcast chat with him:

I think very much policy can play a role, but not an obvious one. I think there’s a lot of evidence that shows the exact composition of innovation and therefore the exact types of technologies that firms develop are responsive to policies and to financial profit incentives. The problem is, it is difficult for us to describe or recognize exactly enabling technologies when they are in the incubation period; so you cannot say we’re going to subsidize the enabling technologies. It was much easier for us to recognize green technologies, but even there, our track record of giving subsidies to green technologies is a mixed one. These sorts of fine incentives are very easy to game.

But I think there are other problems in the labor market and the innovation market that we can start thinking about. We implicitly subsidize production with machines relative to production with labor. If you buy a machine, you don’t have to pay payroll taxes, you can debt finance it, and that’s going to get a subsidy from the government. And the capital income that is generated is going to be taxed at a lower rate. If you hire a worker, you have to pay payroll taxes, they are going to be taxed at a much higher rate, you have to put up with lots of other costs coming from regulations, and other things you have to do when you’re employing workers. So that creates a very non-level playing field, so we’re essentially subsidizing firms implicitly for using machines rather than labor. So I think it’s probably a good idea to start thinking about how we can even that playing field a little bit. So I am definitely not suggesting a robot tax so that we can raise revenues.

And more Acemoglu from a different interview:

I am a big believer in the market and very cautious about regulation in general. But in this instance, I think we cannot just leave this to the laissez-faire dynamics of the market. First of all, given everything else that’s in place (for example, subsidies to capital, tax credits, accelerated advertisement), there is a strong bias for using machines rather than people. In other words, on first principles, I would expect excessive automation in both Europe and the United States (but there is no systematic work to date to back this claim up).

Second, the biggest adjustment we need to make is in preparing our workforce to work productively with robots. For this, workers need to have skills that are complementary to robots, artificial intelligence and other new technologies, rather than skills that are going to be substitutable and thus easily replaced by machines. But we do not at the moment know exactly what bundles of skills are complements rather than substitutes to technology. How can we expect people in their teens to know this and make investments accordingly? Finally, the education system, especially high schools, is broken in the United States and many other advanced economies. There is little that an individual student can do as long as the high-school system is dysfunctional.