Sustain Social Security under the Impact of Automation and a Shrinking Job Market

Social Security and Retirement

The Dallas Morning News article on Oct. 14, 2010, “Employers embracing automation to cut costs, red tape“, mentions the impact of automation to job lost. Automatic machines do not need health insurance; neither do they need bonus, merit increase, and retirement benefit. They are capable of helping workers with their jobs or even replacing workers. Examples are farming equipments, auto manufacturing robots, ATMs, vending machines, self checkout counters in supermarkets and airports, and others.

During the recession, people start to realize that some lost jobs may never come back. It’s a shrinking job market. Some people blame immigrants for taking their jobs. But, they fail to realize that some job lost may be due to automation. When less people are working and contributing to social security, the risk of running out the social security increases.

Current policy continues to assume people are working for most of their life. What would happen to our benefit, if this assumption is no longer valid? What if the job market is actually shrinking? How can we sustain our social security with a shrinking job market?

A solution is to change our social security policy to restore the contribution of the lost jobs as a result of automation.

Specifically, the productivity gain of automation can be treated as intangible labor in the collection of the social security. Governments can calculate the productivity of these machines and their share of social security contribution in terms of the number of people they replace, including the length of working hours. This way, social security can continue to be funded independent from the shrinking labor market.

Then, you would ask: (1) What will motivate people to work, if they will still have their social security? (2) What will motivate companies to follow the policy change?

An answer to the first question within the context of this article is the payout of social security. We can maintain our current payout policy of the social security. People would get more benefit, if they have been contributing; people would get less (but not zero), if they did not contribute enough in the past.

For the second question, companies’ contribution for both tangible and intangible labor will continue to be deductible from their taxable income. If machines retire, or need repair or replacement, companies can get deduction on their taxable income for the value after depreciation. Small businesses can waive their contribution of intangible labor, if their revenue is within a certain limit.

Besides the proposed change, I would like to add that a successful immigration policy will actually help a country to fill the jobs which people are not willing to take, such as agriculture jobs, or to fill jobs of research and technology to strengthen the growth of the country. Without immigration, a country would suffocate to little growth. Evidently, both US farmers and British Nobel Prize winners advocated the importance of immigration recently. Legal immigrants also pay tax and contribute to social security.

In summary, these are examples of my idea to sustain our social security under a shrinking job market. Economics experts and policy makers can work on the details, if they agree. With the proposed change, we will be able to replenish our social security to support retirement. Governments will have a much accurate measure of the productivity from both tangible and intangible labor. Companies can continue to be socially responsible and gain cost savings and tax deduction for their automation. Automation will no longer cost our social security by taking our jobs away but, instead, increase our social security benefit.

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10 Comments

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