A Blog by Jonathan Low


May 2, 2019

How Public Subsidies Are Supporting Job-Killing Automation and Outsourcing

Lenin notably said 'capitalists will sell us the rope with which we will hang them.'

Tech companies' lobbying efforts appear to be embracing a variation on that theme. The question is whether public officials will recognize the dilemma - or care. JL

Jose Garcia and Madeline Janis report in Politico:

Public subsidies for job-killing technologies are growing. Cities, states and the federal government spend billions of taxpayer dollars to help tech companies bring automation to market. In addition to providing funding for robots, taxpayers are funding and purchasing workplace surveillance technology, just-in-time scheduling software and other tools that impact  the lives and future of workers.What this means is that taxpayers are often underwriting the automation that could eliminate their own jobs and exacerbate income inequality.
Amid the public discussion of the changing nature of work and the possibility that computers and robots could displace more American workers, a crucial fact has largely escaped notice: Taxpayers are often subsidizing the transition to automation.
Take a recent case in California. A multinational technology company based in China with no U.S. employees applied for and received a $1.2 million tax credit from the state of California. The company used the money to open a Silicon Valley office that is conducting R&D for automated vehicles — all of which will be manufactured abroad. In exchange for the tax credit, the company agreed to hire a handful of engineers to develop equipment that could eliminate jobs for frontline workers.
These public subsidies for potentially job-killing technologies are growing. Cities, states and the federal government current spend billions of taxpayer dollars to help tech companies bring automation and other high-tech tools to market. Public agencies are also being heavily lobbied by global companies to purchase new tech products to improve public transportation, data processing, education and public services. In addition to providing funding for robots, taxpayers are funding and purchasing workplace surveillance technology, just-in-time scheduling software and other tools that have consequential impact on the lives and future of workers.
What this means is that taxpayers are often underwriting the automation that could eliminate their own jobs and exacerbate income inequality. But this also means the substantial flow of public dollars to support new technology provides a powerful — and underutilized – lever for policymakers to ensure the benefits of innovation are shared equitably.
In the California case and in others, we’ve both been on the front lines — in research and public policy, respectively — encouraging policymakers to actively shape the emerging jobs economy. We recognize that innovation has generated broad societal benefits and therefore do not advocate for halting or slowing the development of these new technologies.
But we also are cognizant of recent studies indicating that automation is on a trajectory to exacerbate income inequality, by potentially eliminating jobs that Americans with low incomes depend on to survive. By the year 2030, as many as 73 million U.S. workers could be displaced from their jobs by automation. And a recent Pew Research poll found 72 percent of U.S. adults are worried about the impact this trend will have on their jobs.
Fortunately, even the most carefully modeled forecasts cannot determine the future of work and workers. And we believe that local, state and federal policymakers can have a substantial influence over how these technologies develop in the coming years.
Here are two tools that policymakers have to influence how technology and jobs change.

Technology Impact Assessments

Beyond the basics — holding tech companies accountable on labor law compliance and fundamental workers’ rights, for example — public officials should also use the power of our public investment to address historic and contemporary disparities in access to good jobs, by ensuring that millions of workers — especially people of color, women and workers with low wages — get access to and training for employment in the workforce of the future.
There are models for this approach. Many people are familiar with Environmental Impact Assessments: the reports companies submit detailing the environmental consequences (positive and negative) of a project before it gets off the ground. Impact assessments require project sponsors to account for potential harm as they build out a plan and require that any harm is mitigated within the fabric of the plan. To shape the future of work, we could require that all recipients of public subsidies for new technological development complete a Technology Impact Assessment.
Such assessments would require companies to outline the jobs the technology might eliminate, the types and number of jobs that might be created in the community (and for whom), and a plan to retrain workers who are directly affected for new tech-driven jobs. The implementation of mitigation and transition programs could be built into contracts and grants.
The idea of a Technology Impact Assessment was inspired, in part, by one of the authors’ direct experience in Los Angeles pushing for more transparency around the potential impact of big-box stores. In 2004, the city of Los Angeles required all proponents of large retail superstores in economic development zones to do a comprehensive cost-benefit analysis describing the potential negative impacts on neighboring small business and the numbers and quality of jobs proposed.
The policy, which was subsequently adopted by surrounding cities, has helped the region more effectively weigh the impacts of proposed superstores on neighborhood development and overall job creation — and could provide the foundation for how a similar assessment could be developed for the impact of new taxpayer-funded technology in local and state governments.

Government purchasing power

Subsidies and tax breaks are not the only avenues for public officials to shape how technological development unfolds. Another tool — with potentially even greater impact — is government’s massive purchasing power.
Each year, local, state and federal governments buy $2 trillion of services, manufactured equipment and infrastructure. That’s equal to 12 percent of the nation’s gross domestic product. Many U.S.-based companies look to cities and states across the country as repeat customers who support their profits worldwide.
Consensus is growing that public purchasing power should be used to reach social and economic goals. U.S. and European cities have begun to adopt this approach — known as inclusive or "sustainable" procurement — to ensure triple bottom line benefits to communities and workers from government contracts with manufacturers, service providers and construction companies. Similarly, public officials can bring the government’s considerable economic weight to bear to ensure that new technologies benefit the workers and communities who are paying for them.
When tax dollars are used to purchase new equipment that automates work previously done by people, governments should insist that the sellers identify the jobs that will be eliminated and the new jobs that potentially will be created. Then the purchasing officials can determine which skills have become obsolete and which new skills the existing workforce can be trained in. Moreover, public officials can embed criteria in the purchase of the item beyond standard price and quality. Will the item be manufactured in the community or state? Will the manufacturing process create new jobs? Will those jobs pay a living wage? Will the employer respect workers’ rights?
In the climate technology field, cities and states have used this kind of framework to ensure that the transition to a clean economy creates good jobs and minimizes the negative impacts on frontline fossil fuel workers. For example, the Chicago City Council recently adopted a resolution committing to the replacement of fossil fuel dependent machinery (such as diesel buses) with clean energy equipment. Mindful of the potential negative impact on existing fossil fuel workers, the City Council resolved to “leverage the City's purchasing power to invest in companies committed to recruiting, hiring, and retaining historically disadvantaged workers and displaced fossil fuel workers to manufacture clean energy infrastructure and equipment at a prevailing wage with comprehensive benefits.”
Of course, companies that object to answering questions about the impact of new technology on jobs and workers as posed in a government’s procurement framework or as part of a tech impact assessment could simply decide to forgo public resources, like Amazon recently did in New York, and seek private capital elsewhere.
It’s worth recalling that many of the world’s game-changing innovations, including the internet itself, have been seeded, funded and then developed by public spending. The same holds true today. In exchange for such generous taxpayer funding, public officials can and should demand that the tech industries who benefit from such subsidies maximize good job opportunities for workers whose livelihoods they could otherwise destabilize, devalue or destroy.
Workers and communities should not feel that they must accept whatever upheaval emerging technologies throw their way. Nor is rolling back the clock and attempting to block automation, which can provide a range of social and economic benefits, a realistic alternative.
The task for policymakers at the local, state and federal levels is to acknowledge that automation does not happen in a vacuum — it is aided and abetted by public resources. The public has a right to demand a share of the benefits and curb the costly fallout, created by technological change.


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