The future of work and the economy
Much has been said, and will be said in the near future, about the impact of automation and artificial intelligence, or technology in general, on employment and the economy. Pessimists claim that most jobs will disappear completely and machines will replace humans at every level in the economy. Optimists believe that new industries and new jobs will flourish allowing humans to maintain their lead as the Earth's dominant species.
While it is increasingly likely that companies, at least some, may attempt to become employee-less, it is fairly unlikely that they may want to become customer-less. Most probably, they will continue to require customers, with a sizable purchasing power, to acquire their products and services.
Out of their total income, on average, individuals pay 10-40% in taxes, with some countries levying as much as 55% and others as little as 1%. In addition, average household savings amount to 5-10% of income, with some countries saving as much as 20% and others having negative savings. The remaining income is spent on private products and services. If we consider taxes as a proxy for the price of public products and services, we may conclude that individuals spend 90-95% of their income on purchases. Essentially, individuals spend all of their income, since even savings will turn into purchases some day or other.
This means that wages and salaries may be considered just a temporary transfer of money that will eventually return to its source, either public or private. Henry Ford's move to significantly increase employee wages in the early twentieth century is a case in point. His rationale was that with better wages his employees would be more likely to acquire his cars. It was a way to expand the market and secure future demand (and also attract the best employees and reduce costly turnover). Obviously, this does not mean that your specific employees will buy your specific products. If you are a train manufacturer you cannot expect that your employees will each buy a train or that you can increase their salaries so they can afford it. What it means is that, across the economy, current salaries will become future purchases (on average, 90-95% as we have seen before).
What lies at the heart of the heated debate over technology and automation is the potential obsolescence of the traditional way of transferring money between enterprises and consumers (salaries/purchases) and on to states (taxes/services), through wages and salaries.
We are still not certain how massive automation will play out in the future, but if human replacement in the economy becomes inexorable and the traditional money transfer is no longer applicable, a new way will have to be defined. We shall remind ourselves that successful enterprises are not about eliminating costs and expenses but about generating revenues that exceed costs and expenses.
In the past, the notion of social contract, by which individuals give up some of their freedoms to a superior power, the state (and its representative bodies), in exchange for protection of their remaining rights, gave rise to modern societies. In the future, a new social contract between states and citizens, and also enterprises this time, may have to redefine how we transfer money from companies to individuals and on to the state. Taxes on machines and robots, universal basic income (citizen's dividend), bonuses based on innovation and learning achievements, etc., might be key elements of the new system. And it is not so much about justifying that it is reasonable that machines and robots replacing humans pay taxes (throughout history machines have replaced humans and we haven't levied taxes from them so far) or that it is fair for everyone to earn a basic income, or that there must always be incentives for individuals who want to deliver more, but about redefining our economy and society in an enduring way.