When AI takes all of the jobs, who will pay our taxes?

Schindlers Attorneys is a prestigious South African law firm with a long history. Some of the partners are of a technological bent. They have enthusiastically embraced AI, building a legal AI engine to assist them with all manner of legal preparation. 

Their system recently dealt with an “ex parte” application on a real matter that was presented to a full court Bench. The AI was asked to draft every submission necessary to sustain the relief sought, for counsel to read to court. The submissions were produced in under 30 seconds, 120 pages worth, using a training canon of case law, law texts, opinions and precedents, as well as the entire record of the matter at hand. 

The document produced by AI was (of course) checked by a lawyer, but there were precious few changes to be made before the matter came up in court. The application was successful and, when the attorney revealed that every word presented was produced by AI, one of the judges and several of the advocates in court commented (only half in jest) that their careers were over. 

Here’s the rub. This matter required the highest level of legal skills. It would usually be prepared and argued by very well-remunerated legal practitioners, who would take weeks to prepare and be paid tens or even hundreds of thousands in fees. 

If AI can operate at this level of very starched white collar, what of the rest of us offering our more mediocre skills to employers?

And so, I ask you to consider the following scenario, the likelihood of which nestles in the great pot of AI predictions along with many others, any one of which may be borne out (our AI future is going to be nothing if not unpredictable). 

It goes like this: AI innovations continue to accelerate, including in the areas of computer vision and robotics. Jobs soon start disappearing at scale as corporations race to deploy cheaper and more productive alternatives. This includes “thinking” jobs and jobs which require physical dexterity. Corporations, businesses and factories become human-free dystopias of robots, computers and automated devices. 

How widespread will this employee replacement be? How high up the skills hierarchy will it reach? The answer is starting to become clear – very wide and very high.

If AI can produce the work of highly paid lawyers in no time at all and at very little cost, then there are few levels of expertise in any industry which will be immune. The question that arises is how soon this replacement will happen and how brutal it will be. The argument has been made by some that it will “free up” employees to do other highly skilled or more productive jobs within the commercial sector. This is an optimistic view. There is no evidence that this will happen at a speed which compensates for the misery caused. 

John Mauldin, the author of the widely read newsletter Thoughts from the Frontline, reflects that previous employment disruptions brought on by technology took decades or more to take root, which somewhat mitigated the employment pain, allowing some people the option of retraining and reassignment.

He wrote: “In 1800, many jobs were agriculture-related. It was still very high 50-100 years later when industrialisation really began to kick in. But we had four generations to transition from farm jobs to factories and other businesses.” The same was true within many other industries in our more recent history, including assembly line workers, telephone operators. typists, typesetters, etc, albeit with somewhat shorter timeframes. New jobs and industries were eventually created and the disruptions to overall employment were minor. 

But, as they say, this time is different. Most alarming is the speed with which the new intelligent agents are being developed — in areas such as healthcare, writing, graphic arts, agriculture, customer service, manufacturing, education, finance and software development. We won’t have decades to prepare, skill up and restart, and protective regulation cannot possibly be implemented at anywhere near the speed of AI innovation.

Displacement has already started in many industries (I have written about the Swedish fintech company Klarna, which laid off 700 employees in favour of an AI replacement) and it can only accelerate, along with the astonishing rate of innovation in AI. 

Employers are interested in two things above all else — profit and their ability to compete. They may say comforting words about their commitment to their staff but, if they start underperforming in relation to their competitors, they will do what is necessary. And what could be necessary, it seems, is the wholesale replacement of humans with AI. If companies don’t do it and their competitors do, they will be out of business. It will be a simple decision driven by the mathematics of capitalism. Venture capitalist Joe Lonsdale makes the point succinctly: “Any business that can triple its profit margins by implementing AI systems is obviously going to do it as fast as possible.” 

Read more in Daily Maverick: AI shaping up to become the greatest geopolitical weapon in history

So, back to our scenario in which most people lose their jobs, but let’s also assume that goods and services fuelled by AI become so cheap to make, produce and distribute that the unemployed are able to sustain themselves quite nicely on state grants, giving them time to write poetry, watch football or whatever. 

Which brings us to my final point. 

Who is going to pay taxes when the jobs go to AI? About 80% of state taxes come from individuals and payroll taxes. Only about 7% comes from corporate tax. And, if there are no taxes to be scooped into the fiscus, how is the government going to provide services for its citizens? 

The formalisation of national income tax is a fairly recent phenomenon, often traced back to the UK Income Tax Act of 1799. It has since become the core of government funding, its greatest source of revenue. Political systems cannot afford idle citizens. This may become the biggest problem for governments if there is little work left for humans to do. 

As I said, this is one possible outcome among many. Even so, it’s worth considering. DM 

Steven Boykey Sidley is a professor of practice at JBS, University of Johannesburg. His new book It’s Mine: How the Crypto Industry is Redefining Ownership is published by Maverick451 in South Africa and Legend Times Group in the UK/EU, available now.