Workforce Displacement and Tax Regulation
A primer into the debates surrounding economic impact of AI Robotics Automation in the workforce.
Today, my robot served me my morning matcha latte.
But today, my robot also served dozens of other people’s morning matcha lattes.
En route to my morning errands, I dropped my robot, Tova, off at work bright and early. As my caffeine slowly kicked in and I went about my errands, Tova got straight to work. It slid effortlessly into a well practiced routine across the sun dappled emerald tiles of Chasen Brew, the fourth district’s latest hot spot.
This may seem like a scene out of a futuristic hollywood film, but it’s reality for my household here in Vienna in 2025. It will become more common as the years press on and AI Robotics are adopted into homes, families and workplaces around the world. This early taste of the future begs the question, are we ready for the ripple effect that adopting this new technology will bring?
Historical Precedence
Automation in the workplace isn’t new by any stretch of the imagination. Technology that improves efficiency in the workplace is a tale as old as time. From the mechanization of the British Textile industry in the early 1800s to Computerization in the US in the 1970’s, industry has always found ways to improve the bottom line for investors and business owners. It’s how those improvements have historically impacted the workforce and the welfare system that gives these moments in history direct relevance to this seemingly futuristic robotics debate. From front loaded government funded reskilling schemes in hopes of avoiding mass unemployment before it hits to taxation structures that range from taxing the automation hardware to the value it adds, the history of rapid automation restructuring gives us a great idea of what the best way forward might be today. This article will introduce you to the many regulatory approaches that have been used throughout history and around the world today so you can inform yourself on the current debate and clarify where you stand.
These previous shifts in technology which increased efficiencies to the point where productivity and wage labor were decoupled give us a roadmap for what we can expect with the introduction of humanoid robotics in the workforce. We can use the historical levels of success of tax regulation adjustments and government programs to inform our current societies’ choices and how we decide to move forward keeping our best interest at the forefront while navigating yet another automation revolution to promote productivity. e
Range of AI Automation
As we can see by examining the history of workplace automation, this new potential phase of AI Humanoid Robotics isn’t completely out of left field nor is it a leap rather than a progression. AI has been slowly creeping into the workforce for many years now. There are three broad phases of AI Robotics automation that can be clearly defined:
Software: Which can take the form of customer facing text or voice chatbots.
Non Humanoid Robotics: Which can implement as precision assembly mechanisms in factories.
Humanoid Robotics: Which are human-like workers who share space and tasks with human workers.
This progression of a technology so similar to the human worker leads us into uncharted waters with regards to worker protections. We must ensure that either the human worker isn’t incentivized to be fully replaced, or that if it is replaced, there is a tax structure so that the process does not erode the social systems that the worker would’ve paid into with their wages and those who may be out of work can be taken care of and reskilled into new jobs.
Partnership with Cobots:
In the interest of not fully replacing workers, there are practical reasons to employ the use of humanoid robotics alongside human workers and ensuring that they work together in a complementary fashion. This practice is referred to as utilizing “cobots.” Using robots as “cobots” means that they handle tasks that may pose issues for human workers alongside them. This could include lifting heavy loads, working in extreme temperatures or conducting torque heavy processes difficult or dangerous to human workers. The distinction is that these cobots work together with specialized human workers who handle more specialized, finesse tasks.
Practical Impacts
Although “cobots” present a more gradual progression, the benefits of full replacement of human workers with humanoid robotics are incredibly attractive to business owners and investors. These humanoid robotics can be trained to complete most of the same tasks as humans but don’t require insurance, overtime or wages. They can work around the clock with little to no downtime depending on battery life and charging capabilities. They can deliver consistent results with regards to speed and quality. And they can be developed to work in extreme or dangerous environments without having to consider human concerns about safety or health.
It’s not all positives, however, as any adoption of AI robotics in the workplace can mean incredibly high upfront costs for the robots and uncertain return on interest. There are considerations when making an initial investment like being locked into a vendor once the robot is integrated into your system, and having to deal with specialized maintenance as a result. This comes with risk of planned obsolescence as well as uncontrollable upgrade cycles, which can increase costs. There are also concerns about safety incidents with the robotics as they deal with human workers and increased cyber security exposure incidents as a result of increased digitalization. Companies, especially in the EU, must also deal with strict regulations surrounding the use of AI robotics with regards to the EU AI Act and GDPR compliance.
Need for Regulation
The intensity of adoption in both positive and negative ways makes the debate around adoption a lightning topic for businesses, workers and technologists alike. Regulatory control becomes a necessity in order to control the economic impact of implementing this new technology. When a welfare system like Europe’s main support is based on payroll, productivity gains without wage increases mean the system will eventually erode to the point of failure. Adaptation of the current regulatory framework is a crucial necessity and a time sensitive priority.
Current Proposals and Regulations
There have been many proposals and attempts to bring forth solutions to this issue across the US and EU. Some have been conceptual proposals brought on to the world stage through platforms of forward thinking candidates for public office like French Presidential hopeful Benoît Hamon’s 2017 campaign or US Presidential hopeful Andrew Yang’s 2020 campaign. Both candidates preached taxation funded Universal Basic Income but they had differing approaches to the taxation which boiled down to taxing increased productivity or taxing consumption. Hamon suggested taxing firms per industrial robot above a threshold, at a rate comparable to employers’ social‑security charges that would have applied to the replaced worker coupled with dolling out Universal Basic Income to citizens financed by the taxes levied on robotic adoption. Yang, on the other hand, preached a Universal Basic Income he dubbed, the Freedom Dividend, and proposed among other revenue streams, to levy a 10 % value‑added tax (VAT) on goods & services to fund it. Both candidates wanted to introduce UBI as a means of addressing job displacement due to automation and stagnating wages for workers in the face of rapid AI automation.
While the US and France had candidates advocating for UBI funded by taxation in anticipation of layoffs and widespread unemployment, Italy took another approach. Italy is attempting to upskill their workforce prior to the expected mass layoffs with their 2023 project: a 30 Million Euro AI Automation Skills Fund. In addition, they have set aside 1 Billion Euros for an AI Transition Fund inside the 2025 Italian AI Bill. The Skills fund will pay for short, modular reskilling courses targeting workers in sectors flagged as high‑automation risk. These sectors include logistics, retail, back‑office and other similar fields. The Transition Fund offers tax credits to firms that retain workers while automating. This front loaded approach is financed from the national budget and big businesses in the form of a small surcharge on the existing digital‑services tax for companies above 750 Million Euros of global turnover.
The EU level regulatory adaptations are similar to the Italian approach. The scope of the European Globalisation Adjustment Fund for Displaced Workers or EGF widened in 2021 to assist workers displaced by AI and Robotics automation. Furthermore, a 2025 Commission proposal lets Member States tap it before sweeping automation layoffs hit in order to assist with financing for re-training and to help fund start‑up grants or mobility allowances for workers who are displaced by AI driven restructuring. This support is paid for by the EU Budget to the tune of 186 Million Euros a year.
Austria’s Local Regulatory Status
Here in Austria, there are some existing measures such as the Digital‑Services Tax or DST which taxes 5% of online advertising revenues of over 25 Million Euros and netted the Nation 103 Million Euros in 2023 and 124 Million Euros in 2024. Similar to Italy and the EU’s approach, there is also the “Robot‑ready” upskilling fund which totals 240 Million Euros and is housed inside the 2024‑27 labour‑market budget. This fund aims to ease transitions from automation driven layoffs through subsidized upskilling courses. The current debate in AI Automation Regulatory change, however, is surrounding the proposed “Wertschöpfungsabgabe.” This is a hybrid of many of the approaches we have looked at and literally means value‑added contribution. Often referred to as a robot‑tax, it aims to ensure that robots “pay in” when they replace humans and makes an effort to stop payroll‑tax erosion. This regulation proposes to replace part of the employer‑side payroll charges that fund Austria’s welfare state with a single‑digit‑rate levy on a firm’s net value added which rather than just payroll includes a combination of wages, profits, interest, and rents.
The pilot idea is to start by converting the Family Burden Equalisation Fund or FLAF charge from 4.5% of payroll to 3% of value added. This would effectively cut labour costs by 1.5% while keeping revenue consistent. The Ministry of Finance published a micro‑simulation which suggests that if the FLAF pilot is adopted nationally, the Nation would see a 1.6 Billion Euro net gain. This restructuring of the taxation from wages to value will target automated businesses and ensure they are paying into the welfare system at a rate which accounts for their displacement of workers. This means that firms with fewer workers and higher productivity will shoulder the burden of this tax shift while labor intensive firms with a greater number of workers will see a potential cut in costs. This is similar to Yang’s 2020 proposal for a Value Added Tax to address automation but it would be reinvested directly into already existing social funds such as pensions and healthcare rather than presented to the public as a UBI cash dividend.
Tova and Current Status
Considering that Tova making morning matcha for the good people of the fourth district doesn't qualify for the Digital Services Tax nor the Upskilling Fund and since the Wertschöpfungsabgabe is still up for debate, what did we have to do to get Tova its job and keep it all legally compliant?
It may shock you, considering I am an American AI Researcher and Tova is from China, but according to the current laws, Tova does not need working papers. It is not considered a foreign worker. It has no wages and therefore does not pay into any social funds and it does not contribute to any Value Added Tax scheme. Although futuristic and engaging for customers and social media, this reality of a robot serving up your morning brew should be seen as the canary in the coalmine. These humanoid robots are being assembled by the hundreds across the East and West. They are capable, adaptable and will transition faster than you think from novel to ubiquitous. It is imperative that people become informed on the imminent impacts these robots can have as well as the range of potential regulatory frameworks for protecting society's delicate balance as they are adopted. We can absolutely live and work alongside these humanoids, but we must study historical precedence and explore future protections to ensure we take proper measures and precautions to ease the transition. Whether it's upskilling, taxing hardware, taxing value, implementing UBI or reinvesting in existing social programs, it's up to the public to be informed and use their voices to advocate for the future they want to see. The robotics field is moving forward at a breakneck pace, society cannot afford to have regulation fall behind.