Robots Could Make Social Security's Problem Worse

By Suzanne Blake

Reporter, Consumer & Social Trends

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Robots could make a major difference in America’s Social Security crisis, according to a new op-ed from MarketWatch.

As artificial intelligence grows in scope, robotic technology is making a major impact on everything from business to education and even dating culture.

However, as the workforce embraces robots, there could be implications on the Social Security Administration as well as the taxes companies pay out for workers.

Why It Matters

The SSA is facing a funding gap by the early 2030s that could see Americans paid only roughly 80 percent of the benefits they are owed in retirement.

However, as the workforce looks to adopt more robots performing everyday workplace tasks, these robots could be taxed on Social Security rather than paying into it, the MarketWatch analysis suggested.

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What To Know

Paul Brandus, a writer for MarketWatch, suggested that since robots do not pay into Social Security, the U.S. should tax them instead.

"Robots are deeply embedded in corporate America," he wrote in his article.

"The basic construct of Social Security is this: Workers and their employers pay taxes. When a worker retires years later, those funds are paid back each month in the form of a Social Security check."

"But what will happen to this 90-year-old model as robots and artificial intelligence reduce the demand for taxpaying human workers?"

Since robots are no longer a hypothetical discussion point at companies across several industries, the tax code has largely not caught up to employers using these agents as workers, instead largely treating them as equipment rather than an employee one would pay taxes on.

"So as taxpaying workers are gradually replaced by robots or artificial intelligence, the strain on Social Security grows. Keep in mind that it is already being squeezed on both ends by longer life spans and a U.S. birthrate which has sunk to a record low," Brandus said.

Retirees are facing a cut of as much as 24 percent in the early 2030s if nothing is done to rectify the situation. While some have suggested solutions like raising the minimum retirement age or hiking taxes on workers or even increasing the cap on earnings subject to taxes to begin with, no policy has garnered widespread support, and benefits remain in danger despite the years Americans have worked paying into the program.

While the common rhetoric has been that if a worker's job is eliminated by AI through robots or other means, they'll have to pivot to another career field, there are larger questions over how this applies to government systems as well, said Alex Beene, a financial literacy instructor for the University of Tennessee at Martin.

"Lost in this advice are the more long-term questions, such as ‘If there are massive permanent job cuts due to these implementations, what happens to the programs that are supported by a tax base of employees that are no longer there?’" Beene told Newsweek.

Still, others like Kevin Thompson, the CEO of 9i Capital Group and the host of the 9innings podcast, say that robots will not impact Social Security, similar to how outsourced labor has had very little measurable impact toward the system.

"Although there may be some jobs lost in roles needing to be automated, much of the higher end labor jobs will still be managed by humans," Thompson told Newsweek.

Michael Ryan, a finance expert and the founder of MichaelRyanMoney.com, said robots and AI will generally shrink the Social Security payroll tax base, deepening an already serious funding gap by the 2030s.

"Automation is a double-edged sword for Social Security. Greater productivity means more wealth, but if that wealth isn’t taxed for Social Security, it’s just empty calories," Ryan told Newsweek. "Lots of output, but no nutritional value for our safety net. Case in point: A single factory that swaps out 100 workers for robots instantly erases 100 monthly Social Security contributions. Multiply that across the economy and, well, you’ve got a revenue hole the size of a crater."

What People Are Saying

Paul Brandus, a writer for MarketWatch, wrote: "Social Security—which for tens of millions of Americans is the only income they have—must be preserved. But as its tax base continues to be eroded by waves of robots and increasingly sophisticated artificial intelligence, something must be done. The sooner the better."

Alex Beene, a financial literacy instructor for the University of Tennessee at Martin, told Newsweek: "With the rapid pace with which AI is being introduced in the workplace, these are concerns we have to address sooner rather than later. Programs like Social Security already face shortfalls in the coming years. If we see a sizable reduction to those paying in, we have to start asking should taxes on robot labor among other AI-related workforce items be considered."

Kevin Thompson, the CEO of 9i Capital Group and the host of the 9innings podcast, told Newsweek: "The funding gap won’t be materially affected by robotics. Most of the jobs being automated aren’t the ones that move the needle on overall payroll taxes. If there were a long-term concern about a shrinking payroll tax base, the logical fix would be to broaden the revenue stream, such as adding a modest national sales tax and dedicating a portion of it to Social Security. If robots make goods cheaper, then a consumption-based model becomes easier to justify."

Michael Ryan, a finance expert and the founder of MichaelRyanMoney.com, told Newsweek: "Is there an easy fix? I advocate a ‘robot tax.’ Making companies pay into Social Security on behalf of their machines. But that triggers its own tough questions. Who pays, how much, and how do you even define a robot worker in tax code terms?"

What Happens Next

Long term, Thompson said the labor market will adapt to robots, and this includes how the SSA handles this type of automation.

"Ten years ago, nobody knew you could make a living on Instagram or YouTube. Entire categories of work emerged out of nowhere and now generate billions in taxable income," Thompson said. "As the economy shifts, new forms of employment and new taxable revenue will replace what automation displaces."

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