Robots Will Pay For Your Retirement (If You Have One)

By Chris Bullivant
February 2022

The pandemic has forced a number of changes to the work format, challenging traditional office hours, the need to commute, and the wisdom of companies holing up their employees in one downtown skyscraper. Pandemic-proofing has required work from home, hybrid working, or dismantling teams siloed from outbreaks. Many of the changes, especially for the laptop class, are welcome. But across the board, they have forced people to think about quality of life issues.

This, though, is just the start of the conversation. The 9-to-5 is a hangover from the nineteenth century, cemented-in by twentieth century rights. As is the concept of retirement.

Working 9-5

In the United States, our current 40-hour week (or 9-to-5) paradigm originated in the late 1800s. Laborers and manufacturers, with no limits to their hours, organized, or had organized for them, rights to limit their work hours to eight a day. Eventually Henry Ford propelled the idea into national consciousness by voluntarily adopting the rules in his factory. FDR, catching up, implemented it into legislation, establishing our concept of 9-to-5 decades after the idea first floated.  

The notion is now being challenged. The U.K. is considering a 4-day week - where companies maintain pay and benefits as for a five day work week. This still operates within a 9-to-5, forty hour week paradigm, but it’s a crack in the mold. Trials in other countries, including Iceland, have shown reducing the amount of hours without reducing salary and benefits boosts both staff productivity and well-being. 

Working 18 - 65

But if we start pulling on this 9-to-5 thread, much else unravels. Norms around retirement at the age of 65 with a pension emerged with the 40-hour week too. By the time the U.S. moved to adopt Social Security in 1935 just over half of the male population made it to 65. Now over three quarters of the U.S. population makes it to 65. Half of babies born in the U.S. now are expected to live until they are 104.

Those men who made it to 65 in 1940 could expect, on average, to live 12.7 years in retirement. That figure is now 21.5 years. In 1940, there were only 9 million Americans aged over 65. Today the figure is 46 million.

That means, as things stand, many Americans are anticipated to spend one third of their life drawing from Social Security, Medicare, private pensions, and savings. None of which are, apparently, going to cut it. Not least when “the median annual cost of in-home care rose to $54,912 in 2020” and the average American in their 60s has $182,100 in their 401k.

Social Security collapse: time to retire retirement? 

Social Security alone is in crisis. The system requires a 2.8:1 ratio in order for it to be sustainable: 2.8 workers to contribute for every one beneficiary. 

The ratio was a healthy 5 contributors to every 1 beneficiary in 1960 when the average male life expectancy was 66.6. Now we are below that magic threshold, at 2.7 contributors to every 1 beneficiary, and falling. The shortfall is picked up by the Social Security Trust Fund which is expected to be empty by 2040. In other words, there is enough to cover baby boomers who have paid into the system and who began retiring in 2011. But by the time any subsequent generations come to take anything, there will be significant challenges.

Politicians aren’t really addressing this looming crisis. The Social Security Administration presents various proposals. But the principle hindrance is perhaps the concept of retirement at all: that you must work all the time and then stop, or at least reach a threshold age by which you can pull on retirement benefits. 

But if our sense of prime working years is now ambiguous, what we are meant to do for work within those years is also becoming less clear. 

Automation and the rise of robots

The nature of work is radically changing before our eyes and will only continue to do so in the decade or two to come. Five per cent of jobs are set to be lost completely to automation, but it isn’t just repetitive rote work that will be replaced by automation and artificial intelligence. According to a McKinsey report, one third of activities in 60 per cent of all occupations, up to and including CEOs, will be lost to automation. The report anticipates that 20 to 25 per cent of the workforce could be displaced by automation by as soon as 2030. All of this taking place in a rapidly changing global economic and geo-political picture. By 2050 the United States will be the third largest economy in the world after China and India (GDP at Purchasing Power Parity) in a global economy that will have doubled in size.

The concern is not only that the ratio of Social Security contributors now is skewed to fail, but also over what jobs will be around for day-to-day income, let alone paying income tax and Social Security dues. Researchers have observed with some surprise that since 2000 technology has begun to impact labor’s share of GDP: no longer constant as for decades at 65 per cent, but now falling to 56 per cent, “which translates into some $11,000 less in annual income for the average household than with a 65% share.”

Not only may people find they reach 65 and there is no Social Security left in the pot for them, but they may struggle to find enough income to live on well before they even reach 65.

Because a shift to an increasingly digital economy favors the highly educated over those with less education and fewer skills, those without may end up with even less. In the United States this risks causing further polarization.

This is why many now call for a universal basic income (UBI). A UBI scheme would help take the guesswork out of an individual’s basic needs being met. Regardless of its merits, it’s hard to imagine how this might be funded when even a time limited social security isn’t. Wage subsidy, tax credits, income tax exemption, stimulus checks, or a central bank digital currency paid out with limits on the items it can purchase are all attempts at scratching the same income itch.

Drawing income from an AI Social Security dividend

Yet automation is set to contribute to the economy. Perhaps to the order of $1.2 trillion to US GDP by as soon as 2026. It is perhaps for this reason - a loss of income through labor but an increase to the economy through automation - that Bill Gates has suggested that we might tax robots.

Yet, what if instead of taxing them, robots became an even growing source of income to meet shortfalls in retirement income. Or, if the sums were suitable, contributing to a lifelong dividend. 

This isn’t too extraordinary an idea. Those who have stocks in companies and receive regular dividend income understand the concept of benefiting financially from another person’s work. So too, why not derive an income from a robot? The contribution automation makes to the economy could be directed to a personal account that supplements your other earnings. You could draw on it now, or save it for later. Either way, the money would be yours - no longer a fictitious amount as with current Social Security payments. A personalized account would be linked perhaps even to the thing you used to call your “Social Security number”. 

This is interesting because it means that the concept not only of retirement could be abandoned, but it changes the complexion and nature of work along the life course.

Abandoning retirement age means less pressure for those on lower income to struggle to an arbitrary finishing line. For those who want to work into their elder years from a place of leisure and not financial necessity, there might be less ageism in the workplace. During ‘prime working years’, career breaks, career changes, sabbaticals, travel, and flexible working will be the norm not just for trust fund kids, but for everyone. Who knows, maybe even stay-at-home child raising will become both fashionable and achievable again?

Emotional intelligence

Which brings us back to the labor market. A dominant concern as we all prepare for a digital economy everybody will need to learn new skills. The U.K. government ran a rather tone deaf campaign to promote digital upskilling in 2020, with a poster of a young woman warming up for a ballet class. ‘Fatima’s next job could be in cyber (she just doesn’t know it yet)’. 

Yet automation and the digital economy, while putting a premium on science, technology, engineering and math, also puts a premium on the one thing robots are not likely to have: emotional intelligence. Complex problem solving will benefit a managerial class with some job security. Teachers and nurses are also anticipated to be in demand, even if not well remunerated demand. But surely, too, art, story telling, theater, and even ballet. The very things that make us human may be both more prized and perhaps more available with the increased time and income that automation may afford us.

This continues a trend over the last two centuries where labor-saving devices and technology has freed up more time for leisure, and allowed workers to transition from performing menial tasks to specialized roles. 

Karl Marx may have been right to diagnose that in 1900 only the aristocratic class were able to enjoy leisure, and that this should be something extended to all. But it turned out that it was the free market, trade, technological innovation (and the release of power from fossil fuels) that allowed for an increasing prosperity to benefit the masses with more money and food from ever less work.

Rather than see automation and Social Security collapse as a threat, it may be an opportunity. It challenges us to let go of outdated concepts of work and the structures of tax and Social Security that underpin it. It may be, then, that automation is the next step in this emancipation from menial work. Flexible human working and lifelong income security can be in part derived from automation in the years to come. 

The pandemic may have started a conversation about flexible work, but it’s a conversation about substantially more than the benefits of working from home.