It must be a high point in Greg Hayes’ career. Who’s Greg Hayes? He’s the CEO of United Technologies, who owns Carrier, the HVAC company that was going to move all those jobs to Mexico, until President-elect Trump swooped in to persuade them to keep those jobs in the United States. But did he really succeed? Margaret Hartmann of New York Magazine has some news on that:
In exchange for $7 million in tax breaks from the state of Indiana over the next decade, Carrier agreed to invest $16 million in its in-state facilities. (Carrier is still moving 600 jobs from the Indianapolis plant — and all 700 jobs from its Huntington, Indiana, facility — to Mexico.)
United Technologies CEO Greg Hayes admitted in an interview with CNBC earlier this week that the money will mostly go toward automation, telling Jim Cramer:
We’re going to make a $16 million investment in that factory in Indianapolis to automate to drive the cost down so that we can continue to be competitive. Now is it as cheap as moving to Mexico with lower cost of labor? No. But we will make that plant competitive just because we’ll make the capital investments there. But what that ultimately means is there will be fewer jobs.
“Automation means less people,” [United Steelworkers Local 1999 president Chuck] Jones underscored Thursday on CNN. “I think we’ll have a reduction of workforce at some point in time once they get all the automation in and up and running.”
So the subsidies promised to Carrier will be used to … automate those jobs away anyways. Sweet deal for Hayes. Trump looks like an idiot. The Art of the Deal, indeed.
But what will the union do? At one time, the IWW (the “Wobblies”, one of the better nicknames of all time) was the best hope to raise labor compensation throughout the world, but they seem to have fallen on hard times. This results in an imbalance in pay across nations, and thus the migration of jobs from well-paying nations to the more needy nations (parsimonious is not the proper term here). The immediate goal is to stop the movement of jobs, first to other nations, and then into the domain of machines. The former is often handled through treaties, but while automation is hardly new, the pace of automation seems to be accelerating as the computers controlling the machines become smarter. When does a machine become taxable?
Will it ever make sense for Congress to attempt to place a special tax on automation? We already tax, as a general concept, the income from jobs (lots of exceptions, but not important here). If a company buys a machine that automates the creation of something, it may pay a tax on the acquisition, but after that the only taxes may come from maintenance; this revenue stream almost certainly doesn’t match that of the worker(s) replaced by the machine. So the government faces a shortfall in estimated revenue for each job lost to automation.
Imagine a manufacturing company which is controlled by a few managers, has maybe a human sales & marketing manager, and everything else is produced by automation. They pay taxes on their profits; the taxes “paid” by employees will, by and large, disappear.
Now, the libertarian response is that the former employees will find new jobs, even creating entire new industries which will produce taxes, and it’s a lovely thought – freeing up human creativity from the drudgery of the factory line. But such creation takes capital, time, intelligence – and its rare for all three to come together for someone fresh off the assembly line.
How this all plays out in general should be fascinating.
