Social Security and robotization: Possible ways to finance human reskilling and promote employment

2.1 Conceptual and EU framework

“A strong robotics industry is key to Europe’s future competitiveness. The growth of our robotics industry will generate new jobs and strengthen the European manufacturing sector.” ^[2] This statement made in 2012 is still valid. However, keeping up the technological pace also entails some risks. Certain public policy measures can contribute to maximize the positive impacts of robotics and minimize its negative ones. With that purpose in mind, we address which ones could be modified and/or adopted, paying special attention to the Social Security context.

The International Organization for Standardization in ISO 8373/2012, standard on robots and robotic devices, defines the intelligent robot as “a robot capable of performing tasks by probing its environment and/or interacting with external sources and adapting its behaviour.” As Nathalie Nevejans [2] indicates, it has a series of fundamental characteristics: it is a physical machine, powered by energy, with the capacity to act in the real-world and analyze its surroundings, which has the ability to learn from these actions and make decisions. ^[3] According to ISO 8373, an industrial robot is a multipurpose manipulator that can be programmed automatically and freely, fixed or mobile for use in automation technology, whose main purpose is to increase productivity as well as relieve the burden of tedious or insecure activities that man assumes. On the contrary, the service robot, since the revision of this ISO standard in 2012, is the one that performs useful tasks for people, society or institutions, without intervening in automated industrial production processes.

Europe in 2012 had a quarter of the world production of industrial robotics and a 50% share in personal and professional services robotics. The forecasts for 2020 were that service robotics could reach a market volume of more than 100,000 million euros a year, which is why the European Commission, industry and academia agreed to launch a partnership between the public sector and the private sector in the field of robotics. ^[4] More than two thirds of the EU citizens (70%) then had a positive opinion of robots: they mostly agreed that robots “are necessary because they do jobs that are too hard or too dangerous for people” (88%) and that “they are a good thing for society because they help people” (76%) [4].

2.2 The rising demand for robots worldwide

Let us remark the historical evolution during the last decade. According to the International Federation of Robotics (IFR): “since 2010, demand for industrial robots has risen considerably due to the ongoing trend toward automation and continued technical innovations in industrial robots. From 2013 to 2018, annual installations increased by 19% on average per year (CAGR). Between 2005 and 2008, the average annual number of robots sold was about 115,000 units, before the global economic and financial crisis caused robot installations to fall to just 60,000 units in 2009 with lots of investments being postponed. In 2010, investments made leeway and drove robot installations to 120,000 units. Until 2015, annual installations had more than doubled to almost 254,000 units. In 2016, the mark of 300,000 installations per year was crossed; and in 2017, installations surged to almost 400,000 units.” ^[5] The year 2018 was another record year: for the first time over 400,000 units were installed. The forecast was made by IFR for 2019–2022 regarding the worldwide annual sales of industrial robots: 2019: 420,870 units, ±0% compared to 2018; 2022: 583,520 units, +12% per year on average from 2020 to 2022 (Figure 1).

The total number of professional service robots sold in 2018 rose by 61%, i.e., to more than 271,000 units, up from roughly 168,000 in 2017. The sales value increased by 32% to US$ 9.2 billion. The total number of service robots for personal and domestic use increased by 59% to about 16.3 million units in 2018. The value was up 15% to US$ 3.66 billion [7,8]. The data provided by IFR are reproduced in Table 1.

2.3 Toward the transformation of the labor market

Robotization is quite rapidly impacting the job market. By focusing on the way this market might change, some solutions could be articulated to ensure socially responsible robotization processes [9,10].

For the International Labour Organization (ILO), technology, demography, globalization and climate change are among the main drivers of changes in the world of work. One should try to understand how they will affect work and society, and what is the best way to take advantage of them to generate opportunities. Technological change is an essential factor of growth and development, although it is also associated with the change in the labor market. The new technological innovations that underpin the fourth industrial revolution, such as big data, three-dimensional printing, artificial intelligence and robotics, to name a few, are having a transformative impact on the nature of work. For example, the distribution of robots is mostly concentrated in the manufacturing sector (80%) and in developed countries (80%). The density of robots, which is measured as the number of industrial robots per thousand people employed in the sector, ranges between 14 in developing countries and 2 in emerging countries [11]. While the main data related to technological developments in the past suggest that the waves of technological changes lead to the destruction of short-term jobs, followed by the creation of new and better jobs, today’s technological advances arise at a pace never seen and are causing unprecedented changes in the world. They are often affecting in a diverse way the different countries, as a result of their uneven situations (Figure 2).

Figure 1

Annual installations of industrial robots 2013–2018 and 2019*–2020*, IFR [6].

Figure 2

Number of multipurpose industrial robots per 1,000 people employed in the manufacturing sector), ILO, 2016 [11].

Figure 3

Job creation and destruction in different sectors, 2018 Questionnaire New technologies and the future of work [15].

Figure 4

Expected average reskilling needs across companies by share of employees between 2018 and 2022, World Economic Forum, 2018 [31].

2.4 New and lost jobs

The jobs, lost and won, related to each of the skills, will vary for each country. Many countries will be able to offer more new jobs than the ones that will disappear. Automation (robots and artificial intelligence) may not have a negative impact on jobs. Will the countries have workers with the skills required for the new jobs? The fact that new jobs will be created does not necessarily mean that this, alone, will solve the unemployment problem created by the loss of jobs, due to the lack of the required skills. Several public and private organizations are studying the types of skills that will be needed [12,13].

The countries that are able to train their workers in the new skills and retain talented workers can shorten the technological transition period. This will enable them to become more competitive and take advantage of the automation benefits [14].

This should not imply that human reskilling is directed at serving the productivity of robots (machines). On the contrary, let us emphasize the Resolution of the European Parliament of February 16, 2017, on the general principles related to the development of robotics and artificial intelligence for civil use. It points out that they should be aimed at complementing human capabilities and not replacing them. It is essential that human beings maintain control at all times, both in the development process and later in their performance (Figure 3).

2.5 A look at the Spanish example

How robotization will affect job creation or destruction may differ from one country to another; however, for a mere illustrative purpose, we are including a recent eloquent graph on the Spanish situation. In Spain, the most favorable sectors for job creation on a 2025 horizon are, by order: health and social services, information and communication technology services, leisure and culture, professional services, education and hospitality restoration. The most disadvantaged will be banking and insurance, administrative tasks, manufacturing, agriculture, commerce and public administration. Technology will contribute to the creation of jobs in areas such as health and social services, leisure, culture, catering, hospitality and transport and logistics. ^[6]

When profiting from the competitive advantages that advances in new technologies imply, one should counteract the negative effects they may directly generate on employment and indirectly on the financial resources of the Social Security system as well. This affects not only its income/revenues (by decreasing the ones received through contributions) but also its expense side (by increasing benefits and pensions as a direct consequence of the new situation).

2.6 The impact on Social Security systems

The sustainability of the Social Security system is related to the budgetary and financial balance between income/revenues and expenses (seen from the perspective of this system). That is, the relationship between workers/taxpayers and pensioners/beneficiaries. Obviously, this equilibrium may be affected by variations in either of these two magnitudes, or both, as happens in situations of either economic or financial crisis, or when economic growth is slow. At low levels of employment, an increase in the volume of expenses of the system (increase in the number as well as the amount of pensions, benefits or subsidies) can coincide with a reduction in income/revenues as a result of the fall in employment, but also of the lower amount collected as a result of the recognition, for different fair reasons, of bonus.

In the pay-as-you-go pension systems (i.e., current active generation pays the pensions of the current retired one), such as the Spanish Social Security, the drop in employment has a truly important effect. This does not mean that something similar happens in the capitalization systems (i.e., where a periodic payment will result in a capital sum), but, above all, these systems are affected by the fall in the returns on the values of the assets in which the pension plans are invested. ^[7]

However, in the search for a stable balance, the first option, in order to maintain the solvency of the system, is to control expenses, specifically pensions and benefits. However, the European position does not follow that path, but rather the maintenance of adequate retirement pensions. The foundation is that they constitute the main source of income for older Europeans who, in turn, are an important part of the population of the EU (120 million/24%). In fact, the basic objective of pension systems for the European Commission is to provide adequate retirement income and allow older people to enjoy a decent standard of living and enjoy economic independence, beyond the important role of automatic stabilizer that it plays. This has been observed during the last economic crisis suffered in which the role of pensioners has been very important: in many cases they have been the only source of resources for families, contributing, in this way, to cope with those hard years. For these reasons, the Thematic Report of the European Semester Adaptation and Sustainability of Pensions also points out that recent reforms of public pensions have tended to improve or maintain the level of protection against poverty.

Another option is to act via income/revenues. That is, it would be necessary to achieve an increase in sufficient levels at least to balance the expenses. The outlook is not hopeful, since despite the undeniable advantages that new technologies produce, such as robotics and artificial intelligence, the important effects they cause on employment cannot be ignored, generating a genuine transformation of the labor market.

The European Parliament in the aforementioned Resolution of February 16, 2017, with recommendations to the Commission on civil law standards on robotics, recalls that during the last two hundred years the employment rate has increased continuously thanks to technological development. It acknowledges that the development of robotics and artificial intelligence has the potential to transform the way of life and ways of working, increase levels of efficiency, savings and security and improve the quality of services, and hopes that, in the short-term and in the medium-term, robotics and artificial intelligence bring efficiency and savings. In particular, the Parliament asked the European Commission to carry out the analysis and supervision of the evolution, in the medium- and long-term, of employment as a result of the development and implementation of robotics and artificial intelligence as well as of the possible scenarios and their consequences on the viability of the Social Security systems of the member states. ^[8] The High-Level Expert Group on the Impact of the Digital Transformation on EU Labor Markets in 2019 has partially addressed the necessary Social Security systems’ adaptation in the member states of the EU. ^[9]

As mentioned in the Reflection Document on the Globalization of the EU [21], automation causes labor costs to lose relevance in decisions about where to locate production, so it can contribute to a partial return to Europe of the manufacturing industry, as the European Reshoring Monitor has observed. However, the losses may be greater than the possible recovery that this return brings, as the cost of labor is not a fundamental factor. Thus, from the point of view of the sustainability of the pension system, the problem would persist.

According to the European Reshoring Monitor database, the data on Spanish companies, reported in the national media between January 2014 and December 2019, are provided in Table 2.

According to the White Pension Book of the EU (2012), the sustainability and adequacy of pension systems depend on the extent to which they can rest on contributions, taxes and savings from working people. To cope with demographic change and the sustainability of public finances, financing agreements, eligibility criteria and labor market conditions would have to be calibrated, so that a balanced relationship between contributions and rights could be established (as between the number of active taxpayers and the number of retired beneficiaries). It is interesting to highlight how those same criteria (“globality” and “integration”) that led to establishing strategies to address them could be applied again today to solve the problems derived from robotization.

Likewise, in the Working Paper of the services of the European Commission entitled Report on Spain 2019 [23], it is stated, in relation to the risks of the sustainability of public finances, that the forecast that the public debt will decrease in the period 2018–2020 has not been successful and that the levels of taxation are low compared to expenses. In addition, this report underlines the inadequacy of qualifications and the deficit of skilled labor as another important obstacle to the development and use of advanced technologies. ^[10]

Having analyzed the situation in a global way and with an eye toward the objectives set by the EU to promote technological development and simultaneously solve the problem of the financial sustainability of Social Security systems, we consider a series of measures aimed at promoting employment in terms of training that could be adapted to the new demand and its financing.

3.1 Some measures from the income/revenue side

To address the imbalance in the Social Security system, the new theoretical possibility of taxing the robots or, where appropriate, their productivity to bear the costs has been considered by several authors [24,25,26,27,28]. In such a case, the problem is whether a robot (machine) can be considered from a legal point of view as a subject of rights and obligations and, therefore, a taxable person obligated to contribute, like any other worker, or taxpayer, either in a personal tax in the case of attribution of income for its contribution to the production process or for the profitability generated by its activity to the entrepreneur. Such profitability would comprise not only by the increase in the productive capacity but also by the savings in personnel costs derived from the activity of the robots.

There could be an extraordinary way to obtain income/revenues, whose analysis should not be overlooked. It is the portfolio in which the Spanish Social Security Reserve Fund is invested (if that type of reserve exists in a given system). The Consolidated Text of the General Law of Social Security, in Chapter VII of its Title I, currently regulates this Reserve Fund in Spain. ^[11] If necessary, it could serve as a minimum protection network. However, the amount available in the Reserve Fund depends on the system’s superavit.

3.2 The hidden potential in some ordinary incentives

Some of the proposed measures to increase income could discourage and hinder technological innovation, and this risk is to be avoided [29]. Other “ordinary” measures could be adopted in the current transition phase. Tax incentives are both part of the expenses and the income option. From the Social Security perspective, they might imply additional expenses in the present with the possibility for some positive outcomes in the medium- or long-term. The collection of some income/revenues will be thus sacrificed and will not feed the public budget, since those incentives will be designed to achieve other constitutionally protected goals [30].

In the following pages, we have selected some traditional incentives in the Spanish legal order that allow reductions in the contributions that are due to the Social Security system as they keep a connection with educational needs or transitional inability for other causes. We think that their analysis could serve, as a starting point, to briefly share their basic configuration features and discover the potential to redefine or adapt any of them in the robotization context. ^[12] Building a common pool of the existing incentives with this purpose in mind could open possible ways forward to better coordinate Social Security systems in the EU, at this stage where their characteristics are determined by the member states.

The foreseeable loss of some jobs will probably lead to an increase in public expenditures (due to the subsequent needs to finance unemployment benefits or early retirements). Given the impact on the sustainability of the system, one should try to keep active as many people as possible. For that reasons, the availability of true opportunities for reeducation is critical.

In the framework of the Davos 2019 report [31], Guy Ryder, Director General of the ILO, pointed out the need to return people to the center of employment policies. In the current transformative context, it is necessary to consider the right to access to continuing education as an extension of the right to education as well as to invest in policies that allow combining professional experience with education to facilitate the training of workers throughout their professional life. This proposal, as evidenced by data from the survey conducted by the World Economic Forum, would help meet the needs of companies (Figure 4).

In a robotization process the maintenance of jobs by employers via “training incentives” can be encouraged, so that workers can acquire the necessary qualifications in order to get new jobs. Also, via “employment incentives,” the employer could be motivated to maintain a job because of favorable factors (the incentive itself and the contribution that the worker could make to the improvement of production) that compensate the salary cost and quote. From the point of view of public spending, in terms of savings, one would have to think not only of the cost of the incentive but also of the difference that is not spent for each job that is saved.