Rapid increases in national minimum wage (NMW) rates could result in more jobs becoming automated, according to analysis by the Institute for Fiscal Studies (IFS), which warns that government should look closely at the potential unintended consequences of rising wage rates for the lower paid workforce
In 2015 4% of employees aged 25 and over were on the minimum, but this is set to reach 12% by 2020.
The IFS’s analysis suggests those now being brought within the NMW and the national living wage (NLW) net are in different sorts of jobs to those who have been on the minimum previously – and in particular they are more likely to be doing jobs that appear more readily doable by machines or computers.
For example, by 2020 they are more than twice as likely to be in the top 10% most routine occupations – such as retail cashiers and receptionists – as those already paid the minimum in 2015 (11% compared with 5%). This kind of work tends to be easier to automate.
The IFS argues that the fact that there seemed to be a negligible employment impact of a minimum at £6.70 per hour – the 2015 rate – does not mean that the same will be true of the rate of over £8.50 per hour that is set to apply in 2020.
While the IFS accepts there is a case for a higher minimum wage as a tool that the government has to help those on low wage, the think tank cautions that ‘it does need to be raised with care and according to a rigorous evidence-based process, rather than subject to a political bidding war based on nice-sounding numbers’.
The IFS says the problem is complex because it is not currently clear where the tipping point will occur, when employing someone in a routine job becomes so costly that technology is an option to consider.
The report states: ‘This is not the same as saying we know there will be big adverse consequences for low-skilled workers of the planned rises in the minimum wage.
‘The reality is more uncertain – we do not know what the employment effects will be – but also more nuanced than that.
‘First, as with other causes of job loss, it would matter greatly whether anyone who did lose out from automation quickly found adequate re-employment. Moreover, the use of technology to replace some jobs can create new jobs that are complementary to that technology (e.g. people to service machinery.’
Will the rising minimum wage lead to more low-paid jobs being automated? is here.
