Institute for Fiscal Studies warns above-inflation increases give employers a greater incentive to replace workers with robots
Above-inflation increases in Britain’s minimum wage are putting a growing number of workers at risk of being replaced by machines, one of the country’s leading thinktanks has warned.
The Institute for Fiscal Studies (IFS) said the proportion of the workforce covered by the minimum wage was likely to triple to 12% between 2015 and 2020 – drawing in groups vulnerable to automation such as receptionists and shop checkout operators.
The IFS said that in 2015 the statutory pay floor had tended to help mainly those employed in the personal services sector, such as bar and restaurant staff, doing work not easily replicated by machines.
But it added that slightly higher paid jobs were often easier to automate and rising wage bills gave employers an incentive to make the switch. The peak for “automatability” would come if and when the low pay floor covered the bottom 25% of wage earners.
The legal minimum hourly wage – rebranded the “national living wage” – has been rising in recent years as a government response to low pay. It has increased from £6.70 in 2015 to £7.50 and will rise further, to £7.83, in April.
By 2020, the government has set a target of the minimum wage being 60% of the national average (as measured by the median).
The IFS said that if the forecasts for wage growth made by the independent Office for Budget Responsibility were correct, that would result in a minimum wage of £8.56 an hour. Labour promised a £10 an hour minimum wage by 2020 in its 2017 election manifesto.
The IFS said the minimum wage was increasing at a faster rate than wages in general, which meant more workers were affected by it. Those set to be brought within the minimum wage net in 2020 were 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%).
Employment has continued to grow in the years since 2015 and the UK’s unemployment rate stands at 4.3% – the lowest level since 1975. The IFS warned, however, there was no guarantee that there would be no impact on jobs from the minimum wage.
Agnes Norris Keiller, a research economist at IFS and an author of the new research, said: “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.
“Beyond some point, a higher minimum must start affecting employment, and we do not know where that point is. The fact that the higher minimum will increasingly affect jobs that appear to be more automatable is an additional reason why extremely careful monitoring is required.
“Meanwhile even higher rates, as proposed for example by the Labour party, would bring even more employees in more automatable jobs into the minimum wage net.”
The IFS said it could not be certain there would be adverse effects for low-skilled workers from the planned increase in the minimum wage.
The thinktank said it would matter greatly whether anyone who did lose out from automation quickly found adequate re-employment. It was also possible that the use of technology to replace some jobs would create new roles that were complementary to that technology, such as demand for people to service machinery.