HR · 4 January 2018

Minimum wage rises could accelerate workplace automation and threaten jobs

Routine occupations, such as checkout cashiers, could be most under threat
Routine occupations, such as checkout cashiers, could be most under threat

Planned increases to UK minimum wage levels could raise the pace of workplace automation and put a higher number jobs at risk, according to a new report.

In a study of how the kinds of employment covered by the minimum wage will change in the coming years, the Institute for Fiscal Studies (IFS) think tank warned that employers will soon look to cut costs in the face of statutory pay increases.

Recent recommendations put forward by the Low Pay Commission will see the National Living Wage (NLW) rise to £7.83 in April 2018, a 4.4 per cent pay increase for low earners aged 25 years old and over. The commission also put forward increases for each younger age bracket.

Meanwhile, forecasts by the Office for Budget Responsibility would see the NLW reach £8.75 by 2020 for over 25s.

The IFS has now predicted the proportion of the workforce covered by the minimum wage could triple between 2015 and 2020, to 12 per cent of all employees. It also claimed the kinds of employment held by those within the minimum wage would change significantly.

Where in 2015 the minimum wage covered predominantly hospitality workers such as restaurant waiters, those entering the minimum wage net in 2020 will be twice as likely to be in computer or desk-based roles that could more easily be replaced by automated technology.

The report claimed low-paid workers such as retail checkout cashiers and receptionists would be most at risk of being replaced by automated machines.

Read more: UK employees have cited automation among the greatest risks to job security

As minimum wage levels increase at a faster rate than general wages, the IFS warned a steep rise in automation – or peak “automability” – was likely to arrive when the NLW covered the bottom 25 per cent of the workforce.

One of the report’s authors, IFS economist Agnes Norris Keiller, warned that close monitoring of the impact of minimum wage increases would be vital in averting high unemployment.

“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,” Keiller said.

“Beyond some point, a higher minimum must start affecting employment, and we do not know where that point is.”

Responding to the IFS’ report, Steve Barraclough, CEO of the Chartered Institute of Ergonomics and Human Factors (CIEH), said it was “inevitable” Britain’s workplaces would see higher levels of automation and robotics.

“However, this will also result in the upskilling of many staff as robots are used for the more repetitive tasks. Most importantly though, we must remember the critical role that human factors will play in this transition,” Barraclough explained.

“Human skills are essential for many tasks, making the marriage between humans and machines vital to success, so it is essential that we fully understand how to best design and operationalise both human and technological functions.”

Automation is already driving a decline in retail jobs

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ABOUT THE EXPERT

Simon Caldwell is deputy editor at Business Advice. He has a BA in politics and communications from the University of Liverpool, and has previously worked as a content editor in local government and the ecommerce industry.

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