Rapid minimum wage rises 'could lead to workers being replaced by robots’ in some sectors

4 Jan 2018 By Marianne Calnan

Number of lower-paid staff in automatable roles will increase in years ahead, says study

The rapid rise in the national living wage could mean robots replace more human jobs more quickly, data published by an economic think tank has revealed today (4 January).

The study from the Institute for Fiscal Studies (IFS) advised that “extremely careful” monitoring of the minimum wage rate was required as employers look to reduce costs and automate aspects of their businesses.

Employers were found to be more likely to invest in robots and computerised systems if the alternative was more expensive labour, suggesting that HR departments could be managing robotic as well as human workers if pay rates continue to climb.

The national living wage for over-25s is set to rise 4.4 per cent in April – from £7.50 to £7.83 an hour – the November 2017 budget announced. It is expected to reach £9 per hour by 2020.

The IFS said employees paid the minimum wage in 2020 will be more than twice as likely to be in the 10 per cent most ‘routine’ occupations – such as retail cashiers and receptionists – compared to today. The report also noted that the loss of certain jobs to automation may open other opportunities.

Robert Joyce, IFS associate director, said: “These types of people tend to be easier to replace with machines. So one response from a rational employer, which is thinking how best to produce what they want, is substituting labour with machinery. It’s an additional reason to be cautious.”

But Natalie Ellis, HR consultant at AHR Consultants, told People Management she does not view automation as “replacing people”, but rather the driving force behind jobs innovation.

“There may be changes to efficiencies such as administrative tasks and reporting, which the HR industry has already seen with the advancements of HR systems,” she said. This has led to more face-to-face advice, and more specialisation by HR professionals into fields such as training and development, Ellis said.

The impact of automation has been particularly prominent in the automotive and technology sectors, she said. Having witnessed the role of robots at Jaguar Land Rover, Ellis said robots “make building a car incredibly simple but the robots there play an assisting role rather than a replacement. For other, more traditional, industries, it may take many years before we witness the impact of artificial intelligence on employment.”

The report’s author and IFS research economist, Agnes Norris Keiller, warned that a higher minimum wage would affect employment at some point, but said economists were unsure exactly when.

“The fact that there seemed to be a negligible employment impact of a minimum [wage] at £6.70 per hour – the 2015 rate – does not mean the same will be true of the rate in 2020,” she said. “The fact that the higher minimum will increasingly affect jobs that appear to be more automatable is an additional reason that extremely careful monitoring is required.”

Increasingly higher national living wage rates – which the Labour party said in its June 2017 manifesto should be £10 an hour by 2020 – could be counterproductive in increasing employees’ take-home pay, by bringing “even more employees in more automatable jobs into the minimum wage net”, Norris Keiller added.

Labour shadow business secretary Rebecca Long-Bailey, however, told reporters today that well-harnessed technological change “could bring about immense benefits – transforming jobs and workplaces and driving up productivity and living standards”.

The government said it was working with industry to ensure the benefits of new technologies were felt across different sectors and regions to create highly skilled, well-paid jobs for the future, backing innovation and supporting the development of new skills.

Bryan Sanderson, Low Pay Commission chair, said it had commissioned research and consulted with employers and workers on the potential of automation to affect the employment of low-paid workers.

Research by the London School of Economics, commissioned for its most recent report, found that minimum wage increases have had a modest negative effect on the employment of low-paid workers in automatable jobs – mainly in manufacturing and among older, male workers.

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