Minimum wage rises may lead businesses to replace more human workers with machines, a major think tank has warned.
The Institute for Fiscal Studies (IFS) warned in a new report that bosses are increasingly looking to automate their businesses, and could just replace people with machines instead of paying them more.
For employees aged 25 and over, the minimum wage is currently £7.50 and will rise further to £7.83 in April.
The rate is planned to reach 60% of median wages in 2020 – which, under current forecasts of wage growth, would be £8.56.
Those jobs set to be brought within the minimum wage net in 2020 are more than twice as likely to be in the 10% most ‘routine’ occupations – for example, receptionists and retail cashiers – as those who were directly affected by the minimum wage in 2015.
This kind of work tends to be easier for employers to automate, according to the IFS.
Agnes Norris Keiller, a research economist at the IFS and one of the authors of the new study, 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 has however said that the future is ‘uncertain’, and that they ‘do not know what the employment effects will be’.
The think tank’s research did say that the automation of some jobs can actually lead to the creation of other jobs related to the new technology.
Research in the US has found higher minimum wages can have some negative impacts on the employment of low-skilled people in automatable positions – but found evidence of concurrent employment gains among other groups.