Increases to the minimum wage could result in more jobs becoming automated, according to the Institute for Fiscal Studies (IFS).
For employees aged 25 or over, the legal minimum hourly wage – now called the national living wage – has risen from £6.70 in 2015 to £7.50 now, and will rise further to £7.83 in April.
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But while the IFS says, “there is a case for a higher minimum wage as a tool that the government has to help those on low wages”, it warns that minimum wage needs 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”.
If wages rise too high, it warns that employees could become too expensive to employ.
The IFS is also concerned that further increases to the minimum wage could result in more jobs becoming automated.
It says workers set to be brought within the minimum wage net in 2020 are more than twice as likely to be in the top 10% most routine occupations – such as retail cashiers and receptionists, which are the easiest to replace with machines – as those already paid the minimum in 2015 (11% compared with 5%).
The IFS adds that the minimum wage increases that have already occurred over the past two years have resulted in an “especially steep rise in the ‘automatability’ of affected occupations”.
However, the IFS does recognise that the substitution of workers with technology “would, if it occurred, be unlikely to happen immediately”, and adds that a rise in automation can also create new jobs that are complementary to technology - for example, people may be needed to service machinery.