With current political noise it was easy to miss that the national minimum wage celebrated its 20th birthday last week. Let’s be frank though – the celebrations were hardly raucous!
Despite a rise of over 4% (depending upon the workers age) the media latched onto the increased cost of living and as such any feelgood factor among employees quickly evaporated.
The minimum wage has always been a source of debate. Supporters point to benefits such as an improvement in the standard of living, an improvement to employees’ morale and an overall boost to the economy with increased consumer spending. Opponents argue that increasing the minimum wage leads to organisations just increasing the price of products and services so they can pay the higher wage, thus a general increase in the cost of living is created that negates the benefit of the salary increase in the first place.
One side effect of the minimum wage that seems to be gaining traction is the introduction of automation and artificial intelligence (AI). 20 years ago, robots in the workplace were science fiction or something akin to a novelty factor. But, automation, AI and algorithms are smarter, have improved capabilities and are increasingly cheaper. Automation has become a viable alternative to hiring and paying workers.
Minimum wage increases have a significant impact on those companies heavily reliant on low paid workers in industries such as services, manufacturing and transport. This is not about to change. Both Labour and Tory governments can see it as a vote-grabber and almost race each other to see who can increase it at the fastest rate.
Common sense dictates that at some point an organisation reaches a tipping point whereby automation could be a seriously realistic means of reducing costings and improving productivity. Technology may have previously not been ready and even today could be limited. But as said things are now moving quicker than ever.
Self-service in supermarkets is an everyday event and could progress to schemes like Amazon Go. Robots arms on production lines are old school. I doubt one could find a cow that is now milked by human hand. Governments across the developed world are allowing tests of driverless vehicles, and construction companies have been looking at robots like Hadrian X that can lay 1,000 standard bricks in 60 minutes. I think you get me here…technology is today showing that in the future it could generate some breath-taking results.
Those industries most likely to turn to automation are the very same industries that rely on large numbers of minimum wage workers to deliver their products and services. So the very workers benefiting from minimum wage are in turn the most vulnerable to job loss with automation. Hardly fair I hear you say! But, the evidence to date suggests job loss due to automation are ‘modest’. Research shows a £1 increase to the minimum wage has led to a 0.24 and 0.15 percent decline in the share of jobs through automation and offshoring. That does not exactly create a sleepless night for any of us.
You see, while jobs may be lost, automation also creates new jobs. Someone has to look after, service, and repair these robots. Or put simply – I still need a customer assistant at the self-service tills to help me scan more than five items without bring the till to a crashing halt due to my Neanderthal approach.
One problem is any new jobs that are created can require a completely different skillset to those that are being phased out. This brings about a new debate around training, education and sourcing candidates with different skillsets and abilities.
Minimum wage is set to stay and increase for the foreseeable. Companies will keep reassessing their procedures to maintain profitability. A tipping point could be reached where companies feel they have no choice but to invest in productivity boosting technology to protect their profitability. And that is one aspect of the minimum wage debate that makes me blink. Some ‘supporters’ of minimum wage demand faster, higher increases not because they care about the worker, but because it will make companies invest in technology and improve the UKs poor productivity rates.
To date the minimum wage has seen the lowest-paid in society improve their salary without causing unemployment. In some instances, the type of work minimum paid workers do is changing. But of more concern is the fundamental detail that the past does not always reflect the future. Just because in the past the jobs that are lost have been replaced does not mean that this will continue to be the case in the future. Technology costs keep falling, technology keeps improving and minimum wage keeps rising.
I do not wish to be as dramatic as to say we are looking at a ticking time bomb. Policy makers could intervene at some point and in some capacity. But let me leave you with these thoughts. “…With the acceleration of [artificial intelligence] and other new technology…the world is changing fast….A lot of exciting new innovations are going to be created, which will generate a lot of opportunities and a lot of wealth, but there is a real danger it could also reduce the amount of jobs…” – Richard Branson.
Unfortunately, the jobs most vulnerable are those that have benefited the most from increases to the minimum wage and who are least equipped to move into technically advanced and higher skilled roles.