In a new report, the Institute for Fiscal Studies (IFS) has warned that future increases in the National Living Wage (NLW) could lead to more UK jobs becoming automated.
Under current plans, by 2020, the NLW will have risen significantly, as part of the government’s commitment to ‘support working families with the cost of living’. The IFS predicts that, by this time, the NLW will rise to over £8.50 an hour.
The NLW is currently £7.50 per hour. It is set to rise from 1 April 2018, reaching £7.83 an hour.
The Institute’s report warned that a higher NLW will eventually begin to ‘affect jobs that appear to be more automatable’, such as retail cashiers and receptionists, which could be replaced by computerised systems.
Individuals who work in the wholesale and retail sector are most likely to be affected by automation, the IFS said. Those working in the manufacturing industry are also highly likely to lose their jobs to automation, according to the report.
The IFS also found that, currently, the NLW is rising faster than workers’ average earnings, meaning that more individuals are being paid at the minimum level.
Commenting on the findings, Agnes Norris Keiller, Research Economist at the IFS, said: ‘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.
‘Even higher rates… would bring even more employees in more automatable jobs into the minimum wage net.’
A survey carried out by the Confederation of British Industry (CBI) has suggested that business owners in the UK will seek to increase their employees’ pay in 2018.
The CBI found that 52% of survey respondents will aim to raise pay for their employees in line with, or above, inflation in the coming year.
51% of businesses are also seeking to grow their workforce in 2018, the data revealed.
However, a significant number of firms reported that they have been affected by rises in the National Living Wage (NLW): 55% stated that they have felt the effects of the NLW on their business, which is a slight rise when compared to last year’s figure of 50%.
Commenting on the findings, Matthew Percival, Head of Employment Policy at the CBI, said: ‘Living standards have been squeezed in 2017 because of higher inflation.
‘The good news is that despite this, more than half of companies will offer real pay rises next year – despite a slowing economy.
‘Higher productivity is the only sustainable way to increase pay, so it is rightly the focus of business and the government through the Industrial Strategy.’
The Trades Union Congress (TUC) has urged the Low Pay Commission (LPC) to raise the National Minimum Wage (NMW) rates for younger workers.
Young employees are ‘at risk of being left behind’ by the NMW, the TUC warned as it gave evidence to the LPC.
Currently, workers aged between 21 and 24 are entitled to at least £7.05 an hour. The NMW for those aged between 18 and 20 is £5.60, and the minimum wage for employees aged under 18 is £4.05 an hour. Apprentices are currently entitled to at least £3.50 per hour.
The National Living Wage (NLW) applies for workers aged 25 and over, and currently stands at £7.50 an hour. NMW and NLW rates change every April.
The TUC is calling for the LPC to extend the NLW to workers aged 21 and above, and increase the NMW rates for workers aged between 16 and 20.
It has also called for a rise in the apprentice NMW rate.
Commenting on the issue, Frances O’Grady, General Secretary of the TUC, said: ‘Minimum wage rates aren’t increasing fast enough and the government’s target of £9 an hour by 2020 now seems a fantasy.
‘The minimum wage needs a serious boost in the coming years, especially for younger workers.
‘With employment, the economy and earnings set to grow next year, employers will be able to afford a decent rise.’
A survey carried out by the British Chambers of Commerce (BCC) has revealed that four in five businesses in the UK have been affected by rising costs generated as a result of changes to employment legislation.
In its Annual Workforce Survey, which garnered the opinions of more than 1,400 UK businesses, the BCC found that the Apprenticeship Levy, the National Living Wage (NLW) and pensions auto-enrolment have led to an ‘increase in the cost base of businesses’.
50% of respondents surveyed revealed that the NLW has helped to increase their employment costs, whilst 75% of firms reported a rise in costs as a result of compliance with pensions auto-enrolment.
Meanwhile, 20% of businesses have experienced rising costs as a direct result of the introduction of the Apprenticeship Levy.
Rising costs could lead to reduced investment and wage growth opportunities, the BCC warned.
Commenting on the findings, Jane Gratton, Head of Business Environment and Skills at the BCC, said: ‘Businesses are under increasing pressure from the burden of employment costs, and this will influence the choices they make and outcomes for employees.
‘Higher employment costs impact on the bottom line and reduce the resources available to invest in the business and its people.
‘At a time when employers across the country are facing acute skills shortages, it is vital that they have the resources and flexibility to invest in their workforce and the future needs of the business.’
The Federation of Small Businesses (FSB) has called on the government to consider whether forthcoming rises in the National Living Wage (NLW) rate may need to be delayed if the economy cannot bear the pace of change.
By 2020, the NLW will have risen to £8.75 per hour. The business group has suggested that any risk to the UK economy should be ‘built into the next NLW increase’, which is currently scheduled for April 2018.
The NLW should not rise any higher than £7.85 next year, the FSB has suggested.
The call to delay further increases comes following the FSB’s publication of new research, which revealed that 64% of small firms affected by the NLW have taken lower profits in order to meet the latest rate rise.
43% of small businesses have had to increase their wages to meet the demands of the NLW, the research also suggested.
Mike Cherry, National Chairman of the FSB, said: ‘Small employers have demonstrated their resilience in meeting the challenges set by the NLW, with many cutting their margins or even paying themselves less to pay their staff more.
‘In sectors where margins are tight, small firms are resorting to more drastic measures to cope with the NLW.
‘It’s vital that the NLW is set at a level that the economy can afford, without job losses or harming job creation. Cost pressures on small businesses are building, and with most recent economic indicators underperforming, we are now facing the reality that the NLW target may need to be delayed beyond 2020.’
The British Chambers of Commerce (BCC) has called for a rise in the National Living Wage (NLW) to help balance inflationary pressures for low paid workers.
Responding to a call made by the Low Pay Commission (LPC) for comments in regards to minimum wage levels, the BCC recommended a 2.7% increase in the NLW rate, to ‘compensate for the rise in inflation’.
The Consumer Prices Index (CPI) rate of inflation currently stands at 2.9% – its highest level in almost four years.
However, the BCC also stated that many businesses are ‘struggling to absorb the rising cost of employment’, citing pressures from existing policies, such as the Apprenticeship Levy and pensions auto-enrolment. The business group said that any amendment to the NLW rate should be ‘cautious’, in order to prevent further wage bill increases.
Jane Gratton, Head of Business Environment and Skills Policy at the BCC, said: ‘The BCC has recommended an increase in the NLW to help low paid workers manage inflationary pressures which are eroding their spending power.
‘Setting the NLW must be done cautiously, comprehensively taking into account economic circumstances so that people are not priced out of jobs.’
Household incomes in the UK are falling at their fastest rate since 2011, data published by the Office for National Statistics (ONS) has suggested.
Real household disposable income per head fell by 2.0% in the first quarter of 2017 when compared to the same quarter in 2016. This represents the fastest decrease since 2011.
The main reason for the decline was the rise in inflation, the ONS said.
Meanwhile, a separate report published by the Joseph Rowntree Foundation revealed that working families are facing ‘bigger shortfalls in their household budgets’ despite tax cuts and an increase in the National Living Wage (NLW).
The Foundation suggests that this is due to rising living costs, and wage increases being reduced.
Campbell Robb, Chief Executive of the Joseph Rowntree Foundation, commented: ‘Working families are facing bigger holes in their budgets worth hundreds of pounds, despite a higher NLW and tax cuts.
‘It means millions of families are facing a struggle to make ends meet as the cost of getting by in modern Britain rises ever higher.
‘With the Bank of England forecasting inflation will increase even higher this year, families are facing no respite. We need the government to take action and ensure living standards do not fall backwards.’