New surveys commissioned by the Low Pay Commission have found that national minimum wage related job losses are no more than "modest"
National Minimum Wage Related Job Losses
In the lead up to the introduction of the national minimum wage back in 1999, there were many warnings that its introduction had the potential to cause widespread job losses. However, those fears ultimately proved to be unfounded. The CBI stated in 2000 that the national minimum wage had worked well as it had been set at the correct level, but warned against increases that went too far too fast. A rise to £4.50 per hour for those aged 22 and above in October 2003 was said to be a "sensible balance between prudence and boldness" by Digby Jones, the then Director General of the CBI. Now, the results of new surveys commissioned by the Low Pay Commission have found that the overall impact in terms of national minimum wage related job losses has been no more than "modest"
New Surveys
The Low Pay Commission commissioned 8 research projects, 4 of which related to the scale of any national minimum wage job losses. One of the reports, entitled "Minimum Wage and the Propensity to Automate or Offshore" by Grace Lordan from the London School of Economics, found that "a £1 increase in the minimum wage leads to a 0.24 and 0.15 percentage point decline in the share of automatable and offshorable employment respectively.....Together, this implies that around 45,000 jobs are affected." The study concluded that: "Overall, the empirical analysis suggests that firms may re-assess their production processes following minimum wage increases, but so far endogenous substitution has been limited. The forecasts in this work also highlight that substitution should continue to be modest up to £8.50." Manufacturing roles, retail positions, call centre operatives, and administrators were the most at risk of substitution and job loss according to the survey. Nevertheless, the study also concluded that the "jobs lost to automation in the future will be met with the creation of new jobs that require an entirely different set of skills. We do not know if these will be in equal number to those lost. Just because all jobs lost have been replaced with new jobs in the past does not mean that this will continue to occur in the future. Replacement at these levels will become less likely as machines increasingly undertake more complex tasks. There is a role for policy to play in ongoing monitoring of trends, and to give due consideration as to how the rents earned by machines are distributed."
