The rising minimum wage in the United States may be detrimental to the volume of jobs in the country, as it would force businesses to automate more tasks in a bid to cut costs.
An increase of around US$1 in the minimum hourly wage would result in the loss of tens of thousands of jobs nationally, according to economists Grace Lordan from the London School of Economics and David Neumark from the University of California at Irvine.
In their research report, which is based on data from the US Census Bureau’s “Current Population Survey” from 1980 to 2015, they note that many tasks in the manufacturing industry and low-skilled jobs like bookkeeping are the most vulnerable to automation.
“The findings imply that groups often ignored in the minimum wage literature are in fact quite vulnerable to employment changes and job loss because of automation following a minimum wage increase,” the paper argued.
As many as 19 US states raised the minimum hourly wage at the start of 2017, with states like Seattle increasing it to US$15.
It is increasingly becoming more common to put robots to work in many sectors. Across the country, robots are already painting cars, assembling products, handling materials, and packaging items.
“We expect that automation is a viable and likely substitute for certain types of low-skilled jobs,” say the authors.
Automation also creates jobs, but not the amount of jobs that it kills. According to findings by Forrester Research published in April this year, robots might create 15 million new jobs in the US over the next 10 years, but the same machines will kill 25 million jobs over the same period.
Worse still, those who lose their jobs to automation are less likely to find reemployment again, nor is it easy to train them in new skill.