Businesses could replace workers with machines because of higher minimum wage, says CBI boss

John Cridland said the Government's policy was a 'gamble'

Jon Stone
Tuesday 03 November 2015 14:09 GMT
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A car factory
A car factory

The Government’s plan to increase the minimum wage so that it is closer to a living wage is a “gamble”, the director of the Confederation of British Industry has said.

John Cridland, the business group’s outgoing director, told the Guardian newspaper the wage increase could lead to the automation of certain jobs.

“The national living wage of £9 an hour is a laudable objective. The increase to £7.20 next April looks OK, but you can’t guarantee what will happen in the next four years. Increasing wages by 5% a year for four years will result in 25% of people being on the national living wage,” he said.

“The national living wage is a gamble. If the government pushes up wages too fast and more quickly than business can accommodate, then business will take out people and replace them with machines.”

Mr Cridland had made similar comments at an event marking the CBI’s 50th anniversary in September this year.

George Osborne has announced he would raise the minimum wage to £7.20 by April 2016 and has said he would like a £9 minimum wage by 2020.

With this increase, the Chancellor has also rebranded the minimum wage for over-25s the National Living Wage.

The actual living wage itself is now £8.25 across the UK and £9.40 in London, however.

Researchers at the Resolution Foundation have warned that the living wage could have to go even higher if the Government’s tax credit cuts go ahead.

The same organisation also found yesterday that a third of women in their 20s earn less than the living wage.

Figures released by the Office for National Statistics last month show that the proportion of workers not being paid the living wage is also rising in general.

“Between April 2008 and April 2010, the proportion of jobs paid less than the living wage in London was stable at around 13%, but it had risen to 19% by April 2014," the ONS said.

“For the rest of the UK, where only 3 years of estimates are available, the proportion of employee jobs paid less than the living wage rose from 21% in April 2012 to 23% in April 2014.”

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