Automation risks exacerbating income inequality across UK, think tank warns

Total level of wages associated with jobs that have the technical potential to be automated in the UK is around £290bn annually

On the back of the report’s findings, the IPPR is calling on the Government to manage automation so that the benefits and threats to the labour market of the future are balanced (Getty)

A rise in automation across a slew of industries could widen an already stubborn gap between the incomes of the UK's richest and poorest, a new report compiled by the Institute for Public Policy Research has warned.

In the study, the IPPR argues that the total level of wages associated with jobs that have the technical potential to be automated in the UK is around £290bn annually. That represents around 33 per cent of all wages and earnings from labour in the economy.

It also found that low-wage jobs have a greater potential to be automated than high-wage jobs, and that income inequality is therefore likely to be exacerbated as automation gains momentum.

“If automation leads to lower average wages or working hours, or loss of jobs in aggregate, a significant amount of national income could be transferred from wages to profits,” the IPPR report states.

“And while increased automation of activities will replace some workers and labour earnings, employment and wages will rise in other areas of the labour market due to higher output and productivity, offsetting some of the original £290bn lost but increasing pay inequality.”

On the back of the report’s findings, the IPPR is calling on the Government to manage automation so that the benefits and threats to the labour market of the future are balanced.

It said that the more rapid adoption of digital technologies should become an integral part of the Government’s industrial strategy and that Westminster should strive to make the UK the most digitally advanced economy in the world by 2040 – in order to be able to combat the challenges presented by automation.

It also urged the Government to establish a new partnership body, called Productivity UK, whose mission it would be to raise firm-level productivity and focus on the wider adoption of digital and other technologies across the economy.

Finally, the IPPR said that the UK’s skills system needs to better equip people to complement automating technologies and help them to be able to retrain where jobs are lost. It said that the apprenticeships levy should be turned into a so-called “productivity and skills levy”, which firms can use to train employees for wider skills. A personal retraining allowance, the IPPR said, should also be introduced for workers who are made redundant.

If the Government does not step up to the challenge, highly skilled workers will be able to command higher wages and better jobs, widening the rift between the wealthiest and the worst off, the IPPR warned.

Overall, though, the IPPR said that there was no evidence that automation of the workforce was about to lead to the emergence of a so-called “post-human” economy in which robots take over the majority of jobs. It said that automation actually has the potential to lead to productivity gains because jobs will largely be reallocated rather than eliminated and new sources of wealth will be created.

In fact, the think tank projects that – if managed effectively – automation could raise productivity growth by between 0.8 to 1.4 per cent annually, in turn boosting the UK’s gross domestic product by 10 per cent by 2030.

“While technological change will reshape how we work and what we do, it won’t eliminate employment,” said Mathew Lawrence, a senior research fellow at the IPPR. “A bigger challenge is arguably the effect of automation on inequality in the UK,” he added.

“Managed badly, the benefits of automation could be narrowly concentrated, benefitting those who own capital and highly skilled workers. Inequality would spiral. Managed well though, with a strategy to increase adoption of technologies in the everyday economy and new models of ownership to spread the benefits, automation could help create a future of shared economic plenty,” Mr Lawrence said.