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Threat to workers' pay if UK steps up pace of automation, Bank economist warns

Fadu News 2018-10-11 00:02:00

The Automated Brassica harvest in Cornwall (ABC) project is developing cutting-edge automated technology to help with the cauliflower harvest.

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  • Helen Chandler-Wilde

  • Robotics
  • Bank of England
  • Artificial Intelligence
  • UK economy

Increased automation could lead to weaker wage growth and a smaller share of national income going to workers, the Bank of England’s chief economist has warned.

Andy Haldane, who sits on the Monetary Policy Committee, said that the UK had until now been relatively slow to adopt automation compared to other countries. "Were the UK to catch up, this could have significant implications for wage growth," he said.

Mr Haldane estimated that increased use of robots could knock up to one percentage point off rises in pay.

“Increased automation and the dawn of a Fourth Industrial Revolution could, then, result in slower pay growth and workers receiving a smaller slice of the income pie."

Mr Haldane pointed to research from the International Monetary Fund, which had "found a significant negative effect of automation on labour’s share”.

Speaking at a conference run by dispute-resolution body Acas on Wednesday, Mr Haldane noted that surveys had found that the UK has 71 robots per 10,000 employees, far less than 127 in France or 170 in the US.

The UK compares even worse to Germany, where there are 301 robots per 10,000 - more than four times the rate in the UK.

Credit: Simon Dawson/Bloomberg

“This might help explain why the UK’s labour share has fallen less markedly than in these other countries," he said.

“If the UK had the same degree of industrial robot penetration as the US spread over a decade, this would lower wage growth by around 0.4 percentage points per year.

“If the UK in a decade was to reach levels of robot use in, say, Germany, then this could lower wage growth by around a percentage point each year.”

Mr Haldane’s comments echoed those made by fellow Bank economist Will Abel at a conference earlier this week, when he called the UK’s level of automation “pretty rubbish”.

"One reason why we might not have seen this decline in the labour share is that we’re pretty rubbish on automation,” said Mr Abel.

Mr Haldane added that sluggish productivity improvements, the decline of unions, and people working part-time or on zero-hours contracts were also contributing to weak pay growth in the UK.