Search Share Prices
World Bank proposes lower minimum wages to fight growing automation
(WebFG News) - In the draft of their World Development Report for 2019, World Bank group has proposed reducing minimum wages and granting employers more power to hire and fire as part of new measures to deregulate the labour market and fight against increased automation.
The report centers around how the labour market is changing at a rapid pace due to developing technologies that take the place of workers, arguing that replacing humans with machines lowers costs.
The report suggests that a good way to go about offsetting those new technologies is to reform labour market regulations, thus making the job market more flexible and hence resilient. Among the measures that were needed they recommended reducing the minimum wage, while at the same criticising weak social protection systems, which they said forced the minimum wage to become a living wage, thus putting pressure on companies.
But above all they stressed that high minimum wages generate more costs and therefore reduce levels of employment.
Hence their proposal to more closely tie wages to productivity, as is the case for those who are self-employed.
More controversially, they proposed enhancing companies' ability to hire and fire staff.
Finally, they recommended reducing severance payments, another "burdensome" legal requirement for firms.
A World Bank spokesman said: "To stimulate debate and draw attention to critical issues, the report will present a range of ideas for how governments can create the conditions for workers to benefit from huge shifts in technology, demographics, urbanisation and other factors.
"To end poverty and boost shared prosperity, it's vital that we consider new initiatives to meet the disruption that will surely come from these structural changes. We encourage and look forward to comments and an evidence-driven discussion on this important topic."