The $1.50 increase will come into effect on April 1. Photo / 123rf
Whanganui union leaders have welcomed news of a minimum wage increase but some in the business community are worried about its knock-on effects.
The government announced the minimum wage would rise by $1.50 to $22.70 from April 1, an increase of 7.1 per cent.
Starting-out and training minimum wage rates will be maintained at 80 per cent of the adult minimum — $18.16.
Whanganui-based union organiser Kaye Hearfield said most of the workers she looked after were in retail and fell under the 30-hours-a-week threshold.
She said larger employers usually offered the living wage but most working for “middle-ground” owner-operators received only the minimum.
“The struggle is the hours and the inconsistency of security with your take-home pay,” Hearfield said.
“I’ve got members who don’t have a hope in hell to have a holiday because they are still struggling to meet mortgages and put food on the table.”
Hearfield said any increase in the minimum wage would be accepted graciously and was always appreciated.
“Never look a gift horse in the mouth, as they say, but I think our standards of living in New Zealand need to be raised.
“It [the increase] is going to make that slight improvement for every individual who can put that money towards a loaf of bread. Prices have just skyrocketed.”
While the high cost of living needed to be addressed and raising the starting-out, training and minimum wage levels would boost some pay packets, it was a blow to business and would deliver little in the way of boosting living standards and overall community well-being, Whanganui Chamber of Commerce chief executive Helen Garner said.
“We acknowledge that great employees are vital to the success of any business. At the same time, we are very concerned for the business owners that continue to struggle to keep their doors open in this hostile economic environment.
“You don’t need to be a rocket scientist to work out that the extra money needs to come from somewhere to pay for these increases.
“While a small portion of businesses might absorb the extra cost, the majority will need to cover it by raising their prices, reducing opening hours, and reviewing staffing levels.”
Assistant national secretary of Unite Union, Manawatu-Whanganui-based Gerard Hehir, said the wage increase was merely catching up with inflation.
“Anyone who says ‘it’s too much, we can’t do it’, what they’re actually saying, whether they realise it or not, is ‘the lowest-paid workers in the country should take a pay cut’.
“If you want to look at domestic sources of inflation, look at the profit-taking going on at banks, big supermarkets and power companies.
“That’s benefiting those that have the most rather than those who have the least.”
Whanganui & Partners chief executive Hannah Middleton said most minimum wage workers were employed in the hospitality sector, followed by retail, administration services and manufacturing,
Although those workers may enter employment on the minimum wage, they generally moved fairly quickly to higher-paid positions.
With a tight labour market and demand for workers, the agency didn’t expect the increase to have a significant effect on local employment rates but it would put extra pressure on many businesses, and small businesses in particular, Middleton said.
“These businesses are themselves facing increased costs due to inflation, supply chain issues, logistics and compliance costs.
“Many small business owners will be very worried about their ability to absorb the wage increases. Some businesses will opt to raise prices in order to cover the added expense while others may reduce employees’ hours or put a hold on new employment.”
Garner said the timing of the rise would be particularly harsh for small retail and hospitality businesses as they headed into the cooler months and revenue slowed.
She wanted to see the Government look for ways to “tangibly increase support for wage earners”.
“Interventions that won’t impact directly on the cost of goods and services would be a good place to start, i.e. tax relief, subsidies, and a GST break on goods and services critical for living like fruit, veges, school uniforms and medical care.
“Business Whanganui needs to see some commitment to economic development from the Government that benefits our businesses being able to keep their doors open, resulting in retaining their staff.”
Amalgamated Workers Union New Zealand central region secretary Rob Popata said the Government should be commended for lifting the minimum wage,
“Despite all the doom and gloom from employers, the National Party and Act, the fact is that it [the increase] adds a very minimal number to inflation.
“Minimum wage workers will spend their money and they’ll keep the economy going.
“The rich get the tax breaks and what do they do? They put it in the bank and let it grow.”
Hehir said there was a shortage of labour nationwide and people had options.
Retaining staff was also an issue.
“It makes it very hard to have trained, skilled and experienced staff when you lose them every nine months, which is what the average is in hospitality.
“Productivity is always going to struggle with the low-wage, high-turnover model.
“I understand businesses have been used to this for 20-30 years, but it has to change and they’ve just got to get their heads around it.”
He said taxpayers supported low wages through initiatives such as housing supplements, income support and Working for Families
“They [the Government] are subsidising employers who have a large number of low-wage and minimum-wage workers.
“The wage going up will actually save taxpayers a lot of money because people will be earning money instead of relying on handouts from the Government. That’s a good thing.”
Historically, when the minimum wage was increased the extra income circulates in the economy, with workers spending extra earnings rather than it going towards savings, Middleton said.
“We expect the same to happen as cost of living pressures continue and people use the extra earnings to alleviate immediate expenses.
“For fulltime employees working 40 hours a week, the minimum wage increase will amount to an extra $60 per week before tax.”
Hospitality New Zealand Lower North Island regional manager Adam Parker said the industry had concerns about the impact of the increase.
“Whilst we are always in favour of employees being paid more, this minimum wage increase may have some detrimental impacts on small business and, as a result, we are continually concerned with the decisions that the Government is making over small business,” Parker said.
The 7 per cent increase was the highest in 17 years and although most hospitality operators were paying above minimum wage at present, it was “not 7 per cent above the minimum wage”, he said.
“This creates a ripple effect with increases throughout the organisation, it’s not limited to just those who receive the minimum wage. The 7 per cent doesn’t include additional costs that the employer has to pay such as ACC, KiwiSaver etc.
“There is no way that operators can absorb an increase of this amount. As a result, this cost will need to be passed on to the consumer and a large increase in consumer cost will have to happen across the board.”
Some businesses may need to reduce operating hours after they assessed costs against revenue “therefore reducing the vibrancy of cities and towns with any kind of hospitality sector”, and consumers may reduce the frequency they dined out and the amount they spent as certain products hit price ceilings, Parker said.
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