New Zealand's minimum wage will increase to $21.20 an hour from the start of April. Photo / Getty Images
New Zealand's minimum wage will increase to $21.20 an hour from the start of April. Photo / Getty Images
The minimum wage will increase by 6 per cent from the start of April, a move welcomed by unions but which will increase costs for businesses already struggling with Covid-19 restrictions.
Last Friday, Workplace Relations and Safety Minister Michael Wood said the minimum wage would be hiked by $1.20 anhour to $21.20 from the start of April, while the starting-out and training minimum wage will increase from $16 to $16.96.
For someone working a 40-hour week on the minimum wage, the increase will see them earning an extra $48 a week, and almost $2500 more each year.
Both increases are exactly 6 per cent, marginally above the rate of consumer inflation, which hit a 31-year high in 2021.
Workplace Relations and Safety Minister Michael Wood. Photo / NZME
Taupō's Amplify chief executive officer Rick Keehan says the increase will "pose some challenges" for the retail, hospitality and tourism sectors in particular due to the added cost of having to pay staff more.
"That's about 30 per cent of the workforce in Taupō, so it's quite major.
"It's certainly tough on those industries currently so it's tough to absorb. It's not just the minimum wage earners, it would only be fair that others on middle incomes get a similar pay rise.
"It's going to be a challenge for businesses, that's for sure."
Rick says there could also be a negative effect felt by young people looking for employment.
"It's going to be a challenge, perhaps, for youth to get into work because a 16-year-old also needs to be paid minimum wage, unless they're training, so is a business willing to take a risk on an inexperienced youth when they need to be fully productive?
Amplify chief executive officer Rick Keehan. Photo / Supplied
"We will absolutely see businesses put prices up as a result of these added costs. That's been held off a bit because of competition so far but I imagine prices will rise across the board during the next six months.
"The person you're trying to help on the ground, their extra $1.20 doesn't buy them $1.20 more goods, it probably cost them $2 more to get those goods. It's a false economy and the minimum wage will just get higher."
He says one benefit of the added cost to businesses is it may encourage them to think outside the box in terms of being more efficient.
Double Shot Cafe owner Sean Burtton says, after absorbing previous increases in the minimum wage, the latest hike will mean he has to raise prices to survive.
"We're basically going to have to put all our prices up, I tried to absorb the last one as best I could but this is just getting a bit ridiculous now.
"They don't seem to understand that you put the minimum wage up to try to match the living wage, but the living wage subsequently goes up because everything else goes up to accommodate the wage increase."
He says the timing of the minimum wage increase is tough on businesses already operating under red-level restrictions.
"Certainly, it is noticeably quieter in town this summer than any other summer, so we have less foot traffic coming through the door but our wage costs are still going up.
Double Shot Cafe owner Sean Burtton says prices will have to increase as a result of the minimum wage hike. Photo / David Beck
"We have to look at other options like adjusting our hours, closing times in particular. We have to be a bit tougher on how long we leave staff on for, send them home earlier as soon as it gets quiet, whereas before I was a bit more relaxed."
New Zealand Disability Support Network CEO Peter Reynolds says the increase in minimum wage will be a welcome boost for many disability sector workers, but the disability support providers who employ them will need more government funding to make ends meet.
"Disability support providers are under extraordinary pressure with rising demand for their services, inflation fuelling increased costs, and difficulty finding workers in the tight labour market," he says.
"Many of our members rely heavily on government funding for the services they provide and it's a constant struggle to get funding levels that accurately reflect the cost of providing the services disabled people and their families need.
"The Labour Government has increased the minimum wage by 35 per cent since 2017, and we expect it will continue to do so. For this to be sustainable, the Government needs to ensure that matching increases in disability support funding are forthcoming."
