The government has announced a $1.20, 6% increase in the minimum wage in New Zealand per hour for April 1, raising it to $21.20 per hour.
The minimum salary for new hires and trainees will also rise from $16 to $16.96 per hour.
In a statement released this morning, Workplace Relations and Safety Minister Michael Wood said the changes will directly benefit nearly 300,000 workers and assist many of the most affected households affected by Covid-19.
“For someone working a 40-hour week on the minimum wage, this increase will see them earning an extra $48 a week, and almost $2500 more each year,” he said.
As a result of the tax rise, he added, the government was following through on an electoral promise to help employees and companies throughout the Omicron outbreak.
“The wage increase will also have a stimulatory effect on the economy as many workers will spend the extra money on goods and services, which in turn, will help support businesses,” Wood said.
With an annual rate of 5.9% for 2021 and a 1.4 percent increase in the three months ending December, inflation has reached its highest level in 30 years.
For the three months ending December, unemployment was at a historic low of 3.2 percent, while private sector salaries increased by an average of 2.8 percent.
The Living Wage, or the amount at which a person must earn in order to meet their basic needs and be a contributing member of society, increased to $22.75 in September.
The measure, according to Wood, struck the correct balance between preserving low-wage workers’ standard of life and meeting the requirements of companies.
“If we had a lower increase coming in or no increase as some business groups advised us we should do, that would mean our lowest income workers going backwards in terms of their standard of living,” Wood added.
“Every year we’ve increased the minimum wage and actually after doing that last year we’ve seen unemployment go down to a record low of 3.2 percent,” he explained.
The opposition is furious about raising the minimum wage in New Zealand per hour
The decision, according to National Party Finance spokesman Simon Bridges, is an acknowledgement by Labour that New Zealand is experiencing a high cost of living issue.
“It’s no coincidence the increase is 6 percent – almost exactly the same as inflation over the last 12 months,” he said.
“Despite this huge increase, those receiving it will be no better off than they were a year ago. And it’s cold comfort to millions of other Kiwis who are also being hurt by cost of living pressure.”
Many firms that were already failing, he added, would find it extremely difficult to make the change.
“National knows that what New Zealanders need doesn’t come from the flick of a pen on minimum wage but from an agenda to lift growth and productivity,” he said.
Grant Robertson, the Minister of Finance, was the object of his ire.
“To deal with the cost of living crisis New Zealand now faces, he needs to rein in his new spending and focus on quality. But with an upcoming Budget where he is planning to increase permanent spending by a staggering $6 billion, the most ever, inflation and interest rates will remain higher for longer.”
The hike, according to ACT leader David Seymour, went against the recommendation of the Ministry of Business, Innovation and Employment (MBIE), which cautioned that it would stifle job creation.
“This move will mean businesses raise their prices or close, and more people are out of work and on welfare for longer. We just can’t afford that,” Seymour said.
Because of the low number of earners with minimum wage in New Zealand per hour, he said, the government had also been advised by MBIE and Treasury that any economic stimulus would be improbable.
“Prices have gone up 5.9 percent. Wages have gone up just 2.6 percent. Kiwis can buy less with their money – they’re getting poorer … the only adequate response is a return to rational economics,” he said.
Chris Baillie, the party’s Small Business Spokesperson, claimed three of his 26 employees were on minimum wage in New Zealand per hour, and that the hike would be ruinous for certain firms and may be the difference between going out of business and going out of business altogether.
“We’re still going through a hundred-year pandemic that the government keeps talking about and the only people who are really suffering from it are business owners who have to keep people employed – everyone else is just carrying on no problem.
He claimed that the government was blaming small companies for its own failures, which would be the best way to boost the economy.
“Why is inflation at 6 percent? I mean the government’s got to look hard at themselves before they start putting their mistakes and blaming their mistakes on small business. I’d love to pay my staff $50 an hour but realistically a business has to earn money to be able to pay it.”
“We just need to take a deep breath, consolidate with what we’ve got, start building businesses back up, become more productive and then conditions and wages will improve.”
“We just can’t keep on piling these extra costs on without expecting some kind of productivity.”
Unions call for a Living Wage and equitable pay arrangements
The head of the Council of Trade Unions, Richard Wagstaff, however, stated that the unions had hoped for more.
“I think the ACT party is … on record for not supporting working people. They need to understand that businesses need workers and workers need to be properly paid for their labour and this is just keeping up with the cost of living so that’s hardly too much to ask at a time like this.”
“Particularly when inflation’s running at the level that it is and we have people that are really struggling who are working – we have far to many working poor in New Zealand … people who work hard can’t make the rent, can’t pay the bills and that’s not acceptable, we need to arrange things so that doesn’t happen.”
A petition urging the government to raise the minimum wage in New Zealand per hour to the level of the Living Wage had been presented, he added, and unions had hoped the government would act on it.
They also hoped that the government would take steps to implement pay agreements similar to those in Australia, “which will bring a much more sophisticated approach to setting basic conditions for industries, so that’s got to be part of the answer too,” they added.
“It’s good, but as I say, we’d be looking for more.”
Minister Wood also dismissed claims that Labour’s economic management was to blame for increasing prices, saying that the facts proved that the wage hike would have no effect on unemployment.
“It is challenging of course for a government to be able to impact those international supply chain factors – things like the cost of petrol, things like geopolitical disputes that are driving up costs, but we’ll do what we can to make sure that Kiwi workers have got the wages to help them deal with that.”