6 Oct 2021

Small businesses coping with minimum wage increase, study finds

6:40 am on 6 October 2021

New research shows the rise in minimum wage has not killed off jobs as some feared, with staff also happier about their jobs.

No caption.

More research is needed to confirm how businesses are handling the minimum wage rise, an economist says. Photo: 123RF

The minimum wage in New Zealand increased to $20 an hour on 1 April.

The New Zealand Institute of Economic Research says while the minimum wage doesn't have broad political consensus, initial indications are that increasing it hasn't been detrimental for small businesses.

But its principal economist Peter Wilson said more work is needed to confirm that finding.

"The evidence, particularly internationally but also in New Zealand is that no, the minimum wage doesn't have large impacts on employment.

"That's one of the things that we think needs to be surfaced and perhaps some more work done to confirm that finding, in what we call the Goldilocks range of not too high and not too low."

Wilson said initial analysis shows the Goldilocks range to be between $18 to $25 per hour, but believes more research is needed.

He also said research in the United States showed some businesses used high wages to increase profitability.

"There's one really good example we've seen of restaurants in some American cities advertising that they actually pay above the minimum wage, because that attracts customers."

Wilson said while there were positives from minimum wage increases, there were limits to how high it can go.

For example, a $30 per hour minimum wage would cause serious economic problems, he said.

Get the RNZ app

for ad-free news and current affairs