1 Apr 2013

Unions doubt increases will benefit low paid workers

10:18 pm on 1 April 2013

Unions representing low income earners say increases in the minimum wage and KiwiSaver contributions will send many of those workers further backwards.

The minimum wage rose 25 cents to $13.75 per hour on Monday, while the lowest rate for employee contributions to KiwiSaver increased from 2% to 3% of an employee's gross salary or wages. At the same time, compulsory employer contributions rose from 2% to 3%.

Unite represents many workers in restaurants and hotels.

National secretary Matt McCarten says most of them are in the workforce for the first time and increases in the minimum wage and the KiwiSaver contribution essentially cancel each other out.

"It is the poorest still getting poorer; they're having to pay their own superannuation and education costs and so on and so on.

"Then it's no wonder when people say, 'How have we become a more unequal society, why is the gap between the rich and poor increasing' - well, this is why."

First Union also represents many low wage earners, mainly in the retail sector.

General secretary Robert Reid says the two increases will make it difficult for its members to better themselves financially.

"The increase in KiwiSaver certainly takes away about half of the increase that people will have got on the minimum wage.

"But I think we need to look broader than that - the $13.75 is not really a minimum wage, it is a starvation wage."

Meanwhile, the repayment rate for student loans also lifted on Monday from 10 cents to 12c of every dollar earned over the current threshold of just over $19,000.

Minister defends increases

The Government says the new minimum wage rate was chosen to protect low-paid workers while ensuring that jobs were not lost.

Peter Dunne.

Peter Dunne. Photo: UNITED FUTURE

Revenue Minister Peter Dunne acknowledges the increases come at a difficult time and will hit people in the pocket, but says they were signalled in the 2012 Budget so employers and workers have had time to prepare.

"In the case of KiwiSaver, it's saving now for their future.

"In the case of student loans, you could make that point with some more force, but then because of the thresholds and because of the nature of people's earnings and because of the rate of repayment, I think it's something they can manage."

Mr Dunne is advising employers to update payroll systems.

Labour Party MP Darien Fenton says the rise in the minimum wage is a measly amount and will do little to help the country's lowest paid workers.

"If we add up what the minimum wage increases have been since the Government's been in power in real terms it comes to $5.60 a week - which is really miserable and I think it's going to make life much more difficult for them."

Ms Fenton says the increase will also be offset by the increase in KiwiSaver contributions.