1 Apr 2019

Low expectations as minimum wage goes up to $17.70 per hour

1:53 pm on 1 April 2019

An increase to the minimum wage is not expected to make much of a difference to the country's poorest families and consumers may have costs passed on to them.

open tipped over savings jar with New Zealand currency coins spilling on to rustic wooden on wooden table closeup.

Photo: 123RF

The minimum hourly wage goes up by $1.20 today to $17.70, the biggest ever increase to the minimum wage, which will give fulltime wage earners an extra $48 a week before tax.

Alana Clarke works just above minimum wage on $16.85 as a cleaner in Invercargill, working 60 hours a week to care for herself and her adult daughter, who has health problems.

"Forty-eight dollars is not going to go a long way for a lot of people - you know, your basic living costs go up so yeah, it's probably not going to make a lot of difference."

Ms Clarke expected the extra money she earned would get absorbed by food and petrol costs.

Waimarie Mana works part-time as a bartender, up to 16 hours a week, and picks up other casual work to get by. The 20-year-old is trying to save up so she can study business at Weltec, but can put only $15 in the bank after rent, bills and food.

She thinks the increase will mean she won't have to spread herself so thinly.

"If I can stick to one job, then I can focus on my studies and then still be able to function at work, because I'm not swapping scenarios and I know what I'm doing as a bartender."

The hospitality sector has 22,800 minimum-wage workers, the highest of any industry.

Hospitality New Zealand national president Jeremy Smith said the increase would likely be passed on to consumers.

"A lot of our suppliers have just announced price increases from them because they're having to manage the increase to minimum wage so there will be generally an increase in prices, whether it's for a coffee or for the sandwich that gets made or the beverage people drink."

Mr Smith said hospitality business owners were already stretched financially, and might look to other ways to cut their costs.

"You've got to look at overall hours and say, wages have gone up but we may have to reduce the number of hours worked slightly to get a balance."

Eric Crampton

Eric Crampton Photo: Supplied

New Zealand Initiative chief economist Eric Crampton agreed employers and customers would end up shouldering the cost.

"If you had people that were on things like Working for Families, instead of getting a 7.27 percent increase in their earnings, they would instead be getting a less than 2 percent increase in some cases, for their take-home pay because the accommodation supplement and Working for Families goes down commensurately."

The Ministry of Business, Innovation and Employment's own modelling shows that for a two-parent family working a combined 30 hours a week, there will be just a 1.74 percent increase in their income.

Read the full MBIE report here: (PDF, 1.2MB).

It found minimum wage increases on their own would have limited impact in reducing poverty for families with dependent children.

The E Tū union said while it welcomed the increase, it wanted employers to raise wages to the living wage of $20.55 an hour.

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