9 Feb 2023

'More modest' minimum wage hikes possible if inflation cut - National

9:25 am on 9 February 2023
Deputy leader of National Party Nicola Willis

Nicola Willis. Photo: RNZ / Angus Dreaver

The country's lowest-paid workers would not have needed as big a pay rise as they got this week if National was in charge, Nicola Willis says, because she simply is "not prepared to accept" inflation being so high.

The government on Wednesday announced the minimum wage would rise from 1 April to $22.70, a boost of $1.50 or 7 percent.

While that is the largest increase in dollar terms it has ever had, as a percentage increase it is smaller than some previous hikes (7.2 percent in 2019, 9.8 percent in 2007) and still below the rate of inflation.

"I do understand that a number of small businesses will have concerns about this decision, however in a cost of living crisis we can't leave those on the lowest incomes behind," Prime Minister Chris Hipkins said.

"An inflation-adjusted lift to the minimum wage will mean that thousands of New Zealanders don't go backwards."

National Party finance spokesperson and deputy leader Nicola Willis said lower-income earners were "being absolutely smashed by out-of-control inflation and by the cost of living".

"National does support increasing the minimum wage," she told Morning Report.

"It's something we did every year that we were in office, and it's something we commit we will do if elected in October."

National did increase the minimum wage every year under finance ministers Bill English and Steven Joyce, between 25 cents and 50c a year. In the 1990s, raises averaged about 1.5 percent a year, and often did not happen at all.

"Our concern is the level of minimum wage increase may put some small businesses to the wall, and that will result in job losses and rising unemployment for some of our lower-income earners," said Willis.

After spiking to 5.3 percent during the first year of the pandemic, unemployment dropped down to a record-low 3.2 percent in 2022. It has since come back slightly to 3.4 percent.

Asked how much National would have increased the minimum wage this year, Willis said she did not have a figure, but insisted it would have been "more modest".

Asked how that would work, considering the $1.50 hike is at about or even below the rate of inflation, she said National was "not prepared to accept an economy where we have inflation burning at this high rate".

"When I talk to those lower-income earners, the things that are smashing them are rents that have risen around $50 a week since Labour came to office. The things that are smashing them are grocery prices, are the rates bill if they own their home, mortgages that are going up.

"So we actually have to get at the economic drivers of those rising costs. We can't accept an economy where prices are rising at these rampant rates and we're always running to catch up…

"What I'm saying is that we need to make sure we are reducing the cost of living for those New Zealanders and other New Zelanders in a multitude of ways. You will see that from the National Party over the next few months."

Inflation has been running hot globally, hitting 11.1 percent in the UK, 9.1 percent in the US and 7.8 percent in Australia in the past year.

Last month, Willis said the minimum wage was already too high to increase much without fuelling inflation. Hipkins dismissed that on Wednesday, saying modelling showed it would contribute an increase of just 0.1 percent on the wages portion.

E tū assistant national secretary Annie Newman said many of its members would be "incredibly grateful" the minimum wage is going up.

"But we know in order to live a decent life, you need something much more akin to the living wage… yes, we need a cost of living increase, but in fact it should now be moving up far more towards the living wage."

The living wage, set by a group of unions and community groups, is the "hourly wage a worker needs to pay for the necessities of life and participate as an active citizen in the community". It is currently set at $23.65.

Newman said focusing on the ability of small businesses to pay the new minimum wage was not fair, because "hundreds" are now paying well more than that in order to attract staff.

"I think that to cluster all small businesses together is a mistake… all costs are increasing, and so if workers are going to survive and small businesses are going to have flourishing communities, then they also have to be paying their workers a decent wage."

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