The Government’s decision to hike the minimum wage by $1.50 to $22.70 from April 1 has received mixed reviews in Wairarapa.
When announcing the rise on Wednesday, Prime Minister Chris Hipkins argued that in “tough times, it’s critical to support those who struggle the most to make ends meet”.
According to Business Wairarapa’s general manager Nicola Belsham, however, the desire to provide some relief to the households hardest hit by the cost of living crisis may come with some unintended consequences.
“With the pressures that businesses have faced since 2020 – not least the national shortage of skilled workers – increasing the minimum wage again within such a short period will be hard for some businesses to manage,” she said.
While such decisions are ultimately for individual businesses, Belsham noted that – given the other inflationary pressures they’re facing – some are likely to pass their increased wage cost on to customers.
“Everything has increased in cost since 2020, and all consumers are aware of this. For cafes in particular, the increase in food costs has highly impacted the bottom line.”
And although the lack of staff means “many businesses are already paying above minimum wage in order to attract and retain good staff”, the upcoming increase will almost certainly mean employers are faced with pressure to raise the wages of better paid workers, too.
Unite Union has welcomed the minimum wage hike, and doesn’t buy the idea it’ll result in more inflation.
“We have had consistent significant minimum wage increases over a number of years that clearly were not inflationary. Inflation has spiked internationally and Aotearoa has actually had lower inflation than most,” National Secretary John Crocker said.
If anything, the union sees the announced seven per cent increase as “actually just standing still”, given it barely matches the current rate of inflation.
Food banks in Wairarapa confirm they’re seeing the on-the-ground reality of that inflation in an increase in demand for their support.
Featherston Foodbank’s demand doubled year-on-year in 2022 and has remained high since the new year.
Manager Elaine Corlette said fuel, car repairs, and rent are the biggest costs for families.
“Rents have gone up, so extra family members move in to save money, then all of a sudden the food budget goes up.”
Masterton Foodbank acting manager Luke Knight said, the pressure of rising living costs can be seen in the changing profile of the people accessing its service.
“We’ve seen people come into the foodbank for the first time and ask how the system works. “Often large families – two working parents and four kids. Retired people.
“Families were already budgeting, putting together a list of cheap staples they expected to be at the same price but then they go to the supermarket. Even the cheap items like pasta and canned tomatoes have gone up.”
Despite seeing the sharp end of increasing need in the community, both Knight and Corlette wonder whether increasing the minimum wage will just make the situation worse.
Corlette worries it may mean job losses: “It’s swings and roundabouts. The Government hope to achieve one thing, but it could have the opposite effect.”
Meanwhile, Knight is concerned that businesses will put their prices up, fuelling further inflation.
On that front, ANZ chief economist Sharon Zollner may provide some comfort. According to her analysis, although the wage hike will put some upward pressure on prices, she isn’t convinced the impact will be large, due to “private and public sector ordinary time hourly earnings running at 7.2 per cent year-on-year anyway – well above the sectors most exposed to the minimum wage.
And as for the risk of redundancies, Zollner said there’s “unmet labour demand to be worked through before the economic slowdown starts to cut into the muscle of actual employment”, although she also noted it’s uncertain “how big that buffer is”.
Nonetheless, the tight labour market means the wage hike’s impact will be “more muted than usual”, she said.
Based on the most recently available figures from the Ministry of Business, Innovation and Employment, the minimum wage increase will benefit an estimated 160,600 workers who are paid the minimum wage – about eight per cent of all New Zealand wage earners in paid employment.
