Minimum wage hikes hits the price of coffee

Friday, 6 April 2018

While wages at cafes may well rise, the policy isn't as steep as the minimum wage increases between 2004 and 2008.

The first round of minimum wage increases is poised to hit some consumers where it hurts – their coffee cups.

Signs on the counters of the major coffee chain Mojo warn customers the cost of their coffee and food has gone up in the wake of a 75 cents increase to the minimum wage on April 1 to $16.50.

Mojo announced price rises due to the hike in minimum wages.

The gradual rise will eventually take the minimum hourly wage to $20 by April 2021.

'Training' and 'starting-out' wages have also risen to $13.20 an hour.

The coffee chain will put its prices up by 10c. A flat white was $4.40 and is now $4.50. Large coffees have gone from $5.40 to $5.50.

Mojo has 31 cafes and its marketing manager Tay-Lann Mark said that the public had had a 'mixed' reaction to the price hikes.

'When we found out about [the minimum wage increase] we had a meeting with all of our managers and it was a celebrated thing.

'Some of our customers have posted on social media that this is a great thing, and then some not so.'

Other coffee makers say the wage increase wouldn't affect their prices.

Peoples Coffee marketing manager Jesse Finn said the hike would not increase the price of a coffee there.

'For us, we want that point between what the minimum wage is and what our starting wage is to be a decent amount, so we're definitely looking at it but we don't have any sort of firm plans to sit down and see what that means.'

Infometrics chief forecaster Gareth Kiernan said the minimum wage increase was as fast an increase as the Labour Government did between 2004 and 2008.

'I don't recall a lot of businesses complaining about the wage back then because the labour market was extremely tight, that to attract new staff they were having to pay significantly more anyway.'

He said the labour market now was not as tight but it was expected to become tighter in the next couple of years.

Kiernan said it was fair for employees that have worked their way above the minimum wage to also want the wage hike to encompass their pay.

'If you've come in at minimum wage and earned an increase over the past six months and you've got a bit more skills, then I think it's fair to want to be paid a bit above the minimum wage to reflect that.

'It's important to preserve that relativity.'

Kiernan said the policy could have a bigger impact on manufacturing than hospitality firms.

'It could accelerate the move away from labour towards automation and capital.'

Modelling from the Ministry of Business Innovation and Employment (MBIE) found the wage hike could lead to the loss of 3000 jobs.

Manufacturer's Association spokesman Dieter Lund said most of the association's members had few if any minimum wage jobs.

'Most of the low-value jobs in the sector have already moved overseas.'

But Lund said businesses were 'seriously concerned' about the 'upward pressure' the minimum wage movement could incur.

Despite this, research done by CTU has found the flow on from past minimum wage increases has not been all that notable.

Those in the wage bracket above minimum wage saw the lowest growth in wages over a 20-year period, while wage growth in the lowest waged bracket matched that of the highest paid.

Retail New Zealand spokesman Greg Harford said smaller businesses would be the most affected by the new policy.

'Over time, especially smaller businesses will look at their costs … this could mean cutting jobs or cutting hours.'

'But anecdotally, I understand retail workers' wages tend to float slightly above minimum wage.'

An earlier version of this story incorrectly said Mojo's coffee prices were going up by 75c.