Govt sends 'mixed messages' over minimum wage hike, after ignoring MBIE advice

Thursday, 7 January 2021

The Reserve Bank is under attack for pouring fuel on the house price bonfire with its latest move to boost the economy, but its defenders say it’s not the bank's job to control the housing market.

A hospitality business owner says the Government is sending mixed signals after ignoring advice about delaying the minimum wage increase and recommendations for a smaller rise after Covid-19.

The minimum wage report by the Ministry of Business, Innovation and Employment (MBIE) published in December 2020 advised delaying the increase until October, and by 25 cents, or 1.3 per cent, due to the economic uncertainty.

However, the Government ignored this advice and confirmed the minimum wage would rise by $1.10, or 5.8 per cent, to $20 an hour from April 2021, sticking to its election promise.

Auckland cafe owner Chris Monaghan said 2020 was a tough year for every hospitality business, and the 5.8 per cent increased wages would add greater pressure on the sector.

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Hospitality entrepreneur Chris Monaghan says the Government’s decision to ignore its own employment agency’s advice was sending conflicting messages to business owners.

Monaghan said he supported an increase in the minimum wage but as cost of goods and rents also increased, owners would feel the pinch.

“There’s conflicting messaging being sent to small business owners. We’ve gone through a difficult 2020 and will go through another difficult 2021,” Monaghan said.

“From a hospitality perspective we’re not trading at a level anywhere near sustainable. It’s really up to the Government to see those impacted and read the room.”

Raise the Bar workers’ rights advocate Chloe Ann-King says workers in New Zealand’s the low wage industries are undervalued.

MBIE’s report said increasing the minimum wage would be unaffordable for some businesses, which could lead to greater unemployment and underutilisation for low paid workers.

Monaghan said many businesses could be forced to trim labour costs by hiring fewer staff.

“In hospitality you require a certain number of staff to operate unlike, say, a fashion store. You can’t just have one person at a cafe or restaurant. In a slow period, we still require four staff members to open the doors and operate.

“It will become a very difficult environment to trade.”

Hospitality worker and workers’ rights advocate Chloe Ann-King said raising the minimum wage was crucial for the already low-wage industry.

While she welcomed the increase, it came with a caveat as business owners would hire fewer staff, putting increased pressure on existing workers.

Retail NZ chief executive Greg Harford says businesses will look at automation as hiring people will become more expensive.

“I always advocate for higher wages but there is a Catch-22, when the minimum wage is increased we see workers’ hours cut, or they lose their jobs,” Ann-King said.

Retail NZ chief executive Greg Harford said it was disappointing that the Government had ignored advice from its own employment agency.

Harford said the medium term impact would likely result in a jump in extra costs without driving productivity.

He said that along with fewer people being employed, businesses will move faster towards automation.

Harford said while the retail industry had been more resilient than was expected, the good performance over the last three months was still very fragile.

“Those results won’t be sustainable,” he said.

But Ann-King said workers in New Zealand’s low wage industries were undervalued.

The minimum wage is currently $18.90 but is due to rise to $20 next year. The living wage – a rate that is said to allow the recipient to participate fully in society – is $22.10 an hour.

Ann-King said any employer who understood how expensive it was to live in New Zealand would pay staff a living wage.

“Employers are complaining that Kiwis are too snobby to work in hospitality jobs, but they’re only willing to offer us minimum wage.

“In retail, hospitality, we’re treated abysmally. We’re called unskilled in all those customer facing industries.

“If employers want to see more productivity they need to treat us with respect, value the skills we bring to the jobs, and stop treating us as disposable units of production just to make them a profit.”