Minimum wage rise 'at precisely the wrong time'

Thursday, 17 December 2020

New Zealand’s business community has expressed concern at the Government’s move to increase the minimum wage to $20 next year.

It was confirmed on Thursday that the change would take effect on April 1. The minimum wage is currently $18.90.

Workplace Relations and Safety Minister Michael Wood said it would mean a pay rise for about 175,500 New Zealanders, and $44 more a week for people working full-time on the minimum wage.

This week’s GDP figures showed a rebound, but that doesn’t mean the risk to business is over, business leaders say.

But some business representatives questioned the timing, with borders still closed and the Covid-19 pandemic a threat.

**READ MORE:

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On the campaign trail, Labour vowed to increase the minimum wage to $20 an hour if re-elected.

BusinessNZ chief executive Kirk Hope said Covid-19 had reduced the earning ability of many firms and now was not the right time for new costs to be loaded on to business.

“While New Zealand’s economy is looking better than predicted with [Thursday’s] figures from StatsNZ showing exceptionally strong growth in the last quarter, we should remember that this growth has occurred in the context of a massive fiscal stimulus.

“New Zealand is not out of the woods yet on Covid, and we cannot assume this kind of growth will continue, given the continued uncertain global outlook.

BusinessNZ chief executive Kirk Hope would like to see the minimum wage held at its current level until financial indicators improve.

“Holding the minimum wage steady until financial indicators improve would be a reasonable move.”

The Employers and Manufacturers Association (EMA) said the increase was at “precisely the wrong time” for many of its members.

Council of Trade Unions president Richard Wagstaff is praising the minimum wage increase as “money well spent”.

“Not raising the minimum wage was the second most requested change the Government could make to assist business in the current environment in our just completed annual member survey,” said chief executive Brett O’Riley.

“But you also have to look at the cumulative costs being applied to many struggling businesses with an additional five days of sick leave also planned for next year and another public holiday being floated. These additional costs are coming at precisely the wrong time with many businesses still just hanging on and many predictions suggesting the most uncertain period for business will be in the first quarter of 2021.”

The EMA’s survey found 82 per cent of its members would suffer negative effects from the additional sick leave.

“It’s encouraging that the economy is doing much better than expected but that doesn’t hide the fact we are not doing as well as we would like, and debt levels are soaring. Sectors such as tourism and accommodation are heading into a period where 70 to 80 per cent of their customers aren’t going to turn up because our borders remain firmly shut to them and to the large cohort of export dollar-generating international students.”

O’Riley said the EMA would rather work with Government, the unions, and businesses on improving productivity, and increasing skills in the workforce as a pathway to raising wages.

“Simply raising wages does not improve productivity. As it is now, we’re aware of members who are not hiring younger people or who are choosing other options as minimum wage increases make the case for further automation at the expense of hiring people.

“New Zealand has been steadily dropping down the OECD rankings for productivity as we are slow to adopt technology, we aren’t as active in exporting as we think, and we are not as encouraging of innovation as we could be. We’ve largely relied on hard work to make productivity gains,' he said.

“Easier access to capital, more focus and funding for R&D and higher and faster depreciation rates to encourage investment in technology and software would really help business to invest in productivity-enhancing measures.”

O’Reilly said there should also be more investment in training, including short courses, in-work training and online learning.

But the Council of Trade Unions (CTU) said the move was welcome.

“Increasing the minimum wage to $20 was a promise that Labour made in 2017. The minimum wage provides a floor; something that employers cannot legally pay less than. Many working New Zealanders will get a pay rise when the minimum wage increases,' CTU president Richard Wagstaff said.

“We know that there are large numbers of working people living in poverty and this will make a big difference. The facts show that people on low incomes put their money into their local communities on basic necessities including, putting a roof over their heads, food on the table, and clothes on their backs.

“In this context alone, this is money well spent.”