Minimum wage set to jump to $20 by 2021

Tuesday, 24 October 2017

Kirk Hope: Small businesses will feel the pressure.

The country's minimum wage is set to soar to $20 within four years under a new coalition deal.

The increase will occur in stages, starting in April 2018 when pay for workers on the lowest income will rise from $15.75 to $16.50.

The proposal, under the new government's coalition deal, to increase the rate to $20 an hour by 2021.

Workers on minimum wage welcomed the announcement on Tuesday, with the Council of Trade Unions hailing it as a 'great start'.

'This will make a huge difference to the dignity of the many, many people who are working hard for low wages in this country - many more than there should be,' CTU president Richard Wagstaff said.

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But while low-income workers were celebrating, some small businesses expressed concern.

Employer Lee-Anne Kilgour worries about how her business will handle a looming increase to the minimum wage.

She runs cleaning company Clean Slate, with nine staff.

At the moment, she pays her staff more than the minimum wage. They are on $16.50 or $17.50 an hour, compared to a minimum of $15.75.

But with the first minimum rate set to rise next year, that premium will be gone.

'I felt they deserved it for their hard work. But now they will all be on the minimum wage and that's only if I can afford to pay it. Soon there will be no incentive to work for me above somewhere else. I want good staff.'

The proposal, under the new government's coalition deal, to increase the rate to $20 an hour by 2021 is more daunting again, Kilgour says.

'I will have to pass the cost on but hopefully won't lose my clients.'

Kirk Hope, chief executive of BusinessNZ, says the plan will put pressure on small businesses.

He said they would need access to funding to ensure they could cover the cost increase, if they were not able to raise their prices.

'$15.75 to $16.50 is a 5 per cent increase so we need to ensure small business has sufficient access to capital so they can fund the increase if they aren't able to increase prices to cover the additional costs.'

Hope said it was possible that a higher minimum wage would also make it tougher for some workers to get into the workforce.

Young people who were not in education or employment needed access to skills and opportunities, he said.

In other countries where the minimum wage had increased substantially, some of those NEET (not in education, employment or training) young people had been locked out of the labour market, he said.

'We wouldn't want to see that happen. I hope there will be support for those people.'

Hope said New Zealand had one of the highest minimum wages in the OECD.

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