The Ministry of Business, Innovation and Employment (MBIE) advised a 2 percent increase in the minimum wage to $23.60 an hour, but the government approved a 1.5 percent raise to $23.50 an hour, falling short of the recommendation for the second consecutive year.
Impact on Low-Income Workers and Households
MBIE’s review highlighted that many minimum wage earners resided in high-income households, making the minimum wage less effective for poverty reduction. However, a decrease in real incomes for low-income households could adversely affect them. With annual inflation at 2.2 percent and expected to remain stable, a 2 to 2.5 percent increase aligns with the government’s goal of safeguarding low-paid workers’ real income while minimizing job losses.
Employment Restraint and Youth Unemployment
MBIE’s estimates indicated that less than 1000 individuals would be impacted by an increase in the minimum wage. The agency emphasized that favoring the 2 percent raise over 2.5 percent would limit employment restraints, particularly benefiting disadvantaged groups such as youth, who face rising unemployment. Given the economic reality that a higher wage increase could lead to more job losses, the 2 percent hike was deemed the most suitable option.
Demographics and Industries Affected
Data showed that most minimum wage workers were aged 16 to 64, with 55 percent under 24 years old, and 50 percent being part-time workers. Additionally, 56 percent were women, and retail, food, and accommodation industries employed a significant number of workers earning minimum wage.
Minister’s Justification and Criticism
Workplace Relations Minister Brooke Van Velden defended the 1.5 percent raise, citing the need to balance economic recovery and labor market stability. On the other hand, policy director Craig Renney criticized the decision, stating that the raise was significantly lower than recommended, marking the second consecutive year of real-terms wage cuts. The New Zealand Council of Trade Unions (NZCTU) advocated for a higher increase to reach the living wage of $27.80 an hour.
Overall, the government’s decision to implement a lower wage increase than recommended by MBIE has sparked debates and concerns regarding the impact on low-income workers, employment rates, and economic recovery. The continuous discrepancy between expert advice and policy decisions raises questions about the effectiveness of minimum wage adjustments in addressing income disparities and supporting vulnerable groups in society.