Employers and Living Wage campaigners agree: The minimum wage hike won't cost jobs

Both employers and advocates for the lowly-paid say next year's massive increase to the minimum wage is unlikely to result in job losses.

From April 2019 the minimum wage will go up $1.20 to $17.70 an hour. It's the second-biggest increase in the minimum wage's 124-year history, but still not enough to give people a "decent life", according to Living Wage Aotearoa.

"It's not there, but it's a good step towards it," spokesperson Annie Newman told RadioLIVE on Thursday.

"It's not enough - there will still be a lot of poverty out there."

National Party leader Simon Bridges told NZME the increase was "too far, too fast" and would result in job losses, while ACT leader David Seymour said it would be a "cruel blow to young, unskilled workers looking for employment".

But the head of the Employers and Manufacturers Association doesn't think that'll happen, with businesses well aware of the Government's longer-term goal of lifting the minimum wage beyond $20.

"We do know that large increases in minimum wage structures in Canada and the United States led to large increases in unemployment numbers, but we are in an already very tight labour market in New Zealand where employers simply cannot find the staff they need," said chief executive Kim Campbell.

"I think we are more likely to see increases in costs to consumers as a result, as many employers are already working to very skinny margins."

Ms Newman says this will be offset by increased spending.

"When low-paid workers get money, they spend it in the local economy. What you find is the little businesses in the suburbs and towns of New Zealand suddenly have more money being spent... and that helps the New Zealand economy."

NZ minimum wage growth over the last 10 years - dollars on the Y axis.
NZ minimum wage growth over the last 10 years - dollars on the Y axis. Photo credit: Trading Economics
NZ unemployment rate - precent on the Y axis.
NZ unemployment rate - precent on the Y axis. Photo credit: Trading Economics

Several international studies have found when minimum wages rise, there is usually no corresponding rise in unemployment. New Zealand currently has a decade-low unemployment rate of 3.9 percent. Workplace Relations Minister Iain Lees-Galloway says our problem isn't that there aren't enough jobs - it's that many of those that do exist don't pay enough.

He cited Ministry of Business, Innovation and Employment advice which said even with the $1.20 raise, it's expected about 49,000 jobs will be created over the next 12 months, and only 8000 lost.

If low-paid workers' incomes go up without a net loss in jobs, "there's more tax being taken in as well, which enables more investment in the public good and public services we all benefit from", says Ms Newman.

"I think we'll find that New Zealand starts to prosper a great deal more... What often people don't realise is the amount of budgeting and care that has to go into managing life when you're on a very low income. A lot of things children miss out on at school - like sports, outings or technology - are things suddenly parents can put into the budget when their income goes up. So it will make a massive difference, and lovely just before Christmas."

Ms Newman says Living Wage Aotearoa has several small businesses on its books as paying at least $20.55 an hour.

"If they can make the business decision to do that even though they are small businesses, then others can do it as well."

The biggest minimum wage hike came in 1985, when the then-Labour Government boosted it from $2.50 to $4.25 - an increase of $1.75, equivalent to $6.35 in 2018.