Hospitality NZ says they asked Government to hold off minimum wage hike, costs will be passed to consumers

The hospitality sector is disappointed the Government has gone ahead with hiking up the minimum wage, warning the costs will likely be passed on to consumers.

Prime Minister Chris Hipkins announced on Wednesday that it would rise by $1.50 to $22.70 an hour from April 1. The increase is seven percent, in line with the rate of inflation which is at 7.2 percent.

"In tough times, it's critical to support those who struggle the most to make ends meet," Hipkins said during the announcement.

But Hospitality NZ is concerned about the impact it will have on the sector.

"We were really concerned about the timing and the ability. Most of the hospitality businesses have absolutely no wiggle room to actually look for this additional cash," Hospitality NZ CEO Julie White told Melissa Chan-Green on AM.

White said Hospitality NZ put forward a submission to put the increase in minimum wage on hold and is disappointed the Government went through with it.

"We've only got seven weeks until we implement this. This is the largest increase in 17 years, off the back of COVID and it just doesn't have an effect on minimum wage, it actually has a ripple effect all through the wages," she said.

The increase can also cause conflict in some businesses if there isn't enough money to increase all wages, White added.

In response to why the submission was declined, a spokesperson for Workplace Relations Minister Michael Wood said families need support now more than ever.

"Those on low incomes make impossible trade-offs between food and medical care, dry homes and a pair of shoes. These families need our support now more than ever and an inflation-adjusted lift in the minimum wage will mean thousands of New Zealanders do not go backwards," the spokesperson said.

"We have worked to find the right balance. Analysis that fed into our decision suggests this increase is unlikely to have a significant impact on unemployment, because it is broadly in line with existing average wage growth across the economy."

The feedback Hospitality NZ has heard from its members is they are going to have to review prices and opening hours - and some could be forced to close.

"What we're really concerned with is how much elasticity can consumers have to absorb those increases in prices," White said.

"There's only so much money businesses have."