Government announces increase to minimum wage: $21.20 from April 2022

The Government has announced an increase to the minimum wage from $20 per hour to $21.20 per hour, which will come into effect from April. 

It has increased by about 5.9 percent, matching the 5.9 percent increase in the price of goods and services in New Zealand in the last three months of 2021 compared to 2020 - the biggest jump since a 7.6 percent annual increase in 1990.

Workplace Relations Minister Michael Wood said on Friday the minimum wage rise will directly benefit about 300,000 workers. The starting-out and training minimum wage will also increase from $16 to $16.96 per hour 

For someone working a 40-hour week on the minimum wage, the increase will see them earning an extra $48 a week, and almost $2500 more each year, Wood said. 

"With the arrival of Omicron, we are once again calling on many of our frontline workers - such as cleaners, supermarket workers, and security guards - to keep the country running as the virus spreads and cases begin to increase.

"I think everyone agrees those contributing so much to our COVID response deserve a pay rise.

"While our labour market has seen some COVID-related disruption, due to our wage relief and resurgence packages to support people and businesses, the latest statistics show jobs and employment increasing across most sectors, and we remain committed to supporting employees and employers throughout the Omicron outbreak.

"The wage increase will also have a stimulatory effect on the economy as many workers will spend the extra money on goods and services, which in turn, will help support businesses."

Richard Wagstaff, president of the Council of Trade Unions (CTU), welcomed the increase. 

"This increase makes sure that some of most critical workers during COVID-19 get a fairer deal for their contribution."

But Wagstaff would have liked to see the Government go further and bring the minimum wage in line with the Living Wage, which is calculated at $22.75 per hour. 

"While we support this change, the CTU is disappointed that the Government did not choose to increase the minimum wage to the Living Wage at this opportunity, as had been requested by a petition of thousands of front-line workers." 

Prime Minister Jacinda Ardern and Workplace Relations Minister Michael Wood.
Prime Minister Jacinda Ardern and Workplace Relations Minister Michael Wood. Photo credit: Getty Images

ACT MP and small business spokesperson Chris Baillie said businesses that have already been "decimated" by COVID-19 will struggle to pay for the increase. 

"Yet another minimum wage hike shows Labour only knows how to divide the economic pie - we need to grow it," Baillie said. 

"For the first time in almost a decade, businesses are closing at a faster rate than they're opening. Labour's response has been to pile on more costs and more rules."

A new MYOB survey has revealed more than half - 58 percent - of small to medium businesses expect to see a negative financial impact if New Zealand stays in the current 'red' traffic light setting for more than a month, with almost a quarter - 23 percent - believing they would take a significant financial hit. 

An example of the impact of the red setting is on hospitality. Venues that check COVID-19 vaccine certificates can open to up to 100 people, but guests must be seated and separated. Venues that choose not to check vaccination status must be contactless. 

Nearly a third - 32 percent - of small to medium businesses have had fewer sales since the country moved into red, while 27 percent said their customer numbers were lower than usual, and 22 percent said there was more pressure on cashflow. 

The Ministry of Business, Innovation and Employment (MBIE) has warned in the past that "sectors that will experience an impact from a minimum wage increase include hospitality, retail, and administrative services".

MBIE has also warned that the "increased cost of labour may then be passed on to customers through rising prices of goods and services, as employers seek to maintain a profit". 

However, "for most businesses and sectors, workers on the minimum wage represent a small fraction of total labour costs so any increase in the minimum wage should not significantly impact overall operation costs".

Baillie said the new Matariki public holiday and five extra days of sick leave will collectively add almost $1.5 billion in costs to businesses and will be passed on to customers. He said Fair Pay Agreements will also add to the pain. 

"The only way to sustainably raise wages is to raise worker productivity. Labour doesn't have any serious solutions on that front."