Govt announces min. wage increase of $1.20 an hour to take effect on April 1; Indicates further $1.20 and $1.10 hikes in 2020 and 2021; Bridges says National would increase the min. wage by 50c a year

The minimum wage will be increased by $1.20 to $17.70 an hour on April 1, 2019, increasing full-time workers' weekly pay by $48 before tax. 

Workplace Relations and Safety Minister Iain Lees-Galloway has indicated it will then be raised to $18.90 on 1 April 2020 and $20 on 1 April 2021, in line with the Labour/New Zealand First Coalition Agreement.

“These indicative rates are subject to each year’s annual review, in accordance with the statutory process, which will take into account the economic conditions at the time,” he says. 

The increases comes on top of the minimum wage going up from $15.75 to $16.50 in April this year.

Lees-Galloway has also announced training wages will be raised from $13.20 to $14.16 an hour in 2019 to stay at 80% of the adult minimum wage.

The Ministry of Business, Innovation and Employment (MBIE) says the 2019 rise could directly affect up to 209,200 people and increase annual economy-wide wages by $231 million.

It expects the move could see 8,000 fewer individuals in employment than there would have been if the minimum wage had not increased.

The rise is expected to cost the Government $93.1 million, and is estimated to see inflation increase by 0.1%.

Lees-Galloway says: “With the labour market tight and unemployment at the lowest since 2008 at 3.9%, now is the right time to lift the wages of our lowest paid New Zealanders.

“Today’s announcement also provides certainty to businesses who told us they wanted to know when the changes to the minimum wage were going to happen.”

National Party Leader Simon Bridges isn't happy with the minimum wage growth trajectory, saying it goes "too far, too fast".

Asked by interest.co.nz how he'd like to see minimum wages increase, he says they should go up 50 cents a year. 

Bridges maintains small and medium sized businesses will take a hit from the hike, having already been affected by industrial law changes. 

He says the costs will be passed to consumers, increasing the cost of living. 

"This kind of rate I would argue is unsustainable when there aren't productivity and other sorts of gains going with it," he says.

"Bear in mind as well, what we've got at the moment is the highest minimum wage in the world relative to average wages."

According to MBIE, the median hourly earnings in New Zealand is $25. A minimum wage of $17.70 is equivalent to 71% of that. 

The organisation, Living Wage Aotearoa, puts the "living wage" at $20.55.

We welcome your help to improve our coverage of this issue. Any examples or experiences to relate? Any links to other news, data or research to shed more light on this? Any insight or views on what might happen next or what should happen next? Any errors to correct?

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79 Comments

Kiwibuild and housing affordability issues solved.

That's 7.3% wage increase in 1 year on the way to a considerable 27% wage increase in 3 years (April 2017 $15.75 - April 2020 $20.00)

that will affect a lot of large companies that have a lot of low wage people on the books, supermarkets, logistics, retail,
that must lead on to prices rises with such a large increase unable to be absorbed straight away, would it not be better to split into six month increases?

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I had a letter from one of my large local suppliers talking crap like that. I went back to them and said if you cant afford to pay people a decent wage, maybe you need to have a good hard look at yourself and your business practices.
Its $48 more for a 40 hour week.... Ouch...

Sluggy - Good on you, sometimes we forget how hard it was to manage when we started out.

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This is a tax on starting out. Rungs have been taken off the bottom of the housing ladder and now they are being removed from the career ladder.

I agree with you, but nobody wanted to get on the bottom rungs of the housing ladder anyway.

Wouldn't you just be saying you are happy to pay more for his services if he is having to pay more in wages?
Or you mean you are happy for other people to make less money if it means you get to keep your prices the same?

I'm sure the supermarket owners will be able to survive on $2.5m in the hand down from $2.7m. Just by a Porsche instead of a Ferrari, or the 40ft launch instead of the 44ft one.

I'm unconcerned about the supermarket owners.
However do you think they are going to accept the drop from 2.7 to 2.5? Nah they will pass that cost on because they can. Quite easily. You will probably barely notice.
Who shops at supermarkets? Everyone, including people on the minimum wage. So how will they be any better off, they get paid more but the cost of everything just goes up to compensate for having to pay them more.
The broader issue is there are a huge amount of small businesses paying people minimum wage. They will also be paying others more than the minimum. It is difficult to make money from a business and risky. And a lot of business owners will be paying themselves less than the minimum wage. Most business owners aren't the fat cat rich supermarkets, who won't be affected by this anyway most are small, employing a few people, and constituting a very significant part of the economy.
You can make the argument that if the business doesn't work then it shouldn't exist. And there is some truth in that. But then who will generate any real wealth in this country? Because all those billions from houses going up......that's not real. For real estate agents and banks sure....but for the economy as whole?
That is the real issue here. Cheap credit and a housing bubble is choking the economy. Selling houses to each other with ever increasing indebtedness constitutes a lost 15-20 years in the New Zealand economy where actual productive activity has been choked out. And what is the solution? "affordable housing" at half a million a pop? Increase the minimum wage to keep the whole thing bollicking on? Keep credit cheap, and relax credit conditions to maintain the status quo. Relax immigration rules so we can import people who see all this as an opportunity? Or tighten them because westerners don't like working hard anymore?
Cheap credit is great at the beginning of the cycle. But through the middle, at the end, and as the solution to the bust? It's ludicrous.
Wages need to go up. But putting them up by decree won't fix anything. It just moves the chairs around while the ship sinks further under water.
The issue is the cost of living and in particular the cost of housing.
The government should just crash the housing market and throw us into a deep recession. It will be crap for a few years and then we can start again from a position of strength. Recessions are valuable parts of the cycle, they blow out the poor decisions and make the economy and society lean and fit again. Somehow they have been demonised to a ridiculous extent, like the boogeyman under our beds.
No one will starve. The poor won't lose much because they haven't been part of any of this anyway. In the middle and at the top some will lose stupendously over priced, poorly built wooden shacks that they should never have been able to afford in the first place. And they will learn good lessons.
It's the hard lessons I remember most keenly, not the easy ones or even the wins. The tough times, when I was challenged and when I got to the end I realised "that wasn't so bad". Sometimes you didn't even realise you were at the end you were so busy dealing with the mess. Surely we all have that experience as well? Why should the economy be any different?
Fat chance selling that to anyone though.
We grow for ever, we borrow for ever, we consume and consume and wonder why it doesn't make us feel fricking awesome like the girl in the ad.
"Sigh"

Western societies can no longer handle a decent recession.
So the ‘prop up’ continues.

Exactly. Try surviving, let alone thriving, on the current minimum wage. Good luck.
There are costs of doing business, that are often in the interests of wider society. A lift in the minimum wage is one of them.
heck, businesses may find they get better calibre and more loyal staff if they pay them more...there's a novel thought. They may find their longer run costs are lower, with lower turnover.
So good on the government. The last government pumped the economy with low quality growth, off the back of high (low wage) immigration, and low minimum wages.

They would be better off increasing their employees pay incrementally by at least the rate of inflation each year, rather than just locking them into a minimum wage.

i wonder if they expect loyalty from their employees when they resent paying more or the minimum wage goes up?

A mate has been on $20/hr for the last 8 years in a provincial town. Was complaining the other day that folks that started more recently (starting with some experience and doing the same job) are now on the same wage. I asked why they don't ask for a pay rise or look for a better paid job. 'I like my job and am relatively happy here' they said. Employees that enjoy their job are usually quite loyal.
A farmer was talking about his staff. He pays hourly and above minimum. Staff work a shift system of 8hrs a day with more hours available if they want them. At a staff meeting the farmer was somewhat surprised to hear that hourly rate wasn't the be-all-and-end-all for the staff. Roster, time off and especially a boss that didn't yell at them and opportunity to take responsibility, collectively, rated higher than hourly rate for them.

I'm an employer, I don't mind the rise in minimum wages, I do mind welfare for doing nothing. I'm very proud that some of my employees come to work on their days off at morning break time to socialize. It quietly tells me they like their job and that I'm not an ass#0le of a boss

Thumbs up on that !!

I wish I had an employer like you. My employer frowns upon me responding to emails outside of company time, something about spending time with family.

So the wage rises should be static and far below cost of living rises so the NZ taxpayers have to subsidise more and more of the social cost and the demand on health services is higher from resulting poverty? So all the better to make them suffer more than they are now? You seem to assume the entire cost of business solely is made up of staff costs, yet staff costs are kept to be more minimal than even business site costs like rental, running bills, upkeep maintenance, assets and equipment etc. Which often factor in to a significant part. Then there is the manufacturing material purchase and logistics of products and services you buy.

Some of my friends think a rise in the minimum wage negatively impacts the earning power of the middle class.

Can anyone explain this theory to me?

I think they would mean buying power? Assuming all jobs and hours stayed the same but min wage increased then more dollars chasing the same amount of goods would decrease their buying power through price inflation.

You're right I meant buying power. Can't wait for the holidays to arrive.

Because if the wages of unskilled people rise the cost of everything that uses locally employed, low-skilled people somewhere in the supply chain (ie, almost everything) will also rise.

That's crazy talk, if that was true why would they increase minimum wage?

Because nobody wants to admit that the cost of living is just too expensive. Nobody wants to admit that they don't know how to solve the problem, that the significant changes required would be politically unacceptable and too much for current day thinking. Easier to tinker around the edges and make it look like something is being done, that they are thinking of the people they represent.

Agree, it is just too expensive to live.

Too true, to bring down the cost of living there would have to be some uncomfortable truths realised. Most uncomfortable of all is that most of the supposed measures implemented by government to improve it end up having the opposite effect.

Where does this expense go anyway? Why is the cost of living more expensive in New Zealand? I suspect it’ll be 100% due to price gouging.

We are a small country, with a lack of competition and a lack of economies of scale.

So the wage rises should be static and far below inflation and cost of living rises so the NZ taxpayers have to subsidise more and more of the social cost and the demand on health services is higher from resulting poverty? So all the better to make them suffer more than they are now? You seem to assume the entire cost of business solely is made up of staff costs, yet staff costs are kept to be more minimal than even business site costs like rental, running bills, upkeep maintenance, assets and equipment etc. Which often factor in to a significant part. Then there is the manufacturing material purchase and logistics of products and services you buy.

Will be keen to see how this plays in with WFFTC abatements; if nothing changes, it just means the same amount of money but the Govt makes it the employer's problem, not theirs.

As it should be.

You're missing the point: no one ends up better off. The Government just has to spend less, business owners wear it, but no one gets extra money. That's why the abatement is so important.

A single man on minimum wage would get the benefit, but not someone with kids.

Why doesn't the Government just pick up the wage bill for the private sector and put company taxes up to 100%?

See why I said your comments cannot be taken seriously?

I don't expect them to be taken seriously. Why do you have such a hard on for me?

Well this is a business website and it's just hard to have a decent conversation if someone continuously posts sarcastic comments

Keep scrolling then. I’m sure you’re a grown up and know how to do that instead of getting upset about it.

Use my calculator to find out http://45.32.191.40

Assuming 1 income, 1920 hours annually, kiwi saver, 3 kids:
at $17.70: $46,608.90 cash in hand including $15,340.00 family tax credit
at $16.50: $44,809.25 cash in hand including $15,340.00 family tax credit

The WFF calculation is based off https://www.ird.govt.nz/resources/9/7/97ef650f-e6ff-4d25-9930-4a3167aecd...

I've ignored infant tax credits (best start package) which doesn't factor in income anyway.

So $1800 better off? So if the abatement isn't adjusted, the outcomes for people on WFFTC is $36pw better, not $48pw.

Roughly yes but it would depend on the number of kids and hours worked. I'm not sure if IRD actually uses a bracketed calculation like that PDF. Anyone know the formula?

As an illustrative example though, it serves a purpose: that the full cost of the minimum wage increase will come from employers but what actually registers as 'income' for tax/WFFTC will have a different outcome if the abatements are not adjusted.

Here’s a thought experiment (no I am not advocating for it), imagine what would happen if we removed social welfare and the minimum wage completely. I think we would see a substantial amount of jobs created and obviously a substantial increase in job seekers.
That thought came to mind travelling in Japan. They have an approx $11nzd min wage and accordingly there were many more simple/entry level jobs that existed because they were economically viable.
I wonder if the purported benefits of an increased min wage will exceed the negatives. I think it will expedite automation and the destruction of jobs in many areas. What will it do to our international competitiveness in relation to production of goods as well or is that already too far gone? More unintended consequences?

Totally - but removing the minimum wage completely would contribute to deflation - and we can't have that in a debt-based economy, where prices must be allowed to continually rise to support that debt burden....

It makes more sense to have a maximum wage/wealth. I'm guessing those over a certain level of income/wealth aren't really driving the consumer economy.

That might work but how far down the “government controls everything” rabbit hole do you want to go?

True. Bring on the reset! We’re backed into a corner in so many ways with our current system.

We'd have far more old people working in supermarkets etc. too.

I have noticed that there are now more older people working in our supermarkets than there used to be. Both cashiers and trolley gatherers. It's been especially noticeable this year.

Why not just shoot the disabled and elderly while you are at it since you want them to have no access to any income or living necessitiesand become unable to live in their community. Discrimination against the disabled by employers is not only openly there, it is actively encouraged. This is far worse then gender discrimination. Those of older age and medical disabilities face far more discrimination than even that of race as it is not only recognised as a critical factor preventing work but recognised as a positive for businesses. No wonder disabled and elderly struggle to find any work at all. The discrimination and lack of work for disabled people is even to the point even the government does not care at all about disabled employment or business start ups for those with disabilities (often the only way to have employment is to employ themselves but many cannot handle the management and work together). All govt actions are only targeted to youth and culture specific while a disabled person is three times less likely to be able to find work, with an employment gap for those wanting to work of 47.7 percentage points. They literally are the most discriminated and deprived group in society yet all govts snub the disabled and leave them to rot.

That went from 0 - 100. As I said, I’m not advocating for it. I was using it as an example to show that I think it will lead to a reduction in jobs. But don’t let that get in the way of you strawman...

I would remove the dole and have a universal job guarantee at the minimum wage + Kiwisaver. Yes you should work to support yourself if you can and not get money for nothing. The jobs would probably have a lower productivity than the private sector but it would be at least a bit productive and keep people work ready for when the private sector has recovered, rather than slowly succumbing to alcoholism and despair.
Japan runs an ongoing, Bank of Japan financed, government deficit. This is what sustains aggregate demand and employment in Japan and allows the private domestic sector to net save (alongside its current account surplus). It also results in some fantastic public services. Very impressive. I think we have a lot to learn from Japan.

Do wages really matter when our basic goods and services are priced by pulling gouging numbers out of thin air with no relationship to cost. The supermarkets, building merchants, banks and insurance companies etc are laughing at us. Expect more inflation and more automated check-outs and call center bots.

Supply vs demand and sadly enough all the examples you pointed to are duopolies or cartels. More true competition would at least solve much of the price equation which would increase the purchasing power of current wages.

If employers paid their customers a little more in wages, their customers would have a little more to spend.

So businesses are going to have to pay higher wages all while we are about to go into the next Global economic downturn? It will be interesting to see how this works out when a lot of businesses will already be struggling to keep staff on. I wonder if staff will be reduced in many businesses and the remaining staff will have to work even harder to justify these wage increases?

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Employers only have to pay minimum wage if they're hiring kiwis. The "skilled chef" from overseas will buy himself a job and get paid 20 hours wage for 40 hours of work.

You've got the Masalas and Burger Kings but there is a lot of this crime going on under the table.
But this headline today has to be the worst I've seen: Jail term increased for Kasmeer Lata who prostituted her underage daughter 1000 times

...on visitor visas from Fiji. ... forced to be a sex slave, she was sold about 1000 times ... about $100,000 in earnings...

Hmm. Will be interesting to see how this impacts inflation in NZ - particularly if Orr remains dovish, and even considers cutting the OCR to support house prices in the near future - importing even more inflation.

The timing of this is also curious, considering global economic outlook and NZ business confidence isn't looking too flash at present.

I'm betting the NZD gets spanked, too.

Great news for people with no experience and struggling to find work. Does this mean someone on $17.70 gets a pay rise, or will they be happy to be on minimum wage?

Wouldn't the NZD go up? Increased wages, more money flowing around, higher goods and services prices, inflation up, needs to be controlled by RBNZ with increased interest rate - higher dollar.

Certainly explains the sudden prevalence of chatbots on every online sales site. No unions, no ACC, no Monday-itis, no PG's.

so three rises all over 7% - close to 30% cumulative -- and this wont make a difference to employers ...

as someone who runs a healthcare industry -- the huge rises made no difference to productivity - or earnings -- and has n fact led to job losses -

FACT - l4 support workers are no on 24.50 or 51K per annum - the same or more than first and second year nurses, occupational therapists and social workers cost

simply remodelled services to employ 3 nurses etc instead of 5 support workers -- better skilled , trained adn motivated staff - less staff needed to provide the services -

the more you pay someone the - the more you expect - and less likely to tolerate poor service

What I hear from nurses - questioning why did I take on student debt - and deal with the stress and responsibility of of life and death decisions, to be paid little all more than the unskilled?

Having lived with one and seeing her 'wrecked' after manic shifts with regular death experiences on her patient list (and feeling responsible), i can see why they are fed up.

Expect a growing skill shortage in this country as the easy option becomes more and more attractive to school leavers.

if government can simply impose 30% pay rises for employees they don't employe why are they being so stubborn to increasing nurses and teacher pay by the same levels. Actually I think I just answered my own question.

Oh this one is easy: because they have far more overseas work opportunities that pay far higher than cheap arse NZ businesses.

It is going to speed up automation. Those lollipop men at the council need replacing asap with traffic lights for one rather than p****ing tax payers money down the drain.

Plenty of other jobs out there for them.

The problem for employers is that it is not just the minimum wage earners that will get a pay rise!
The workers currently on $20 will now want more because they think they are worth more than the ones that were getting the minimum and so it escalated into a massive increase in wages for employers!
It is going to cause job losses for many that are currently battling to keep afloat!
Employers will lay of staff and expect the remaining ones to cover, it is obvious!
Government is clueless!

It's also a perfect Universal Pricing signal to those who actually buy and sell stuff or services for a living.

Q - why have yer Prices just gone up 5%, are you just following all the others who have suddenly hit me with around about the same rises?

A - Why, nada ter do wiv Me, mate. It's the Gubmint, y'see.

“Minimum wage laws appear to give low-income workers something for nothing—and appearances are what count in politics. Realities can be left to others, so long as appearances get votes.” Thomas Sowell

allowing the masses to have more discretionary spending actually increases business, because poor people are more likely to buy more they could not otherwise afford, hence more business sales.

Those lucky masses. "Historically, lower skill levels did not prevent black males from having labor force participation rates higher than that of white males for every US Census from 1890 through 1930. Since then, the general growth of wage-fixing arrangements: minimum wage laws, labor unions, civil service pay scales, etc. has reversed that and made more and more blacks unemployable despite their rising levels of education and skills: absolutely and relative to whites."

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What could possibly go wrong with setting the highest minimum wage (relative to median) in the developed world? This will be a fun experiment for the 'capitalism has failed' folks to prove their genius insight that more distributive socialism produces better outcomes - just like every other time it hasn't in modern history.

Higher inflation + Higher unemployment, more youngsters becoming long term unemployed. But both these are good from the govt's perspective - beneficiaries are their voter base so making more is double plus good, and high inflation gives them an ever increasing portion of GDP in tax through bracket creep.

Minimum wage increases should really be set mechanistically by being tied to cost of living + a margin. This way we could also localise minimum wages, in Whanganui the cost of living might be quite different to central Auckland for example. We can't perpetuate a situation where one government increases wages rapidly and the next suppresses wage growth.

Sweat-shop-NZ avoided. Imho.

"Bear in mind as well, what we've got at the moment is the highest minimum wage in the world relative to average wages."

This is not true at least for 2017 (maybe for 2018 it is?)

For the OECD group of nations (not a worldwide comparison)
https://stats.oecd.org/Index.aspx?DataSetCode=MIN2AVE

NZ is out ranked by 6 other countries

Not to mention the cost of housing is far far lower in those other countries. Makes you wonder how the French must feel about NZ, I know the ones I met in NZ refuse to pay accommodation costs.

Looks like that chart puts NZ second after Columbia if you remove "median" from the series to look only at mean - or am I looking at it incorrectly? In any case, we are further down the rankings if we look at median instead of mean.

I wonder if inequality and poverty can be reduced by simply increasing the minimum wage, why some of the poorest countries in the world, don't do that?
I agree that a greater share of the pie should go to labour vs capital. However, I dont think simply increasing minimum wage is the answer to that.
There is also the obvious issue that NZ economy (which relies on primary industry products) do not manufacture and exports products that can attract a high added value (thus enabling a better pay and social welfare). To really change the game for labourers require a change into what NZ sells to the rest of the world. But off course that is much much more difficult (and actually requires exceptional and visionary leadership) that increasing the minimum wage. Even I can order minimum wages to increase. This is not unlike countries such as Turkey and Iran who "order" their interest rates to be a certain figure with no regards to the underlying economic realities of their countries.

The damage done to low paid workers by rise in minimum wage in Seattle (study by local govt in Seattle):

"The group’s first study last year (of the policy’s first phase, increasing the minimum to $11 an hour) was a mixed bag, with fairly imprecise estimates. But the new findings, adding another year of data and including a second increase to $13 an hour, are unequivocal: The policy has caused serious damage to low-wage workers in Seattle. The number of hours worked by low-wage workers fell by a staggering 3.5 million per quarter. This is reflected both in thousands of job losses (or, more precisely, in jobs that would have been created but never were) and in reductions in hours worked by those who retained their jobs. These effects were so dramatic that total payroll accruing to low-wage workers fell by about $120 million per year, with workers actually losing $125 per month on average.
https://www.nationalreview.com/2017/06/seattle-minimum-wage-university-w...