New Zealand’s minimum wage has increased from $13 to $13.50 per hour.
This is despite advice of the Labour Department to fix the rise at $13.30.
The minimum wage provides a basic level of security for low-income families but setting the rate needs to be balanced against its impact on job creation and therefore the unemployment rate, as higher wages make it more expensive for businesses to hire people.
While the Labour Department does not estimate significant job losses as a result of this particular rise, they do caution the benefit of raising the minimum wage this high in the current economic climate.
According to some of the agencies, New Zealand’s minimum wage was already among the highest in the OECD.
Between 2000 and 2008, New Zealand’s minimum wage increased at a faster rate than the average wage, placing pressure on employers with flow-on effects for the job market.
As Michael Papesch of the Labour Ministry said, “The increased wage costs could be an obstacle to job creation in the current economic situation.”
Research indicates that vulnerable groups, such as Maori, Pacific, disabled people and low-skilled workers, are highly represented in minimum wage work and are therefore most affected by both the positive and negative effects that may result from increasing the minimum wage.
As the Cabinet noted in its Review of the minimum wage, “The benefits of minimum wage increases will be felt most strongly among low paid workers. These groups may also be the first to experience any negative impacts such as a decrease in available jobs.”
Increasing the minimum wage higher than the Labour Department’s recommendation may have seemed to the Government to be a way to support low-paid workers, but it could in effect do the opposite.
The importance of ensuring a fair wage for workers must be held alongside the importance of job creation.
If we are to offer job security to those most at risk in our society, we must also offer it to the people who can offer them the work—their employers.
