Rising Wages Requires Rising Productivity Too

Today’s announcement by the Labour-led coalition government that the minimum wage will rise to $17.70 per hour on 1 April next year provides businesses and employers with certainty, according to the Wellington Chamber of Commerce.

"Labour’s coalition agreement with NZ First set a goal of a $20 per hour minimum wage, so Minister Lees-Galloway’s announcement today helps employers by laying out the steps towards that goal," says Chief Executive John Milford.

"Pay rises for low-paid workers is welcome news. But for employers, any cost increase needs to be managed.

"Research shows that any minimum wage increase has a cascading effect on workers paid above the minimum wage too. This particularly hits SMEs who are unable to pass on or manage their costs easily.

"We urge the Government to accelerate productivity-enhancing policies such as investing in strategically important transport networks, freeing up labour supplies to desperate primary industry employers, and raising the quality of tertiary education graduates.

"MBIE’s minimum wage review estimates the employment restraint impact from today’s announcement at 8,000. But Kiwis have already started to see an impact from the significant minimum wage hikes foreshadowed.

"The past four quarters added 6,000 new jobs per month on average, a marked slowdown from the preceding two years when over 10,000 new jobs were added per month on average, despite the currently hot labour market.

"The Government should also re-examine the tax impact on workers. The Minister proudly claimed today’s announcement will mean, ‘an extra $48 a week before tax - enough to make a real difference for working people,’ but unfortunately this $48 is quickly whittled down by tax and abatements.

"Today’s announcement needs to be supported by Government action on productivity and tax reform too."

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