By Todd Harper
May 06, 2019

The True Effects Of The Minimum Wage Increase

The beginning of April this year saw an increase in New Zealand’s minimum wage to $17.70; the largest minimum wage increase New Zealand has ever seen. This was a $1.20 increase from the previous minimum wage of $16.50.

For an average student working 20 hours part-time, this is around an extra $24 a week. If you add that up over the course of the year, it’s around $1248.

The Government is proposing two more minimum wage increases before the middle of 2021 - the first is up to $18.40 by April 2020 and the second is $20 by 2021. This means that a student who was making $17,160 per year in February 2019 will be making $20,800 by 2021.

Effects of this increase have yet to be truly felt, but the ongoing conversation is concerned with how this increase could affect everything, from the cost of living to increased spending boosting the economy. The changes will impact around 71,500 people who are currently on minimum wage.

Nathan Rahui, WSU President says for many students that are trying to make extra money, the majority are all in working positions that only pay minimum wage.

“To see an increase in the amount that they earn is a positive thing because it means helping to alleviate some of the financial stress that student life can bring, just that little bit more.

“Many students don't qualify for student allowance so have to borrow the loan living costs from StudyLink, which soon amount to another large sum of money to pay back on top of University fees. The more money students are able to earn to pay their bills from employment, means less money that they have to borrow and pay back in the future.”

However, Rahui is also slightly concerned about the rapid increase of $20 an hour the government is proposing by 2021.

“Considering that 2021 is very quickly approaching, a $2.30 jump by next year is very ambitious. Although the increase in the minimum wage has its benefits, on the other hand, it can also mean a rise in prices for consumers, a huge jump would see many prices soar rapidly. Minimum wage earners would be making more, but they would be spending more too which sort of defeats the purpose of an increase.”

The Restaurant Brands Association, which advocates for a range of service and hospitality organisations such as Mission Estate Wines, Hobbiton Movie set and many others, says increases to the minimum wage will have long-reaching effects.

“While impacts from smaller incremental minimum wage increases can be controlled by businesses, a ‘larger’ minimum wage increase in one jump is viewed as having an ‘extremely negative’ impact by 48 per cent of employers. A recurring comment from employers is their concern for pay parity for other employees and the upward pressure on all wages in the business.

“In previous years, the increases were more manageable and impacts were felt only on the most junior staff. Now with the ‘promised’ increases being much larger, the impacts are expected to be much more broad, as the ‘halo effect”’ will affect ALL staff and what their pay expectations are.”

Eric Crampton, chief economist at the NZ Initiative says New Zealand's 2019 minimum wage increase pushes us into rather uncharted territory.

“The $1.20 an hour increase is the largest on record and is expected to affect about 209,000 workers. With the minimum wage rising to nearly 70 per cent of the median wage, we are also reaching levels well beyond those present in most other OECD countries.

“With prior smaller hikes, we would expect minor changes for those workers earning above the minimum wage to maintain relativity. I would be hesitant to make guesses about how employers will accommodate the sequence of hikes bringing us ultimately to a $20 an hour minimum wage.”

Nexus spoke to an Auckland based student who works in a supermarket. He says in most supermarkets, the only way you can get a pay rise is when it is lifted by the Government. He is lucky enough to be paid more than the minimum wage in his current position.

“I hope the $1.20 lift in the minimum wage on April 1 will help me to negotiate a rate of more than $20 an hour. Rent on my one-bedroom flat costs more than $300 a week. The guy who lives in front of me is paying $700 a week and all his wages go on rent.

“I am lucky enough to earn $2 more than the starting hourly rate of $17 an hour. The grocery trade is a traditionally low-paid employer, but it is a struggle.”

Regardless of how the minimum wage increase has affected you, any increases in wages will have a positive effect on the surface. If you think these changes are positive, or if you dislike the direction of these increases, you have a voice. Be sure to use it next year when election time comes around.

Joe, BA:
“It’s pretty mean, my pay just went in a few weeks ago, so I get more money each week. It helps a lot.”

Max, BMS:
“I’m a little worried about how this rise in wages might affect the prices of stuff. The level of wages doesn’t affect me, as I get student living costs.”

Hayley, BSc:
“I currently work in retail above minimum wage, however, I never saw an increase in my wages when it went up, but some of the staff that have just started got a raise due to the increase. It’s not really fair for me if I’m the same as them.”

Megan, BHSHP:
“It’s lit. It helps me a lot. By the time I have done my shopping and got a cheeky Sal’s, I generally don't have much left.

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