Notice that warns that 9,000 jobs could be affected by a minimum wage of $ 20 that the minister considers ‘obsolete’

The Minister of Workplace Relations is ignoring advice warning that raising the minimum wage to $ 20 in April could lead to poorly paid workers losing their jobs.

Michael Wood said the recommendation from the Ministry of Business, Innovation and Employment not to increase it to $ 20 because it could affect 9,000 jobs was based on outdated economic data.

Instead, MBIE recommended raising it to $ 19.15 in October to match inflation.

“Given this and we had record unemployment before Covid despite significant increases in the minimum wage, I do not accept the hypothesis that working Kiwis will be negatively affected,” Wood said.

The government today committed to an April 1 deadline to raise the minimum wage to $ 20 to fulfill the Labor electoral promise and the last government’s commitment.

It is expected to give 175,000 workers a weekly wage increase of $ 44 before taxes.

Wood said the increase was noted years earlier and that the Labor Party was elected with a strong mandate “to deliver on our promises.”

“This increase will raise the income of thousands of people who will then spend a good part of their salaries in local businesses.”

Wood said MBIE’s annual review of the minimum wage and its recommendations to increase it were based on economic data “that is now out of date.”

MBIE’s advice was compiled in early December before the Treasury opened its books this week to reveal that the New Zealand economy had done better than expected.

His advice to recommend a more gradual approach and increase it from $ 18.90 to $ 19.15 was primarily based on the September Pre-Election Fiscal and Economic Update, which cast a much darker picture of Covid’s economic impact.

He advised that the rise should occur on October 1 because that is what forecasts at the time indicated that unemployment figures would begin to recover.

“The economic situation, consumer caution and future uncertainties around business conditions mean that employers may not be able to recoup increased wage costs through normal responses, such as reducing profit margins or increasing prices.” officials at the council said.

“The bottom line could be that the workers who would benefit most from an increase in the minimum wage are the ones most likely to experience the negative effects of an increase in the minimum wage (such as reducing working hours or replacing some groups of workers by others)). “

But opting to increase it to $ 20 instead of $ 19.15 would mean an estimated 70,000 more workers would benefit.

And it would have a positive impact on the daily living conditions of some low- and middle-income families and help reduce material difficulties.

He said the timing of a minimum wage increase was “an important consideration in this year’s decision.”

MBIE said previous minimum wage increases were cushioned by the creation of new jobs in the economy, but the impact of Covid-19 meant that the increase to $ 20 in April “would be unaffordable for some companies.”

“This runs the risk of increasing unemployment or underutilization of low-wage employees, particularly those at or near the current minimum wage.”

The Treasury has an employment growth that recovers in the year until June 2022; postponing the increase until October would align the change “with a potential rebound” and could mitigate the risk of employers letting go of staff or cutting hours.

“This proposal would give employers much-needed respite and allow those most affected by the slowdown in trade to recover and retain their staff until the economic situation improves.”

But he did not recommend that there be no hike, as that “would erode the real incomes of the lowest paid workers compared to rising wages and inflation.”

Raising the minimum wage would have the greatest impact on young workers, women, Maori, Pasifika, part-time employees, without formal qualifications, or working in the retail and hotel industries.

This group was also the most prone to job losses and reduced hours.
This could be mitigated with government interventions such as labor subsidies, job creation, employment support, or other initiatives.

Law enforcement leader David Seymour called the pay hike “economic vandalism” and said companies “simply won’t be able to keep up with the constant stream of costs and rules imposed by Labor.”