The government has announced an increase of minimum wage from $20 to $21.60 an hour to commence in April.
Workplace relations and Safety Minister Michael Wood has confirmed this wage increase will directly benefit around 300,000 workers and will help households most affected by Covid 19. For someone working a full time, 40-hour week, this will see them bringing in an additional $48 a week, almost $2500 a year. This increase follows a record high for inflation in New Zealand, with an annual rate of 5.9% for 2021.
One of the ideas behind this increase in wages is that it will encourage consumer spending across the economy, which would in turn support businesses. But is this the reality of how spending will change come April when the minimum wage increases?
On the other side of reports which applaud the increase in minimum wages, businesses seem to not be sharing the same positivity. The wage increase comes at a time where businesses, especially small businesses are in a position where they are struggling. "This increase comes at a time when businesses are under extreme pressure from fast rising costs in labour, capital, and in their supply chains, and when some are fighting for their very existence," said Business NZ chief executive Kirk Hope. it is a rather large increase in wages, in a very short period of time, and businesses have not been given the time to prepare for it.
Especially given that we are currently operating under traffic light Red setting, a 6% wage increase is a slap in the face that businesses cannot keep up with.
Building from this point, as businesses are struggling to keep up with inflation rates and loss of business from Traffic light Red setting, then households must be feeling the same. An increase in wages is not going to be going back into businesses, as households are in need of that extra 6% in wages just to keep up with the inflation around the country. Therefore, bringing us back to the point made by Business NZ that the minimum wage increase is a kick in the guts for businesses.
As a business owner, it is important that you aware of these changes and investigate how this wage increase is going to impact the operation of your business. Our team at Godfreys Law can help you prepare for the wage increase and come up with a plan to cope with the extra 6%.
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