New Minimum Wage Comes Into Effect

Largest Minimum Wage Increase in History

Anticipated to benefit more than 200,000 New Zealanders and their families, the largest minimum wage increase in history also effects starting-out and training minimum wage rates; they have increased from $13.20 to $14.16 per hour, remaining at 80% of the adult minimum wage.

The Government has also set indicative rates of $18.90 from 1 April 2020 and $20 from 1 April 2021.

“The Government is determined to improve the wellbeing and living standards of all New Zealanders as we build a productive, sustainable and inclusive economy,” said Workplace Relations Minister Iain Lees-Galloway.

Living Wage

The living wage - reflecting basic expenses such as the cost of food, transportation, housing and childcare - for 2019 is $20.55 per hour, as calculated independently by the NZ Family Centre Social Policy Unit.

Advice from Ministry of Business, Innovation and Employment (MBIE) is that the new minimum wage of $17.70 would mean that 8000 fewer people in work. Even allowing for fewer new jobs, MBIE still estimates about 49,000 new jobs would be created in 2019.

Mr Lees-Galloway said the issue was not the quantity of available jobs, but their quality and the amount of pay they offered.

Lowest Unemployment Rate since 2008

With unemployment currently at 3.9 per cent, the unemployment rate is the lowest it has been since June 2008. This tightening labour market has occurred since minimum wage increase on 1st April last year and with wide publicising of the increase to $20 by 2021.

A regulatory impact statement from MBIE officials said the higher cost of labour could be passed on to consumers through higher prices for goods and services, but also noted that the effect on employment "is heavily debated in economic literature, with no clear consensus".

According to the latest figures from the Half Yearly Economic and Fiscal Update, GDP growth was expected to be roughly 3 per cent over the next five years.  

(MBIE: Dec 19, 2018 & NZ Herald: Dec 19, 2018)

 

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