Minimum wage drives largest labour cost increase in a decade

The Government’s decision to increase the minimum wage has yielded the largest quarterly lift in labour costs since December 2008, according to Stats NZ, with the labour cost index rising 0.7 per cent in the June quarter.

The minimum wage was lifted from $16.50 an hour to $17.70 an hour on April 1, and will increase further to $20 an hour by 2021.

“If wages affected by the minimum wage had remained constant, the LCI would have only increased by 0.5 per cent this quarter,” Stats NZ business prices delivery manager Sarah Johnson said.

Retail trade in particular jumped from a 0.1 per cent increase in the March quarter, to a 1.4 per cent increase in June. 

Accommodation and food services rose 2.3 per cent, compared to a 0.3 per cent increase in the prior quarter. 

The increase in labour costs has had a negative impact on business, according to the latest Retail NZ Retail Radar report. Despite this, 64 per cent of retailers expect to maintain their current level of staffing, Retail NZ found, with only 27 per cent considering employing fewer staff moving forward.

The current minimum wage is still far below the $20.55 hourly wage, which Living Wage Movement Aotearoa New Zealand has been campaigning for.

“Workers in this country deserve to earn enough to live a decent life by hundreds of thousands do not,” Annie Newman, national convener of the Living Wage Movement, previously said.

“The time has come to turn our backs on being a low wage economy and create a kinder, more sustainable and more equitable society for future generations.”

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