A vast majority of retailers polled by Retail NZ disapprove of the government’s decision last week to increase the minimum wage from April 1.
Of the businesses polled, 69 per cent said they would increase their prices, 57 per cent said they would reduce the working hours available to their teams and 41 per cent plan to reduce their workforce.
One in five said they will consider reducing their store hours and 17 per cent will consider closing their businesses altogether. In many cases, businesses will undertake a combination of such actions.
“Many small business owners do not even earn minimum wage out of their own businesses and are now faced with yet another big hike in their wage bill,” said Retail NZ CEO Greg Harford.
Harford said the reaction to the increase should concern government given that the sector – on average – pays well above the minimum wage, with an average hourly rate of $26.65 last year.
On April 1, the minimum hourly rate will increase by $1.50 to $22.70, aligning with the 7.2 per cent rate of Consumer Price Index inflation in the year to December. Government officials said the training and starting-out minimum wages will also both increase to $18.16 per hour, remaining at 80 per cent of the adult minimum wage.
Flow-on effect
A major concern of retailers is that increasing the minimum wage necessitates a flow-on effect for other staff earning higher amounts.
“Most of my staff are paid above the new minimum wage, but they too, will expect an increase to maintain the differential,” one retailer said in the survey. “That’s where the expense comes in. I don’t think the government understands the expectations of employees already above the minimum wage.”
Another said the government lacks understanding of the retail industry and the impact its decisions have on employers.
“I approve of an increase,” said one. “However over the last three or four years, the increases have been too heavy-handed. It seems that the government does not understand that all we do is pass on the cost to the consumer or if we can’t then we even may discontinue offering that service or being in that industry.”
Another retailer said the increase was simply not sustainable.
“Retail has had it tough, many struggling to get by, Covid, floods and much more. Retailers have strived to look after their staff through this, at much personal cost. The increased costs from the government leave no option but to lift prices which will drive inflation higher.”
