NZ Herald
  • Home
  • Latest news
  • Video
  • New Zealand
  • Sport
  • World
  • Business
  • Entertainment
  • Podcasts
  • Quizzes
  • Opinion
  • Lifestyle
  • Travel
  • Viva
  • Weather forecasts

Subscriptions

  • Herald Premium
  • Viva Premium
  • The Listener
  • BusinessDesk

Sections

  • Latest news
  • New Zealand
    • All New Zealand
    • Crime
    • Politics
    • Education
    • Open Justice
    • Scam Update
  • Budget 2025
  • On The Up
  • World
    • All World
    • Australia
    • Asia
    • UK
    • United States
    • Middle East
    • Europe
    • Pacific
  • Business
    • All Business
    • MarketsSharesCurrencyCommoditiesStock TakesCrypto
    • Markets with Madison
    • Media Insider
    • Business analysis
    • Personal financeKiwiSaverInterest ratesTaxInvestment
    • EconomyInflationGDPOfficial cash rateEmployment
    • Small business
    • Business reportsMood of the BoardroomProject AucklandSustainable business and financeCapital markets reportAgribusiness reportInfrastructure reportDynamic business
    • Deloitte Top 200 Awards
    • CompaniesAged CareAgribusinessAirlinesBanking and financeConstructionEnergyFreight and logisticsHealthcareManufacturingMedia and MarketingRetailTelecommunicationsTourism
  • Opinion
    • All Opinion
    • Analysis
    • Editorials
    • Business analysis
    • Premium opinion
    • Letters to the editor
  • Sport
    • All Sport
    • OlympicsParalympics
    • RugbySuper RugbyNPCAll BlacksBlack FernsRugby sevensSchool rugby
    • CricketBlack CapsWhite Ferns
    • Racing
    • NetballSilver Ferns
    • LeagueWarriorsNRL
    • FootballWellington PhoenixAuckland FCAll WhitesFootball FernsEnglish Premier League
    • GolfNZ Open
    • MotorsportFormula 1
    • Boxing
    • UFC
    • BasketballNBABreakersTall BlacksTall Ferns
    • Tennis
    • Cycling
    • Athletics
    • SailingAmerica's CupSailGP
    • Rowing
  • Lifestyle
    • All Lifestyle
    • Viva - Food, fashion & beauty
    • Society Insider
    • Royals
    • Sex & relationships
    • Food & drinkRecipesRecipe collectionsRestaurant reviewsRestaurant bookings
    • Health & wellbeing
    • Fashion & beauty
    • Pets & animals
    • The Selection - Shop the trendsShop fashionShop beautyShop entertainmentShop giftsShop home & living
    • Milford's Investing Place
  • Entertainment
    • All Entertainment
    • TV
    • MoviesMovie reviews
    • MusicMusic reviews
    • BooksBook reviews
    • Culture
    • ReviewsBook reviewsMovie reviewsMusic reviewsRestaurant reviews
  • Travel
    • All Travel
    • News
    • New ZealandNorthlandAucklandWellingtonCanterburyOtago / QueenstownNelson-TasmanBest NZ beaches
    • International travelAustraliaPacific IslandsEuropeUKUSAAfricaAsia
    • Rail holidays
    • Cruise holidays
    • Ski holidays
    • Luxury travel
    • Adventure travel
  • Kāhu Māori news
  • Environment
    • All Environment
    • Our Green Future
  • Talanoa Pacific news
  • Property
    • All Property
    • Property Insider
    • Interest rates tracker
    • Residential property listings
    • Commercial property listings
  • Health
  • Technology
    • All Technology
    • AI
    • Social media
  • Rural
    • All Rural
    • Dairy farming
    • Sheep & beef farming
    • Horticulture
    • Animal health
    • Rural business
    • Rural life
    • Rural technology
    • Opinion
    • Audio & podcasts
  • Weather forecasts
    • All Weather forecasts
    • Kaitaia
    • Whangārei
    • Dargaville
    • Auckland
    • Thames
    • Tauranga
    • Hamilton
    • Whakatāne
    • Rotorua
    • Tokoroa
    • Te Kuiti
    • Taumaranui
    • Taupō
    • Gisborne
    • New Plymouth
    • Napier
    • Hastings
    • Dannevirke
    • Whanganui
    • Palmerston North
    • Levin
    • Paraparaumu
    • Masterton
    • Wellington
    • Motueka
    • Nelson
    • Blenheim
    • Westport
    • Reefton
    • Kaikōura
    • Greymouth
    • Hokitika
    • Christchurch
    • Ashburton
    • Timaru
    • Wānaka
    • Oamaru
    • Queenstown
    • Dunedin
    • Gore
    • Invercargill
  • Meet the journalists
  • Promotions & competitions
  • OneRoof property listings
  • Driven car news

Puzzles & Quizzes

  • Puzzles
    • All Puzzles
    • Sudoku
    • Code Cracker
    • Crosswords
    • Cryptic crossword
    • Wordsearch
  • Quizzes
    • All Quizzes
    • Morning quiz
    • Afternoon quiz
    • Sports quiz

Regions

  • Northland
    • All Northland
    • Far North
    • Kaitaia
    • Kerikeri
    • Kaikohe
    • Bay of Islands
    • Whangarei
    • Dargaville
    • Kaipara
    • Mangawhai
  • Auckland
  • Waikato
    • All Waikato
    • Hamilton
    • Coromandel & Hauraki
    • Matamata & Piako
    • Cambridge
    • Te Awamutu
    • Tokoroa & South Waikato
    • Taupō & Tūrangi
  • Bay of Plenty
    • All Bay of Plenty
    • Katikati
    • Tauranga
    • Mount Maunganui
    • Pāpāmoa
    • Te Puke
    • Whakatāne
  • Rotorua
  • Hawke's Bay
    • All Hawke's Bay
    • Napier
    • Hastings
    • Havelock North
    • Central Hawke's Bay
    • Wairoa
  • Taranaki
    • All Taranaki
    • Stratford
    • New Plymouth
    • Hāwera
  • Manawatū - Whanganui
    • All Manawatū - Whanganui
    • Whanganui
    • Palmerston North
    • Manawatū
    • Tararua
    • Horowhenua
  • Wellington
    • All Wellington
    • Kapiti
    • Wairarapa
    • Upper Hutt
    • Lower Hutt
  • Nelson & Tasman
    • All Nelson & Tasman
    • Motueka
    • Nelson
    • Tasman
  • Marlborough
  • West Coast
  • Canterbury
    • All Canterbury
    • Kaikōura
    • Christchurch
    • Ashburton
    • Timaru
  • Otago
    • All Otago
    • Oamaru
    • Dunedin
    • Balclutha
    • Alexandra
    • Queenstown
    • Wanaka
  • Southland
    • All Southland
    • Invercargill
    • Gore
    • Stewart Island
  • Gisborne

Media

  • Video
    • All Video
    • NZ news video
    • Business news video
    • Politics news video
    • Sport video
    • World news video
    • Lifestyle video
    • Entertainment video
    • Travel video
    • Markets with Madison
    • Kea Kids news
  • Podcasts
    • All Podcasts
    • The Front Page
    • On the Tiles
    • Ask me Anything
    • The Little Things
    • Cooking the Books
  • Cartoons
  • Photo galleries
  • Today's Paper - E-editions
  • Photo sales
  • Classifieds

NZME Network

  • Advertise with NZME
  • OneRoof
  • Driven Car Guide
  • BusinessDesk
  • Newstalk ZB
  • What the Actual
  • Sunlive
  • ZM
  • The Hits
  • Coast
  • Radio Hauraki
  • The Alternative Commentary Collective
  • Gold
  • Flava
  • iHeart Radio
  • Hokonui
  • Radio Wanaka
  • iHeartCountry New Zealand
  • Restaurant Hub
  • NZME Events

SubscribeSign In
Advertisement
Advertise with NZME.
Home / Business / Small Business

Liam Dann: The problem with raising wages

Liam Dann
By Liam Dann
Business Editor at Large·Herald on Sunday·
28 Oct, 2017 10:33 PM5 mins to read

Subscribe to listen

Access to Herald Premium articles require a Premium subscription. Subscribe now to listen.
Already a subscriber?  Sign in here

Listening to articles is free for open-access content—explore other articles or learn more about text-to-speech.
‌
Save

    Share this article

The role of government in the labour market is one of the most fundamental political divides of the past 150 years.

The role of government in the labour market is one of the most fundamental political divides of the past 150 years.

I read a news story about how exhausted the press gallery is after the election. It made me smile.

I'm not denying it's true. I have friends and family in the gallery. I appreciate how hard they worked and how tired they must be.

I feel exhausted myself. Election campaigns are always gruelling and this one came with about a month of extra time.

But I was reading this story in the supermarket queue and as I reached the check-out the friendly woman behind the till handed me the "next check-out" sign to put behind me.

It was about 6.30pm so I asked if it was time to head home.

Advertisement
Advertise with NZME.
Advertisement
Advertise with NZME.

Yes, she said with a sigh.

"Long day?" I asked.

It turned out she started at 7.30am. As it was Labour Day the queues had been relentless.

It sounded worse than chasing Winston Peters around Parliament for 11 hours.

I don't know if she was being paid the minimum wage but it's a good bet she was "choosing" to work those long hours on a public holiday because she needed to.

Discover more

Opinion

Liam Dann: Rise of robots? Our economy needs it

30 Sep 04:00 PM
Employment

Return to Oz: Is the brain drain back?

29 Oct 12:15 AM
New Zealand

Auckland Council comms costs slammed

27 Oct 09:12 PM
Employment

Chef dismissed by vegan food firm wins $25K

27 Oct 11:55 PM

It seems difficult to imagine how anyone could oppose a rise in the minimum wage when they consider the struggle workers go through every day.

That's the bleeding-heart sob-story part of this column done, though.

Advertisement
Advertise with NZME.

It is important to look at the other side of the argument because, despite what some on the left seem to think, it isn't driven by mean spiritedness.

It's true business leaders and employers groups push back on minimum wage legislation for ideological reasons.

The role of government in the labour market is one of the most fundamental political divides of the past 150 years.

I'm not jumping into that one.

But the risk of arbitrary wage rises pushing up inflation is worth considering because those most at risk are the least well paid.

Wage inflation drives price inflation as businesses pass costs on.

Advertisement
Advertise with NZME.

And because workers earning the least tend to spend a higher proportion of their wage on fixed costs like food they are disproportionately disadvantaged by inflation.

An extra dollar an hour isn't worth anything for someone if the cost of living rises by the same amount.

Even if the inflation impact is limited, a legislated wage rise is less valuable to the worker than one driven by productivity and that doesn't lift prices.

Rising inflation also tends to result in higher interest rates - the key tool for fighting it.

That raises the cost of living for those with mortgages and makes business less likely to borrow to expand.

There's a risk businesses that rely on low wage workers will be less inclined to hire extra staff and unemployment may rise - which puts downward pressure on real wages.

Advertisement
Advertise with NZME.

Economists want to see a lift in real wages - the amount average wages rise above the cost of living.

To generate real wage growth across the economy we need to improve productivity per worker.

It's worth noting here none of this will be a surprise to new finance minister Grant Robertson.

He spent much of the campaign talking about plans to boost productivity and real wages by upskilling workers and investing in technology.

He is also looking to head off some of the inflation impact on interest rates by requiring the Reserve Bank to include unemployment in its equations on the official cash rate.

So Labour will argue the lift in minimum wages - across four years - is part of a balanced package to address wage growth.

Advertisement
Advertise with NZME.

They might also add the timing couldn't be better coming as it does during a period of historically low inflation.

Governments around the world have been battling deflation risk and looking for ways to stimulate their economies.

Raising the minimum wage in this environment could be seen as a kind of stimulus - certainly less risky than it would be if inflation were already running hot.

Some business owners might feel aggrieved they'll be providing that stimulus rather than a direct government subsidy. But last week Jacinda Ardern hinted there may be tax measures in the mix for small businesses to balance the costs of a higher wage bill.

That makes sense. We need small businesses to grow into bigger businesses if we want to boost productivity and create jobs.

But they are the ones that may struggle most with minimum wage legislation.

Advertisement
Advertise with NZME.

They are certainly the ones who least fit the union narrative of employers screwing down workers wages to pay their CEO's million-dollar salaries and deliver big dividends to shareholders.

A decent living wage for everyone is something we should all agree on. It's better for New Zealand if those working the hardest for the least have more time to spend with their children and more disposable income to invest in their children's futures.

The extent that the Government can legislate that will always be contentious.

Business shouldn't be surprised that a Labour Government would move on this.

Labour's job now is to articulate how the obvious risks of such policy will be minimised as part of a broader package - one that addresses issues of fairness without stalling the economy that creates the jobs society's most vulnerable desperately need.

Save

    Share this article

Latest from Small Business

Premium
Property

From Ikea to Kmart: The biggest building projects taking shape in Auckland

20 May 05:00 PM
Premium
Small Business

Small Business: Salt, surf and saving the ocean with Gypsea Sol

18 May 05:00 PM
Premium
Retail

NZ fishing rod pioneer returns with innovative tech for new venture

16 May 12:00 PM

The Hire A Hubby hero turning handyman stereotypes on their head

sponsored
Advertisement
Advertise with NZME.

Latest from Small Business

Premium
From Ikea to Kmart: The biggest building projects taking shape in Auckland

From Ikea to Kmart: The biggest building projects taking shape in Auckland

20 May 05:00 PM

Huge new retail outlets opening this year and next are set to change Auckland's shops.

Premium
Small Business: Salt, surf and saving the ocean with Gypsea Sol

Small Business: Salt, surf and saving the ocean with Gypsea Sol

18 May 05:00 PM
Premium
NZ fishing rod pioneer returns with innovative tech for new venture

NZ fishing rod pioneer returns with innovative tech for new venture

16 May 12:00 PM
Premium
Gin, lavender, and life for a Lotto executive

Gin, lavender, and life for a Lotto executive

14 May 09:00 PM
Gold demand soars amid global turmoil
sponsored

Gold demand soars amid global turmoil

NZ Herald
  • About NZ Herald
  • Meet the journalists
  • Newsletters
  • Classifieds
  • Help & support
  • Contact us
  • House rules
  • Privacy Policy
  • Terms of use
  • Competition terms & conditions
  • Our use of AI
Subscriber Services
  • NZ Herald e-editions
  • Daily puzzles & quizzes
  • Manage your digital subscription
  • Manage your print subscription
  • Subscribe to the NZ Herald newspaper
  • Subscribe to Herald Premium
  • Gift a subscription
  • Subscriber FAQs
  • Subscription terms & conditions
  • Promotions and subscriber benefits
NZME Network
  • The New Zealand Herald
  • The Northland Age
  • The Northern Advocate
  • Waikato Herald
  • Bay of Plenty Times
  • Rotorua Daily Post
  • Hawke's Bay Today
  • Whanganui Chronicle
  • Viva
  • NZ Listener
  • What the Actual
  • Newstalk ZB
  • BusinessDesk
  • OneRoof
  • Driven CarGuide
  • iHeart Radio
  • Restaurant Hub
NZME
  • About NZME
  • NZME careers
  • Advertise with NZME
  • Digital self-service advertising
  • Book your classified ad
  • Photo sales
  • NZME Events
  • © Copyright 2025 NZME Publishing Limited
TOP