Minimum wage hike to come at a cost for Tauranga businesses, but a relief for families

Crown and Badger owner Jessica Rafferty said the increase in minimum wage would make a huge difference for many small to medium businesses. Photo / George Novak

Tauranga business owners warn an increased minimum wage is likely to hit customers hard, but a budget advisor says it will still be a welcome relief to struggling families.

Yesterday, the New Zealand minimum wage was raised to $17.70 per hour, up $1.20 from $16.50. It is the second increase in a year and a half, and the hourly rate is expected to increase again to $20 by 2021.

Crown and Badger owner Jessica Rafferty said a minor change like a minimum wage hike would make a huge difference on her business's bottom line.

Although Rafferty already paid her staff above minimum wage, she would have to continue raising her staff's wages to keep up the stigma of "paying well", she said.

Raffety was left with the ultimatum of either cutting her staff down and getting people to work even harder in the high-pressure industry or passing on the cost to the consumer, she said.

Rafferty paid more than 450 hours of labour a week despite only having a small team and with margins so tight in the industry, she did not have much choice when it came to prices, she said.

People often use hospitality to disconnect and enjoy themselves, so "why should they be paying a fortune for a beer?", she said.

Stan Gregec from the Tauranga Chamber of Commerce welcomed the realistic increase to the minimum wage.

Gregec said some employers would take a hit because they were in more price-sensitive markets, where raising prices will not be an easy option for them.

Most bigger employers will have already factored the additional cost in and will have found ways to absorb it, he said.

Gregec said he believed business growth in Tauranga would not be overly hindered by the increase, despite the region having a considerable base of lower-income jobs.

Cafes, restaurants and also some exporters who are in global markets will likely be the most affected, he said.

Bay of Plenty/Waikato regional manager for Hospitality New Zealand Alan Sciascia said businesses would likely have to make some big decisions on how to cover the cost.

Sciascia said the hospitality industry would be hit hard as it had such a low-margin, high-labour business model.

"One-third of every dollar made goes out as wages in hospitality."

Raising prices was really the only way these businesses were going to be able to stay ahead, he said.

However, manager at Tauranga Budget Advisory Shirley McCombe said the minimum wage increase was a blessing for some local families.

A lot could be achieved with an extra $40 or $50 per week, whether that be just making ends meet or reducing debts, she said.

"They are struggling and the minimum wage is exactly that - 'the minimum'."