Minimum wage to rise by 2 per cent - slowest rate in a decade

Workplace Relations Minister Brooke van Velden (right, with Prime Minister Christopher Luxon) is wary of headwinds facing the economy. Photo / Mark Mitchell

The Government has announced the minimum wage will increase by 45 cents an hour, to $23.15, from April 1.

This marks a 2 per cent rise - the slowest rate in a decade - from the current minimum wage of $22.70.

Because the cost of living is expected to increase by more than 2 per cent over the next year, those on the minimum wage will likely go backwards financially.

Workplace Relations and Safety Minister Brooke van Velden recognised the Government was taking a “cautious approach” to changing the minimum wage because of the “headwinds” facing the economy.

Economic growth is at rock bottom and more people are expected to lose their jobs, as the impact of high interest rates keeps filtering through the economy.

Van Velden noted that under the previous Labour-led Governments, increases to the minimum wage outstripped increases to the consumers price index (CPI).

“Between June 2016 and June 2023, overall, the minimum wage increased at nearly twice the rate of inflation, with a 48.8 per cent increase in the minimum wage and a 25.1 per cent increase in consumers price index,” she said.

“This Government’s approach sets the balance right.”

Labour workplace relations and safety spokeswoman Camilla Belich called the increase “pathetic” and “beyond disappointing”.

“The coalition Government has chosen to turn a blind eye to our most vulnerable income-earners,” she said, recognising the Ministry of Business, Innovation and Employment (MBIE) recommended a 4 per cent rise.

Van Velden, who is also Act’s deputy leader, proposed lifting the minimum wage by only 1.3 per cent.

She made the point that the gap between the minimum wage and median wage has been shrinking.

In 2017, the minimum wage was equivalent to 62 per cent of the median wage. In 2023, it was worth 72 per cent of the median wage.

“This has made it harder for businesses to issue pay rises or take on more staff,” van Velden said, noting historically large increases to the minimum wage have distorted relativities with other wage-earners.

The training and starting wage will remain at 80 per cent of the adult minimum wage rate and thus rise to $18.52.

Jenee Tibshraeny is the Herald’s Wellington business editor, based in the Parliamentary press gallery. She specialises in government and Reserve Bank policymaking, economics and banking.