Business groups and Australian-owned ANZ National Bank yesterday opened fire on the Government's plans to lift the minimum wage.
In return for New Zealand First and the Greens' parliamentary support, Labour has agreed to lift the minimum wage from $9.50 to $12 an hour by 2008 if economic conditions allow.
The ANZ said an increase of that size would result in higher inflation and interest rates.
"The unintended consequence of this policy is it may hurt those people it is trying to help, through fewer jobs and higher interest rates."
The bank said its analysis showed the higher wage, which would apply to roughly 2 per cent of the workforce, would add 0.5 per cent to wage pressure. The effect could be double that as wages further up the scale moved to maintain relativity.
Already there is pressure mounting on wages with several strikes around the country this year focusing on a 5 per cent pay hike.
The bank's view was supported by the Employers and Manufacturers Association, which said a "'quick-fire survey" this week showed most businesses believed the increase would affect them "badly or very badly".
EMA manager of employment relations David Lowe said most survey respondents were concerned that a higher minimum wage would produce a "flow-on effect" further up the scale. "Some businesses said they would have to reduce employees' hours of work, or the number of staff they would employ, if they faced this level of increase," he said.
But Council of Trade Unions secretary Carol Beaumont said the link between higher wages and fewer jobs was not a given. "There's just so much evidence that that's not correct. There's a huge number of studies showing an insignificant effect.
"The reality is there's been high growth and higher profitability for a significant period of time and we are saying there's a need for a fair share now."
Auckland Chamber of Commerce chief executive Michael Barnett said many employers would struggle to remain competitive if they were forced to pay a $12 minimum wage. He said New Zealand could afford a higher minimum wage if it had a bigger economy.
