Mike Hosking: We're all about to pay for minimum wage increase

One of the kids and I were out eating breakfast yesterday. She had just finished her job. She was full of anticipation that the minimum wage rise that is coming to a workplace near you, would be seeing its way to her pocket.

And so began the discussion around wages and staff and hiring.

Everyone is looking for good people, good people are in short supply. Her place of work is no different, there is a lot of turnover and quality staff are rare.

This is where Mojo coffee comes in. Mojo has announced their prices are rising to cover the boost in the minimum wage - and they certainly won't be the only ones.

The reality of wage rises is the punter pays for them. Now if you make 20 of something but the demand is 35, then you can probably get away with putting your prices up. But if what you make is coffee and you sell 100 a day, it's entirely possible that when you put the price up you won't sell as many.

What if you sell 75? You're now making less than you were. In other words, you can't pass the increased wages on. So you are then faced with absorbing those wages, and if you can't, you are then faced with cutting staffing hours.

And that's the problem with government-induced increases in the cost of doing business.

Costs are market-driven, market and demand. The prices for something are based, or should be, on what the market can bear.

The Government coming in over the top of that equation and arbitrarily handing out instruction disrupts the markets. It brings an artificiality into it that the market might not be able to bear, and if it can't, the only loser is the person out of work. Or worse, the owner out of business.

Further, the more cost you put into the market, the more inflationary it is. The higher the tax on petrol, the more literally everything costs because everything has a transport component to it.

And the more inflation you have, the higher interest rates go. And interest rates affect borrowing, both domestically for things like housing, and commercially for things like business.

If the cost is too high people, don't or can't borrow. If they can't borrow they can't spend and grow and expand - and when that happens jobs don't get created. And the whole thing is a vicious cycle. That's how growth stalls and unemployment rises.

So are you prepared to pay for more for your coffee? Can you afford for your cost of living to rise?

That's the test we are now entering, from wages to petrol, to the cost of your mortgage.

Life is about to get more expensive, the Government is arguing this is a good thing. Let's see shall we.