Minimum wage to increase to $16.50 from April, 2018

Minimum wage will go up t $16.50 next year. Photo / File

Workplace Relations Minister Iain Lees-Galloway says he does not expect lifting the minimum wage to $16.50 in April next year to have a significant impact on jobs.

The Government announced today that it will lift the minimum wage by $0.75 to $16.50 early next year. It has committed to lifting it to $20 an hour by 2021 as part of Labour's coalition agreement with NZ First.

Lees-Galloway said the change will benefit about 164,000 workers and their families, and will increase wages throughout the economy by $129 million per year.

"Raising the minimum wage to $16.50 next year was one of the Government's top priorities for the first 100 days, and we are committed to increasing the minimum wage to $20 by 2021."

He said he had received some advice on impacts on the labour market, but the extra pressure on employers was usually cancelled out by increased demand from customers with more money to spend.

"It's always hard to pick the impact on job numbers, because you have the impact of labour costs, but you also have increased demand because customers have more money in their pockets, so it tends to balance out.

"Every year we put the minimum wage up, there are predictions it's going to have an impact on jobs, and by and large there is no noticeable impact.

"All the advice I've received is that the labour market will easily absorb this increase at this time."

The Government has signalled that its Tax Working Group could look at easing the corporate tax burden for small to medium-sized businesses to help them absorb the extra labour costs.

Lees-Galloway said the minimum-wage changes were part of the Government's wider workplace relations policy platform, which was about fair pay and conditions and ensuring those on lower incomes could share in the country's economic prosperity.

"To that end, within the first 12 months of this Government's term we will abolish starting-out rates and consider changes to the training wage. In the meantime, these rates will continue to be at 80 per cent of the minimum wage, increasing to $13.20 per hour," he said.