Workers on minimum wage are looking forward to a pay rise in April, when the rate jumps from $17.70 per hour to $18.90. But the increase may not stick, as the National Party says it's considering scrapping the Government's planned minimum wage increases if it wins this year's election. How are Bay business owners coping with extra labour costs, and what does the additional money mean for local workers? Dawn Picken spoke with people who say New Zealand's relatively high starting wage is helping and hurting the economy.
Dining and Dollars
On many evenings in Rotorua, Eat Streat is pumping. Diners sit outside with artfully-plated food and chilled drinks or coffee. Many of the people serving them get paid at or near minimum wage, and they're about to get a raise.
Paul Croucher co-owns Croucher Brewing and BREW pub and restaurant on Eat Streat. The business employs about 25 staff and Croucher says the higher minimum wage requires careful cost management, including analysing hours of business and supplies. For example, he says staff used to chop all the vegetables for the restaurant. Then a supplier said it could deliver pre-chopped veges at lower cost.
"I heard this great expression once and I try to live by it, that in business we need to be cherry picking the value chain."
Croucher says one positive aspect of the rise is it affects every business.
"It's not like one restaurant will get stung and everyone else isn't. I think if you left it totally to the free market, we wouldn't pay everybody enough. I think it's the role of government to say this is what we think is acceptable. Sure, it'll be tough on some businesses, but at least it's across the board."
He says part of his mission is looking after staff who provide great service.
"We want our people to do well and have a good standard of life ... if National cut the minimum wage back and someone had their wages increased by a dollar, we're not going to cut it again."
Gains in the Gym
It's three o'clock Thursday afternoon as 18-year-old Libby Harrison begins her shift at Global Gym in Mount Maunganui. Harrison says she staffs reception, does some maintenance and cleaning - just about everything except personal training.
She switched from serving tables to helping fitness buffs a couple of weeks ago.
"I love the environment of the gym and everyone is really lovely. I deal with the same people every day, so I get to know them."
Harrison works around 20 hours per week and also studies online. She says she entered her new job just above minimum wage, and the April boost will help.
"My pay will go up to $18.90. It's good. Every little bit counts, and you don't realise it until you add it up."
Crops and Cash
According to the Ministry of Business, Innovation and Employment, 61 per cent of those earning the minimum wage are younger than 24.
MBIE estimates around 250,000 workers earn around the minimum. That leaves nearly 100,000 Kiwis aged 24-plus earning starting wages, many of whom support themselves and often, a family.
Andrew Smith, who's past age 24, has worked in the agriculture sector five years doing general farm and orchard work. He's currently working kiwifruit.
"I love it. Just not the wages."
Smith says he'll be $40 to $50 better off after taxes each week when the new minimum wage kicks in, but other issues will eat the increase. He says overseas temporary workers (RSEs) get more hours than he does, and as a single man, he struggles to find accommodation and pay petrol costs.
"I can't even afford to put a Warrant of Fitness on my vehicle."
New Zealand Kiwifruit Growers Incorporated chief executive Nikki Johnson says less than 20 per cent of the seasonal workforce in kiwifruit is provided through the RSE scheme and New Zealanders are by far their most important workforce.
"The industry prefers to use New Zealanders as a priority because they are local and can continue working throughout the year and build a career in the industry. RSE employees are primarily used to provide continuity of the workforce by filling the labour shortfall of worker availability including, for example, weekend and night shift work in the packhouse and winter pruning."
Johnson encourages Kiwis to shop different employers, rather than taking the first available opportunity.
"Many employers provide pay rates well above minimum wage, others may provide transportation while others may offer guaranteed and, or flexible working hours."
Small Business Owners Speak Out
Josh Fitzgerald, who owns Rye Bar & Grill and the Barrio Brothers chain in Tauranga, employs around 60 staff members and says 10 to 15 are on minimum wage.
Fitzgerald could pay some of his younger employees a training wage (which increases to $15.12 in April), but chooses to pay at least the minimum instead.
"I've believed why should a 16 or 17-year-old be punished if they're doing the same job as a 19-year-old. Training doesn't take that long and we've got reasonably high turnover in those positions."
But if the minimum wage keeps rising, Fitzgerald says he may consider paying a training wage.
Fitzgerald says the increase also affects experienced staff making more than $19 per hour, as they see the bar moving up behind them.
"So the gap between the person just starting and the person who's worked here a while, that gap will be less. It's got to be a bit demoralising for everyone, because we can't just put everyone up a dollar."
The company has already raised menu prices, he says, because food costs have increased, too.
"It's hard because with restaurants, it's a price decision when we go out to dine and we're at the value end of the market. We've got to be competitive."
Fitzgerald says all managers have performance targets.
"If we don't increase prices, at some point it will be impossible for us to do those numbers. We won't be doing it in April, but we did it at the tail end of last year."
Mount Maunganui business owner Chris Andrews calls the higher minimum wage a "vote-grabber".
Andrews runs a motorcycle custom and repair shop, Hostile Customs, with one part-time employee. He says each time the minimum wage climbs, higher labour costs ripple across the economy.
"It'll hurt small businesses. We need to incentivise people to upskill and earn more in the workforce. People say, 'Yay, I have more money in my back pocket', but the cost will be passed onto the consumer with increases to the price of goods and services."
In addition, Andrews says the Government will collect more GST and PAYE tax.
"Basically, it's a good revenue maker for the government."
Andrews also worries about the closing gap between school leavers and more experienced tradespeople.
"There's a lot of highly qualified and skilled technicians out there that are in the $25-$30 an hour bracket and some have spent decades in the workforce gaining experience and qualifications. It means someone like me will have to pay a contractor an increase, as well."
Rather than raising the minimum, Andrews says he'd rather see the Government hike payments to pensioners and people who qualify for Working for Families, in addition to providing tax cuts or training grants for people to upskill.
"There's other ways of helping people who are struggling to make ends meet."
Rotorua Chamber of Commerce chief executive Bryce Heard says he's not heard feedback from members about minimum wage hikes.
"It seems to be bedded in without a great deal of fuss."
Heard says Rotorua's heavy reliance on tourism means a high proportion of people earn at, or near minimum wage.
"I can't say if members are happy or unhappy about it. They're kind of taking it on the chin and going with it."
Heard says each time the minimum wage increases, all boats get lifted.
"It's always a toss-up between trying to create jobs and trying to give people a wage they can live on. It's a trade off to create and maintain jobs. Even at $17 to $20 an hour, that's still a pretty hard wage to live on. You need to be able to pay the rent and buy the groceries ... there's no right answer, it's always going to be subjective."
Bay Venues chief executive Gary Dawson asked Tauranga City Council earlier this week for more funding, partly to offset increased labour costs.
Bay Venues runs aquatic, sports and community centres as a Council-controlled organisation. It relies on a mix of user fees and Council funding, and is seeking increases for both.
Dawson says many of Bay Venue's 337 staff members are younger people earning at the low end of the wage scale. He says the organisation has allocated additional money to address the gap between what it pays and market rates.
"This additional spend has helped resolve the problem of paying staff just above the minimum wage; however it is also what is contributing to the overall additional costs we are incurring in operating community facilities, thus the need to review pricing and TCC subsidies," Dawson says.
The council agreed to consider a "hybrid" funding model to cover a $550,000 shortfall - user fees would be hiked and so would Bay Venue's ratepayer funded subsidy - spreading the burden.
Dawson says minimum wage increases have a flow-on effect throughout the organisation and costs must be passed on to users or ratepayers.
"Your supervisor or team leader says, 'Hang on, you've come closer to me, I need to go up'. Then that team leader's manager says, 'Me, too'. It's not just the bottom ... it's maintaining the relativities throughout the staff."
Dawson says the problem is exacerbated by the fact a large proportion of employees working as lifeguards and venue staff are young people struggling to pay rent in Tauranga.
"Because of the population growth and the popularity of Tauranga for visitors we need staffing to look after our facilities. We rely heavily on those people. It's a real challenge and we're trying hard to make sure we're paying people at a fair market rate."
Tauranga National MP Simon Bridges made headlines earlier this week when he said his party was considering scrapping the Government's planned minimum wage increase if it wins this year's election. Bridges told NZME on Wednesday National hadn't yet decided its policy on the future minimum wage increase to $20 next April and was thinking it through.
"Our concern is for the half a million or more small businesses around New Zealand which are the backbone of our country," Bridges says.
Bridges says Tauranga is a city of small businesses that aren't generally run by wealthy people.
"One of the top costs has been the large minimum wage increases. National agrees with increasing the minimum wage every year and we did that in government. But in the last couple of years we worry the increases have been too far, too fast to be sustainable."
If elected, National could scrap the future $20 minimum wage without a law change.
In the Labour's coalition agreement with NZ First, an agreement was struck to increase the minimum wage to $20 per hour by 2020, with the final increase to take effect in April 2021.
The first increase came into effect on April 1, 2018 – it was raised 75c an hour to $16.50.
The next year it was hiked to $17.70 and on April 1 this year, it will again be increased to $18.90.
Labour MP for Waiariki Tamati Coffey says minimum wage increases mean low wage earners contribute more to the community, by putting money in the pockets of local business owners.
"When people have more money, they are able to spend more money. Businesses win," Coffey says.
Coffey and partner Tim Smith own Ponsonby Rd Lounge and Our House on Rotorua's Eat Streat. Both venues are accredited living wage employers, meaning they pay staff at least the current living wage, $21.15 per hour. The initiative is voluntary.
"As a local living wage business owner, I talk with personal experience about the effect that higher wages have on the morale, and the mana of my team. This in turn, leads to an easier process of attracting and more importantly, retaining staff," Coffey says.
The Ministry of Business, Innovation and Employment in January says the Government's decision to raise the minimum wage this year is expected to result in the creation of 6500 fewer jobs.
NZME reported documents released by MBIE show: A full-time minimum wage employee would have their net weekly income rise by about $39, from $603.11 to $642.04; About 242,400 workers would get pay rises; Total wages across the country would rise by $306 million.
MBIE's best guess at what the raise could do to the number of new jobs created is that it is likely to hamper growth by between 4000 and 7500 jobs, with an average estimate of 6500.
Coffey disputes the losses.
"The wild political ravings of the local National MP, that minimum wage increases lead to job losses, is pure fear-mongering. This Government has lifted the minimum wage regularly whilst in Government, and still, unemployment is at a near record low at four per cent and the books are in a strong financial position."
Assistant National Secretary for E tū Annie Newman says higher wages allow the working poor to reduce their hours and spend more time with their families and in their communities.
"Workers spend every extra dollar they get on poverty wages on items they'd otherwise be juggling to survive. So instead of making the choice between paying for a child's school outing and buying quality fruit and vegetables, they're able to participate fully in both things. They don't buy yachts and sail into the Pacific; they just go buy the things they need to live a decent life."
Newman says in a city like Tauranga, which competes for hospitality workers, a mandatory higher minimum makes business sense.
"Competition is so severe because workers in that industry tend to be minimum wage workers. If we lift it so the gap starts to close, it becomes more viable [for business owners] to do the right thing."
The 2019 list of fully accredited New Zealand Living Wage Employers includes 157 employers in the public and private sectors.
"I think the national consensus is that minimum wage levels are too low. When the lowest paid is better off, everyone in society is better off," Newman says.
Workplace Relations and Safety Minister Iain Lees-Galloway said an increase in the minimum wage to $18.90 was a step toward the goal of a $20 minimum wage by 2021.
The rise would put more money in the back pocket of more than 250,000 New Zealand workers.
Lees-Galloway said the new $18.90 rate will mean an extra $48 per week before tax for Kiwis working 40 hours on the current minimum wage.
The starting-out and training wages will also see a boost, with a rise to $15.12 per hour from 1 April 2020, remaining at 80 per cent of the adult minimum wage.
Lees-Galloway said New Zealand's unemployment rate was low at 4.2 percent, and the economy predicted to add 43,600 jobs in 2020.
The Living wage rate is voluntary and for 2019 has been calculated to be $21.15 per hour. The 2020 living wage will be announced in April. It's the hourly wage a worker needs to pay for the necessities of life such as food, transportation, housing and childcare. The rate is calculated independently each year by the New Zealand Family Centre Social Policy Unit.
The first living wage campaign was launched in 2012 in Auckland and in Wellington followed by other local networks around the country. Tauranga City Council in 2018 agreed to implement the living wage as a minimum standard for all directly employed council staff.
During the June 2018 council salary review process, TCC found 31 positions being paid below the living wage. Direct council employees paid below the living wage had their salaries raised to $20.55 per hour last June. The increase cost an estimated $28,000 and was funded within the existing salary budget.