Low-wage workers look likely to get a small pay rise of under 3 per cent next April after the Government removed social factors from the criteria for setting the minimum wage.

Labour Minister Chris Finlayson has trimmed the criteria for the annual minimum wage review from 20 factors, which have been considered since 2008, to just four: the consumer price index, the median wage, effects on jobs and a catch-all category called "other relevant factors".

A footnote in a paper he took to Cabinet last month says "other relevant factors" means, "For example, the effect on the public sector, particularly on ACC, the Ministries of Health and Education".

The Cabinet agreed on a policy to "keep increasing the minimum wage over time to protect the real incomes of low-paid workers while minimising job losses".


But the new criteria mean the minimum, currently $13.50 an hour, is likely to go up by less than 50c an hour. Consumer prices rose by only 0.8 per cent in the year to September, which would put the minimum up to $13.61, and the median wage rose by 2.4 per cent in the year to June, which would mean a new minimum of $13.82.

The median wage in the annual June income survey was $20.86 an hour, lower than the average wage of $25.07 in the same survey because a few people on very high wages pulled up the average.

An alternative measure, the quarterly employment survey, found an even higher average of $27 an hour because it surveys employers rather than workers, excludes farming and fishing, and does not count extra hours that employees worked but were not paid for.

The Government is required by law to review minimum wages by December 31 each year to kick in the following April. Last year 32 groups made submissions.

The 20 previous factors used to set the minimum included social factors such as fairness, protection, income distribution, the gender pay gap, and impacts on women, migrants, Maori, Pacific people, part-time workers, temporary workers, people with disabilities and young people.

Consultation has been cut back to just the Council of Trade Unions and Business NZ, which were asked on November 22 to make submissions by November 30.

The simplified process will now be followed in three years in every four. The Cabinet paper promises a "comprehensive review that considers a wide range of other factors and consults more widely" in 2015 and in every fourth year after that.

Wage options
Hourly wages, June 2012
average earnings, Quarterly Employment Survey

average wage/salary, Income Survey

median wage/salary, Income Survey

minimum wage

Minimum wage options
$13.61 (+0.8 per cent)
consumer prices

$13.66 (+1.2 per cent)
average pay, Income Survey

$13.76 (+1.9 per cent)
labour cost index

$13.82 (+2.4 per cent)
median pay, Income Survey

$13.86 (+2.7 per cent)
average earnings, Quarterly Employment Survey.

Source: Statistics NZ