NZ: Wage hike to have modest impact - Westpac

The planned increase in the NZ’s minimum wage over the next few years to $20/hr will have modest impacts on employment, costs and inflation, according to Michael Gordon, Senior Economist at Westpac.

Key Quotes

“The new Labour-led Government plans to increase the minimum wage to $20 an hour by April 2021. After accounting for general growth in wages over that time, this amounts to a 13% relative increase in the minimum wage.”

“New Zealand already has the highest minimum wage in the developed world, and this lead will extend further over the coming years. International research on the impact of minimum wage hikes is mixed, but we can reasonably expect the impact in New Zealand to be towards the upper end of estimates.”

“We estimate that by 2021 the change in the minimum wage will affect a quarter of the workforce, will increase total labour costs by 1%, add about 0.3% to consumer prices, eliminate or reduce the hours of 8,500 jobs, and raise the unemployment rate by 0.2%.”