Prime Minister Chris Hipkins concedes small businesses will find a $1.50 per hour minimum wage increase "difficult".
The head of a retailer group says the move will have a negative impact on already languishing business confidence, but a student leader says the increase could go further to help low wage earners.
Hipkins announced the minimum wage would rise at a post-Cabinet press conference today. The increase is in line with inflation and would mean a person in full time work on minimum wage currently earning about $715 a week will now bring in $756.
It also follows the release last month of the New Zealand Institute of Economic Research's (NZIER) latest Quarterly Survey of Business Opinion which showed the business community's most pessimistic outlook since the survey began 53 years ago, on a seasonally adjusted basis.
Asked by 1News if raising the minimum wage would help raise business confidence, Hipkins said he acknowledged some small businesses would find the minimum wage rise "difficult".
He said he had also committed to more "regulatory certainty" for business.
"I've had a wide range of conversations with business here in New Zealand and even in Australia yesterday about how we might do that, and the issues that are on top for them."
He said an example of that was the government scrapping its income insurance scheme for the rest of the term - which has eight months remaining.
"We know that was something that there was uncertainty [about] and that was adding to their anxiety ... that will give them that greater clarity that they're looking for, and we'll continue to."
Asked if he was concerned the minimum wage increase cost could be passed on to consumers in a cost of living crisis, Hipkins said people on the minimum wage had the least ability to absorb additional costs.
"We need to help them to be able to keep up."
New Zealand Union of Students Associations president Ellen Dixon said her organisation had not yet met to formally adopt its position on the topic, but from her point of view the increase was not enough to have a real impact in the current economic climate.
She said many students worked minimum wage jobs and increasingly in precarious employment, where stability was not a guarantee.
The cost of food was a big issue for students, and while the increase was welcomed it would not address "systemic issues" in employment.
She said NZUSA was a "strong ally on the living wage movement".
The wage set by the Living Wage NZ was $23.65.
Retail NZ chief executive Greg Harford said he did not think the increase would increase business confidence.
"We've asked the Government to hold off on any minimum wage rise ... it's pretty disappointing."
He said it would "absolutely" result in increased costs being passed on to consumers.
"Wage bills are one of the biggest costs of running a retail business."
He said it also had a knock on effect - where when minimum wage workers earned more, it had an exponential and relative effect on the wages of higher earners in the same business - meaning the cost increase was not just from the raises for the lowest earners.
However, Harford said it was a "really good move" by the Government to hold off income insurance changes, though because it was not completely scrapped it did not provide certainty beyond the election.
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