The adult minimum wage will increase by 2% to $23.15 an hour from April 1, the Government has announced.

It is currently $22.70 an hour.

Workplace Relations and Safety Minister Brooke van Velden said the Government wanted to strike a balance between “protecting the incomes of our lowest paid workers and maintaining labour market settings that encourage employment”.

“The economic context has changed significantly over the past year,” she said.

“While unemployment is currently low, the labour market is softening due to high net migration rates, constrained consumer spending and subdued economic growth. Given these economic headwinds, a cautious approach to the minimum wage is required this year.”

She said the increase would impact between 80,000 and 145,000 workers.

A Cabinet paper shows van Velden had proposed a 1.3% increase, while the Ministry of Business, Innovation and Employment recommended 4%.

The minister said increases to the minimum wage under Labour far outstripped the Consumer Price Index (CPI).

“Between June 2016 and June 2023, overall, the minimum wage increased at nearly twice the rate of inflation, with a 48.8% increase in the minimum wage and a 25.1% increase in CPI. This Government’s approach sets the balance right.

“Moderate annual increases to the minimum wage reflect this Government’s commitment to growing the economy, boosting incomes and supporting job growth throughout New Zealand.”

Training wages and starting wages will remain at 80% of the adult minimum wage rate, increasing to $18.52.

A ‘relief’ for retailers

Retail NZ chief executive Carolyn Young said that retailers are “relieved” the increase is limited to 2%.

She said a report released by the organisation yesterday found “wage increases are one of the major concerns for retailers right now”.

“During these challenging economic times, every cost increase has to be passed on to consumers. So it is a relief that the Government has announced the adult minimum wage rate will increase by only 2% to $23.15 an hour from 1 April 2024,” she said.

“We are pleased that Minister van Velden has listened to us and recognised the pressures that retailers are under.”

BusinessNZ also welcomed the moderate approach, with chief executive Kirk Hope saying it “takes into account the inflationary pressures and general economic conditions that businesses are grappling with”.

“Minimum wage increases coming too hard and too fast tend to impact very heavily on business, especially if they are unable to pass on their increased costs,” he said.

“Small businesses, in particular, will be relieved to see the moderation in this latest rise.

“The significant increases introduced since 2017 have brought the minimum wage very close to the level of the median wage, at significant stress to small businesses.”

Labour labels increase ‘pathetic’

The Labour Party was less impressed with the increase, saying it wasn’t enough for struggling families.

Workplace relations and safety spokesperson Camilla Belich called it “pathetic” and “beyond disappointing”.

“As the price of goods and services continue to climb, the Coalition Government has chosen to turn a blind eye to our most vulnerable income-earners by not increasing minimum wage to a level in line with inflation,” she said.

“We’ve seen official advice recommend an increase of four per cent, yet the Government has cruelly opted to go against this — resulting in a real wage cut for minimum income earners.”

She accused the minister of “playing politics” in an attempt to “save face and give tax cuts to the wealthy”.

“This drop in the bucket increase will only make it harder on New Zealanders who are struggling to put food on the table.

“This is another backwards step for New Zealand under this Coalition Government,” she said.