Two experts debated the upcoming minimum wage rise on Breakfast this morning, with one saying it's "great" but another concerned the hike will be a blow to already-struggling small businesses.
The Government yesterday announced the hourly minimum wage will go up to $22.70 from April 1 - a 7% increase, or $1.50.
The increase is in line with inflation, which currently sits at 7.2%.
Economic and political commentator Bernard Hickey said: "7.1% is a pretty hairy increase on the face of it".
"It does keep up with inflation, but the Government was careful I think to do a quid pro quo and say, 'here's quite a big minimum wage increase but on the other side we're not going to impose the social insurance scheme on you'."
He added that previous minimum wage hikes over the last five years have been "double inflation", whereas this was in line with it.
"So, in real terms, this is actually a slow down in the minimum wage increase."
And it's not such bad news for businesses, Hickey said: "It feels like [a blow] if you're in small business and you're struggling, but actually when you look overall across the economy, business profits have increased 40% in the last five years to $51 billion a year, and the real concerns about minimum wage are that somehow we'll slow jobs growth".
"That hasn't happened in the last five years... Turns out the minimum wage is a great way to improve incomes for those who are low paid, and it doesn't either contribute to inflation or drag down jobs growth," he added.
'A little blow to the mental resilience'
But Alan McDonald of the Employers and Manufacturers Association said he had concerns for small businesses.
"Over the last five years, the cumulative increase in the minimum wage has been 44%," he said.
McDonald said the business profits Hickey mentioned are "not what's happening at the smaller end of town".
"If you look at those guys, those people struggling with those businesses, the pressures they've been under, it's not just the minimum wage; there's been a whole slew of employment law that's raised the cost for that smaller end of town."
McDonald agreed with Hickey that the rise wouldn't increase the inflation rate - but he added that "at the moment we've got very high, almost baked-in inflation", and said the rise contributes to keeping it at that figure.
He pointed to the recent floods in Auckland as another factor for some businesses, alongside the Covid-19 pandemic.
"For some people, whose fingernails are down because they're hanging on that tight, these sorts of things... short notice, probably unbudgeted or not budgeted for quite such a high [minimum wage rise], it's just a little blow to the mental resilience.
"And that mental and financial resilience is something businesses are really struggling with at the moment."
Arena Williams, Simeon Brown give their views
The Labour and National MPs had different views on the upcoming increase. (Source: Breakfast)
Later on Breakfast, Labour MP Arena Williams and National MP Simeon Brown discussed the hike.
Asked if the 7% rise was enough, Williams said she was "really excited" about the increase.
"Last week, you heard that medium income earners were getting increases through the tax cuts to fuel and half-price public transport, and this week, it's those minimum wage earners - who are doing it the toughest right now - going up to $22.70 an hour," she said.
But Brown disagreed: "It doesn't deal with the underlying issues that we're actually facing in New Zealand... and I'm sure families will find that helpful, but it doesn't take into account the actual pain this is also going to put on businesses'.
He said they would have to pass the extra cost on to consumers, that tax reform is needed, and that inflation needs to be controlled.
In response, Williams argued Brown's point on inflation was "a bit of misdirection", and the rise wouldn't increase inflation or affect the unemployment rate: "When we look at these changes and the effect that they'll have on the economy, this is only going to help those people who are having the most pain from cost of living increases'.
Challenged on whether this was a welfare issue being solved by businesses, Williams said the proportion of people on minimum wage has fallen: "Wages are increasing with businesses being able to pay people more because their productivity is going up and because the demand for people is still there".
"Businesses will need to innovate, some will need to change the way that they do things," she conceded.
"But that's where the Government is there to support those businesses to do that."
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