ZB

Why most of NZ's workforce is in for a 'virtual' pay cut

Author
Cameron Smith, NZ Herald,
Publish Date
Tue, 26 Jul 2022, 3:10pm
Wages are failing to keep pace with inflation. Photo / NZME
Wages are failing to keep pace with inflation. Photo / NZME

Why most of NZ's workforce is in for a 'virtual' pay cut

Author
Cameron Smith, NZ Herald,
Publish Date
Tue, 26 Jul 2022, 3:10pm

Most of New Zealand's workforce is in line for a "virtual" pay cut this year, says a recruitment specialist.

The reason: wages are failing to keep pace with inflation.

Shannon Barlow, Frog Recruitment managing director, said the misalignment between inflation and wages paints a worrying picture for our workforce.

"The result is people are going backwards with their budgeting; they're taking 'virtual' pay cuts," she said.

Global inflation continues to rise as central banks hike interest rates in response to earlier Covid-related stimulus, supply chain struggles and the war in Ukraine.

In New Zealand, inflation rose 7.3 per cent in the June 2022 quarter - its highest increase since 1990.

However, wage inflation only rose 3 per cent in the March quarter, according to Stats NZ.

A survey conducted by Frog Recruitment of more than 950 Kiwi workers this month found more than 80 per cent of workers had either not had a pay increase this year (40.9 per cent), or their pay increase fell short of the inflation rate (41 per cent).

Of the respondents who had had a pay rise in 2022, 72.2 per cent of them said the extra money didn't cover both the higher cost of food and petrol.

"We are hearing more stories of people not making ends meet and going without the essentials such as food and petrol," Barlow said.

"The impact of these higher bills is creating increased anxiety for people."

Almost half (48.4 per cent) of those surveyed said they felt increased anxiety about their cost of living situation.

Meanwhile, 24.5 per cent of people said they hadn't noticed any impact on their lifestyle as a result of the increased costs of food and petrol. A further 27 per cent said they had adjusted their spending by making minor lifestyle changes.

Stats NZ's quarterly Consumer Price Index revealed petrol prices increased 32 per cent in the year to the June 2022 quarter.

This was the largest annual increase since the June 1985 quarter.

Annual food price inflation also remains high, rising 6.6 per cent in June 2022 compared with June 2021.

Grocery food was the biggest contributor to the movement, having risen 7.6 per cent in the 12-month period.

Barlow said while some organisations have little movement in their bottom line for wage increases, there were other alternatives to help staff.

"Organising one-off food bags for loyal workers, offering grocery and petrol vouchers, or even giving up your car park for a temporary period to an employee who may be paying more for theirs, can make a big difference to people who are struggling - financially and mentally," she said.

"It's an inevitability that many will lose people to their competitors, to Australia or further afield. If employers cannot afford to keep up with market rates for salaries, can they afford to stay in business against competition who can?"

Barlow said she was optimistic however that a wage adjustment was around the corner.

"We've got employers scrambling for workers and it's obvious we are in a candidate's market right now," Barlow said.

"Employees keep our businesses turning over. It's vital to pay fairly and accordingly."