Minimum wage increase will be costly for Govt departments

Author
Jason Walls, NZ Herald,
Section
Politics,
Publish Date
Wednesday, 30 January 2019, 6:35PM
The minimum wage is increasing by seven per cent. (Photo / Getty)
The minimum wage is increasing by seven per cent. (Photo / Getty)

The upcoming seven per cent increase to the minimum wage will cost the Government almost $100 million a year.

The vast majority of this cost would be borne by the Ministry of Health, the Accident Compensation Corporation (ACC), the Ministry of Social Development, the Ministry of Education and Oranga Tamariki.

A recently released regulatory impact statement (RIS) by the Ministry of Business, Innovation and Employment (MBIE) revealed the cost of the $1.20 an hour increase would cost the Government $93.5 million a year.

Finance Minister Grant Robertson deferred questions to MBIE.

Its manager of employment standards, Gerard Clark, said the cost to Government was from increased staff wages, increased ACC costs and the "indirect costs on funding for third-party employers".

The complete figure was likely to be higher than the RIS had forecast as only the aforementioned ministries had said the wage hike would have a material impact.

But Clark said it was not expected to be a significant cost.

Raising the minimum wage from $15.75 an hour when the Government took office, to $20 an hour by April 2021, was part of Labour and NZ First's coalition agreement.

In December last year, Workplace Relations Minister Iain Lees-Galloway announced the minimum wage would be hiked to $17.70 an hour on April 1 this year.

National Workplace Relations and Safety spokesman Scott Simpson said the minimum wage increase would start to hurt people as the economy "continues to slow".

As the minimum wage progressively increases, it is likely it would continue to cost the Government more money.

Asked how much the planned minimum wage increase to $18.90 in 2020 and then $20 in 2021 would cost the Government, Clark said he did not know.

"We do not currently hold this information as actual payroll data is used to develop estimated costs to Government."

But he said the Government provided an early signal of their intentions for future minimum wage increases to give businesses greater certainty and allow for informed investment and business planning decisions.

"MBIE will still undertake a review each year so that the economic and other conditions at the time can be taken into account before a new rate takes effect, and will estimate the costs for Government at that time."

 

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