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Minimum wage increase 'little benefit for low-income families' - economist

Newstalk ZB,
Publish Date
Thursday, 20 December 2018, 9:51AM
Workplace Relations Minister Iain Lees-Galloway has announced that the minimum wage will rise to $17.70 an hour next April. Photo / Getty Images

There are questions about how much the minimum wage rise will actually benefit low-income families.

From April, it will rise to $17.70 an hour from $16.50.

The government also announced its planned minimum wage increases for the following two years, as it moves towards a goal of an $20 an hour minimum wage by 2021.

New Zealand Initiative chief economist Eric Crampton told Mike Yardley one of the problems is often people who get the minimum wage are also getting income-linked benefits, which reduce as their wage rises.

"One of the problems we have the minimum wage is that if you live in a low income household you are probably getting income from sources like working for families."

Crampton says people can be left with very little cash in hand after losing some of their Working for Families or the Accommodation Supplement payments.

"Labour markets are currently very close to capacity, unemployment is low, so these are all factors you have to take into consideration when making a decision. The minimum wage needs to help low income workers. If it is to low, it can definitely discourage employment."

According to the latest figures from the Half Yearly Economic and Fiscal Update, GDP growth was expected to be roughly 3 per cent over the next five years.


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