Minimum wage and benefit increases kick in under widely criticised package

The minimum wage and benefit levels get a boost today, as part of a package of changes coming into effect from 1 April.

Those on the minimum wage get a pay bump to $20 an hour - an increase many employers say is too much and badly timed.

Main benefit and superannuation levels also rise, as well as the amount people can earn before their benefit reduces.

But poverty advocates are equally unimpressed, saying the changes will barely help people keep afloat.

Prime Minister Jacinda Ardern said the minimum wage increase "struck a balance".

"Our job as government is to constantly strike that balance of ensuring that our lowest paid workers are earning enough to meet their cost of living and to thrive. At the same time balancing that against the ability of employers to sustainably keep people on," Ardern said.

'We're dying to spend time with our family'

Rose is a cleaner in Auckland working two jobs at 65 hours a week, and Lavinia is a full-time security guard - both are on minimum wages and support families.

Rose told Morning Report the increase would help pay her bills but the living wage of of $22.10 would help pay her rent, "instead of moving around".

It would give her the chance to work fewer hours and "more time with my family".

"The issue at the moment [is] I don't have any time with my family."

Rose said low-income workers had to work longer hours to just get by.

"We are dying ... to just have eight hours and come back home and spend time with our family."

Lavinia said it would make a big difference.

"Thanks a lot to the government but I really want the living wage."

She said it would help her get "that extra loaf of bread and butter on the table for my four boys as I am a single parent".

'Burden' on employers

Employers and Manufacturers Association policy director Alan McDonald said the balance had tipped away from business.

The minimum wage increase was the latest in a litany of costs employers are having to bear, he said.

"When you look at the cumulative effects, you've got the minimum wage, you've got the Matariki public holiday, you've got five days [extra] sick leave, fair pay agreements - it's quite a burden on employers at probably precisely the wrong time.

"A lot of businesses are on the brink, you know, there's not much left in the finger nail department, and I just think just pause, draw breath give business time."

In Taupō, The Bistro owner Jude Messenger said expenses go up along with minimum wage.

"So ... a minimum wage increase doesn't make anyone's life easier."

The hospitality industry had fine margins, he said.

"We can't increase our prices at the same rate [as] the wage increase. In 2018 it went to $16.50 and in only three years we're up to $20."

He said most employees started at minimum wage, but for a 16-year-old living with their parents - "It seems ridiculous for a kid that old to be paid that much," he said, especially when others on the same salary had families to feed.

In Auckland, The Riverhead pub owner Stephen Pepperell agreed with Messenger that it was only: "School leavers, first jobs, working part-time funding themselves through tertiary education."

"We all knew it was coming, it's just the timing of it that's more concerning for the industry at the moment."

His other full-time staff were above the living wage.

"Our big concern and the concern that the industry has is the upward pressure that it puts on the people above them. So shifting minimum wage staff to $20/hr in itself is not a big impact but it is the expectation to move everybody else up at a similar rate is what we're struggling with the most."

ACT leader David Seymour said the government would only end up harming those people they were trying to help.

"It will affect decision making by employers. They will decide to employ fewer people than they otherwise would have, to invest less, and to raise prices for their customers," Seymour said.

"Those effects cannot be denied, and they defeat much of the purpose of the government's initiative, while the real answer is genuine productivity growth."

However, Council of Trade Unions president Richard Wagstaff said that was scaremongering, and the increase would make a big difference for people.

"The evidence doesn't support that. Minimum wage increases in New Zealand haven't resulted in less jobs, in fact the reverse is the experience," Wagstaff said.

"It's not a simple equation but we do know that people on the minimum wage spend the money they get and they'll put it back into the economy, and the money will go round and benefit employers."

Impact on benefits

Indexation sees main benefit levels and superannuation rates too, by 3.1 percent.

The amount people on benefits will receive will vary, but they could get up to an extra $16.16 a week.

Child Poverty Action Group spokesperson Janet McAllister said the measures would have limited impact.

"The catchup in main benefits relative to wages won't make things get better, it will just make the rate at which things are getting worse get slower," McAllister said.

The amount people can earn before their benefit reduces - the abatement threshold - is also going up to $160 a week before tax.

But again, McAllister was underwhelmed.

"There will be some families that will notice a difference, yes, and that's positive, but does it go far enough? No. You can still only work eight hours on minimum wage before your benefit starts being abated."

The government was moving far too slowly on welfare reform and there needed to be a dramatic increase in benefit rates if people are going to be lifted out of poverty, McAllister said.