The minimum wage will be increased by almost seven per cent by April 1 next year to $17.70 an hour.
Business New Zealand's Kirk Hope joined TVNZ1's Breakfast this morning to discuss the potential unintended consequences of the $1.20 hourly increase.
Mr Hope said, "It won’t just be next year, but there will be increases every year after until they hit the $20 mark, so, for example, some small business employing 10 people, that would be another $75,000 that they’re going to have to find between now and 2020 to meet that minimum wage".
He says the increase might be a problem for “some businesses that aren’t able to pass those costs on, that might be a challenge".
"Say, a smallish, as I said, 10-person business somewhere in regional New Zealand that doesn't have a lot of products or services that it can pass those costs through. Yeah, that would be a challenge for them."
"What the impact of that will be for the business will probably be hashed out."
However, it's currently unknown how many small businesses are employing people on the minimum wage.
Mr Hope said, "There are some 210,000 people that the Government say whose lives will be improved by an increase in the minimum wage, so that'll be dispersed throughout the small business community".
He says the economic impact on workers benefiting from the increase could be huge for small to medium-sized businesses.
"You'd hope that they'd spend it, and as a result, some of those small or medium businesses are able to continue to employ people because that's the really big impact. If some of those businesses are not able to employ people then they shut down then, particularly in smaller communities."
Mr Hope said while it's unlikely there is a real risk to small local businesses shutting their doors over the April increase, subsequent increases may affect their ability to operate.
"It's been pretty well-signalled and, as you said at the start, the Government's created certainty around what they want to achieve, but for, as I said, $75,000 a year for a small, 10-employee business will have to find between now and 2020 – so they're going to have to figure out where they’re going to get that extra $75,000 from, and it will have to be from the pockets of the people who are probably having their lives improved by another $48 a week."
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