Cost of a coffee set to rise as minimum wage goes up

by Patrick O'Meara / 09 April, 2018

Your morning cup o' joe will cost a bit more as the minimum wage rises. Photo / Getty Images

Consumers are being warned to expect to pay more for their coffee or booking a bed for the night as the minimum wage rises.

The government lifted the rate by 75 cents to $16.50 an hour on 1 April, its biggest jump is more than a decade, benefiting some 164,000 workers.

That is set to keep gradually rising to $20 per hour by 2021.

Mojo Coffee, which operates 31 cafes around the country, has raised most prices for a cup by 10 cents.

"Wage costs are the largest single cost to the business. The impact is not so much the increase from 15.75 to 16.50 as this effects only a small number of our team, but more so the chain effect of the increase on the next pay brackets," Mojo's head of marketing, Tay-Lann Mark, said in a statement.

"We will continue to keep our prices under review as and when the government makes the next changes to minimum wage."

"We have received positive feedback from customers in store."

Wellington-based hotel group Village Accommodation employs 60 staff of which half are part-time.

Managing director Adam Cunningham said it had no choice but to hike prices as its profit margins were too thin to cope with the extra cost.

"Just this increase will see just under $1 million added to our costs for the next 12 month period. And I can tell you right now, we don't have a profit line of a million dollars."

In a statement, fast food chain McDonald's acknowledged rising labour costs was one reason behind higher burger prices.

"McDonald's has not increased prices specifically to absorb the increase in national minimum wage."

"In 2017 we increased the starting rate for staff by 10 cents above minimum wage, and that increased by a further 10 cents this year. These increases are passed on to all staff on hourly rates."

The government calculates the increase will add $129 million a year to the country's wage bill.

"If businesses can't absorb costs because of a price ceiling, potentially it's going to impact on employment as well because people could lose their jobs," Wellington Chamber of Commerce chief executive John Milford said.

The Ministry of Business Innovation and Employment (MBIE) estimated the wage hike could lead to 3000 job losses.

But convenor of the Living Wage campaign Annie Newman argued firms could afford it, but chose not to.

"We have got a lot of Living Wage employers, who are small and medium-sized employers, that are showing you can redistribute money."

"You can create a business model where your best resource, which is your workforce, isn't suffering as a result of it."

The Council of Trade Unions (CTU) also rejects that jobs are at risk, pointing out that significant increases in the minimum wage in the mid-2000's did not stop employers hiring more people, with unemployment falling below 4 percent.

CTU president Richard Wagstaff said business stood to benefit from having workers with more money in their pocket.

"I don't think there's an argument there that says everyone's better off when wages are lower.

"Clearly people on the minimum wage will definitely be better off with increases, even if some prices increase a little," Mr Wagstaff said.

This article was originally published by RNZ.

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