The Government has announced the minimum wage will increase by 45 cents an hour, to $23.15, from April 1.

This marks a 2 per cent rise from the current minimum wage of $22.70.

Because the cost of living is likely to increase by more than 2 per cent over the next year, those on the minimum wage will likely go backwards financially.

Workplace Relations and Safety Minister Brooke van Velden recognised the Government was taking a “cautious approach” to changing the minimum wage due to the “headwinds” facing the economy.

Economic growth is at rock-bottom and more people are expected to lose their jobs as the impact of high interest rates keeps filtering through the economy.

Van Velden noted that under the previous Labour-led Government, increases to the minimum wage outstripped increases to the consumers price index (CPI).

“Between June 2016 and June 2023, overall, the minimum wage increased at nearly twice the rate of inflation, with a 48.8 per cent increase in the minimum wage and a 25.1 per cent increase in consumers price index,” van Velden said.

“This Government’s approach sets the balance right.”

Van Velden also made the point that the gap between the minimum wage and median wage has been shrinking.

In 2017, the minimum wage was equivalent to 62 per cent of the median wage. In 2023, it was worth 72 per cent of the median wage.

“This has made it harder for businesses to issue pay rises or take on more staff,” the van Velden said, commenting that “historically large increases to the minimum wage that have distorted relativities with other wage-earners”.

Training wages and starting wages will remain at 80 per cent of the adult minimum wage rate, thereby increasing to $18.52.

Jenee Tibshraeny is the Herald’s Wellington business editor, based in the Parliamentary press gallery. She specialises in government and Reserve Bank policymaking, economics and banking.