Helen Kelly

Wellington, Jan 28 NZPA - Union groups have condemned the 25 cents an hour, or $10 a week, increase to the minimum wage but the Government says any higher increase would constrain job growth.

Labour Minister Kate Wilkinson said advice from officials estimated that increasing the minimum wage from $12.50 to $15 would have cost between 5400 and 8100 new jobs.

The increase to $12.75 was in line with the Consumer Price Index which was the same method the Government used last year, she said yesterday.

Council of Trade Unions president Helen Kelly said the new rate might not even cover inflation. The average wage rose 2.8 percent in the six months to September last year.

"This decision will leave low paid workers even further behind. We need to be reducing income inequalities not increasing them."

Pay Equity Challenge Coalition spokeswoman Angela McLeod said the 25c rise was "a slap in the face for gender pay equity".

About 65 percent of low paid workers were women and the government decision would hit Maori and Pacific women workers very hard, as they represented a much higher proportion of the low paid.

"The commitment that the Government says it has to reducing the gender pay gap is hollow. It shows the ineffectiveness of the current minister of women's affairs in having any impact in Cabinet on gender equity," Ms McLeod said.

The training and new entrants' minimum wages, set at 80 percent of the adult minimum wage, will increase from $10 to $10.20 an hour. All new rates take effect on April 1.

Every year the Minister of Labour reviews the minimum wage, received by 87,400 workers but the figure is closer to 100,000 when those on a few cents more than the minimum are counted.

"My decision was based on the need to find a balance between protecting jobs and ensuring a fair wage," Mrs Wilkinson said.

She said the modest increase would still have an impact on businesses, especially in the hospitality/retail industries, and would cost employers about $52 million more a year.

But Business NZ chief executive Phil O'Reilly said the increase was reasonable and the Government had to consider what businesses could bear.

"Too high an increase could be a break-point for those already struggling with slim margins and low demand."

Labour MP Trevor Mallard said he would put up a member's bill seeking the increase to $15 and slammed the 25c increase as "miserable".

The increase barely kept up with inflation and when the recently increased ACC levies were factored in, the $10 a week increase would be seriously dented.

"So much for catching up with Australia," he said.