The Government’s promise to increase the minimum wage to $20 an hour by 2021 will put more money in the pockets of packhouse workers.
Fruit may be left on trees and businesses face closure as steep rises in the minimum wage hit labour-intensive industries such as horticulture.
Many exporters were facing higher costs due to employment law changes and the minimum wage lifting to $17.70 an hour on April 1, an increase of $1.20, a survey of 400 exporters by ExportNZ has found.
Businesses with 75 to 120 staff said the minimum wage increase would add an extra $120,000 to $800,000 to wage costs a year.
The Government’s promise to increase the minimum wage to $20 an hour by 2021 will take it to just below the current living wage of $20.55 – the equivalent of $42,744 for a 40-hour week.
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Michael Franks, chief executive of kiwifruit grower Seeka, said it employed up to 4000 people during peak season, when its packhouses ran 22 hours a day, six days a week.
Seeka was the largest kiwifruit grower in New Zealand and Australia and the second largest packhouse operator.
“A number of people who work for us in the packhouses will be on minimum wage, so there will be a cost impact,” Franks said.
“There is a concertina affect. If you pay the packer a certain amount, then you have to pay the product grader a margin above this and the supervisor above this. You have to move them all.”
Seeka was looking to further automate packhouses. “We can’t get enough New Zealanders to do the work and we need to beat the inflationary affect of wage increases,” Franks said.
Another labour shortage was likely this year after 1200 vacancies were unable to be filled during the 2018 Bay of Plenty kiwifruit harvest.
ExportNZ executive director Catherine Beard said exporters were unable to put up prices in response to employment changes, because it would make them uncompetitive in overseas markets.
Many exporters already paid above the minimum wage, but increasing the minimum wage caused all pay rates to rise to maintain relativities. Meanwhile, other costs would rise because of changes to meal breaks and union rules, Beard said.
“Employment changes have been designed with good intentions towards employees, but are making the job of exporters more difficult. Exporters must absorb the extra costs or invest in technology to reduce staff numbers,” she said.
Beard said exporters to Australia already faced a 10 per cent shipping cost disadvantage to local producers. After wage increases it would be cheaper to manufacture in Australia, removing New Zealand’s competitive advantage.
Horticulture New Zealand chief executive Mike Chapman said growers were struggling with the increases and some may exit the industry, leaving fruit and vegetables unpicked.
“If you are not going to make enough money to sustain your business, why would you harvest it,” Chapman said.
The industry was part of a global market and price sensitive, so higher costs couldn’t automatically be passed on, he said.
“It’s a fragile balance and the more you gouge out of businesses, the less likely they are to be economically viable and survive.”
Pay depended on skill level and productivity, with good seasonal workers receiving above the living wage, Chapman said.