Minimum wage rise will 'hurt hort sector'
The minimum wage increase set for 1 April will cut into the horticulture industry’s already tight margins and put increased financial pressure on a sector decimated by bad weather.
It will also put increased financial pressure on a sector decimated by bad weather, not least the floods – some small growers could go under as a result.
From April 1, the adult minimum wage across New Zealand rose to $22.70 per hour. The training and starting wage rates increased from $16.96 to $18.16.
“We’re not say don’t pay fair wages for a fair day’s work—pickers should be suitably compensated for their labours,” Dataphyll chief executive Christoph Kistler says.
“But this minimum wage increase will hurt not just small growers, but ultimately it will hit the consumer in the pocket and deprive Pasifika of employment opportunities.”
New Zealand orchard management company Dataphyll is a Kiwi tech start-up that uses radiofrequency identification (RFID) technology. It aims to create an efficient harvest system that helps growers improve productivity, fruit quality, meet compliance obligations and measure picker performance down to the last berry.
In February, the Government announced its Growing Together 2035: Aotearoa Horticulture Action Plan Strategy, which included a goal for horticulture production to reach $12 billion by 2035. Agriculture Minister Damien O’Connor said that in 2023 the horticulture sector is expected to clock in at $7.1 billion.
However, Kistler believes the new minimum wage increases will make the Government’s goal more challenging for the horticulture sector. He says this is because more of its revenue will be funnelled into wages rather than being reinvested into expanding the industry to reach those targets.
“With all the additional costs horticulture businesses have this year, with the supply chain and the follow-on consequences of Cyclone Gabrielle and other weather events, this policy change puts more pressure on small growers especially,” he explains.
“These sorts of artificial input cost increases won’t stop in the horticulture sector. They tend to have ripple effects across the economy as prices for goods rise in lockstep with the wage rises, cancelling any positive effect the policy might have had on people’s take-home pay.”
Kistler says that even before the policy change, wages often constituted 60% or more of a grower’s costs in a sector with slim margins. He believes the wage rises could put some small growers into more debt—or push them out of the market entirely as they struggle in a competitive marketplace.
He adds that growers also employ seasonal workers from the Pacific Islands, many of whom are paid the minimum wage as the job of picking produce is relatively manual. He claims the new minimum wage increases will significantly impact growers’ ability to hire seasonal workers.
Kistler says growers use various systems to pay their workers, including by the kilogram, hourly rates and bucket rate. The bucket rate is common but open to disputes as it is easily manipulated. Hourly is the most straightforward system to manage but rarely used. Per kilogram is a favourite of growers.
However, the bucket rate system is easily manipulated, and growers who use it frequently overpay their workers. Also, manually entering pick rates leads to errors and pay disputes.
“Growers that pay by bucket or hourly are affected by the minimum wage increases as the pay rate must be adjusted when the worker’s pick rate compensation may fall below what they would have earned on an hourly wage,” Kistler concludes.
