Customers absorbing costs is what some Bay of Plenty small business owners will be relying on to combat the minimum wage increase on April 1.
Early-February Prime Minister Chris Hipkins announced the minimum wage will increase from $21.20 per hour to $22.70 per hour this Saturday, April 1.
Tauranga Business Chamber chief executive Matt Cowley says the increase will effect 'different businesses in different ways”.
'For a lot of businesses a lot of their supplier's costs will be going up by another seven per cent or so just to pay for delivery drivers, food costs, maintenance people etc. So it will have direct impacts on some businesses but it will have direct impacts for everyone through the economy.”
A big deal
Mount Maunganui business owner Bun Keo is predicting a 20 per cent drop in sales for his bakery as a result of the minimum wage increase. '$1.50 up per hour – that is a big deal.” In turn, he says he will be raising the price of bakery goods 10-20 cents per item. 'We have to do what we have to do…otherwise we can't afford the staff.”
Donna Atchison's cleaning business has been serving the Bay of Plenty region for nearly 19 years and employs five staff. 'The cost of living is particularly hard at present compared to previous years. However with the large increase in wages over the last three years, we cannot absorb this and the clients will be charged extra to cover [this]. Materials and fuel have also increased dramatically.”
Donna thinks we are in for tougher times but have been prepared for this by earlier financial hard times. 'Hopefully it will not be as tough as previous 2008 crash, 1990's crash and 1980's crash. We have come through this era in business with skyrocketing 21 per cent mortgage interest rates and high cost of living and have learned to be more prepared.”
For now, business remains 'static” for Donna while trade has been going particularly well for Bun with the welcome return of cruise ships back at Mount Manganui. Yet this respite will set sail soon. 'Next month is the off season [for cruise ships] and we'll just do what we can do for the staff. If we cannot sell the stuff, then there might not be enough hours to work either.”
Opportunity to refocus
Matt says it's not all 'doom and gloom” for small businesses. 'There are opportunities to have very targeted marketing to get the right types of customers in – and I'd say for many businesses who've been around before – these economic cycles come and go.
'It's around using it as an opportunity to refocus and really focus on what brings you value, and weathering the storm – because I'd say in the next few years we're going to go through another demand peak because our population growth hasn't stopped.”