How many people earn minimum wage? And why are so many just above?

In this story the earlier minimum wages were incorrectly stated and have been corrected on 12 June.

About 5 percent of the population is earning the minimum wage - but a lot of us still aren't earning a whole lot more, data shows.

New Zealand's minimum wage is now $23.95 an hour, up from $13.75 in 2013 and $20 in 2021. In 2008, it was $12.

Infometrics chief executive Brad Olsen said government data showed that the percentage of the workforce on the minimum wage had varied between 3.2 percent and 4.2 percent between 2015 and 2019.

It increased to up to about 8 percent after 2019 as the minimum started to step up quickly but when wage growth accelerated after the pandemic, the proportion dropped back to more like 3 percent again.

"Reporting changes from 2024 onwards show a much higher proportion, of around 7 percent to 8 percent but that's only due to a method change of who is counted. MBIE restated some data for 2023 that shows that proportion of people on the minimum wage, under the new method, was around 7.7 percent in 2023, before falling back over time to 5.8 percent in 2024 and then below 5 percent in 2025."

University of Otago senior lecturer Murat Ungor said New Zealand had a relatively high minimum wage by international standards, both in absolute terms and relative to the median.

About 122,500 people were earning less than this year's minimum wage last year.

"A far larger share of workers cluster near the bottom than the raw headcount alone suggests.

"The minimum wage has risen aggressively - nearly doubling since 2008 - and now binds at the 30th wage percentile, up from the 10th in 2001.

"Yet New Zealanders continue to cluster toward the lower end of the income spectrum due to structural factors: a low labour income share, an industry mix heavy in low-wage sectors - retail, hospitality, agriculture, care work, productivity-wage decoupling traceable to 1980s-90s labour market reforms, a self-reinforcing low-wage/low-productivity cycle, and brain drain to Australia.

"The result is a compressed, floor-heavy distribution where minimum wage policy has lifted the bottom but broader forces keep the middle from rising."

He said the wage floor had risen into territory that used to be comfortably above it.

It was useful to use the Kaitz index to make comparisons, which expresses minimum wage as a share of median. By that measure, the minimum wage is about two-thirds of the median.

Ungor said Australia had a similarly high absolute minimum but a lower Kaitz ratio. The US was at the other extreme with a federal minimum of US$7.25 that had not changed since 2009.

He said if there were more increases to the minimum it could raise questions about the effect on employment.

"Substitution away from low-skilled labour, potential hours reductions, and whether firms absorb the cost through lower profits, higher prices, or reduced hiring. This does not mean the current level is necessarily too high. New Zealand's labour market has absorbed large increases without clear disemployment effects to date. However, it may mean that the mechanics of further increases would look different from the past two decades of steady rises."

He said high-productivity-growth industries tended to pay higher wages.

"There is also a self-reinforcing dynamic at work. As the NZCTU argued in 2017, when wages are low there is less incentive for employers to improve productivity.

"This means firms can remain competitive through cheap labour rather than investing in technology, automation, or upskilling, which keeps both wages and productivity suppressed in a mutually reinforcing cycle.

"The proximity of Australia, with consistently higher wages across most occupations, compounds this by acting as a continuous drain on skilled workers. And the combination of relatively low wages, high capital costs, and small domestic markets discourages firms from investing in the higher-productivity activities that would pull the distribution upward."

Dennis Maga, Workers First general secretary, said pay in unionised workforces tended to be higher than the minimum wage.

"There are very few sites in our union's coverage who still offer minimum wage as a starting rate.

"A good example is in supermarkets, where we know that unionised Foodstuffs stores with a collective agreement are offering start rates that are higher by at least $2 to $3 per hour.

"What we're still not seeing enough of are living wage employers. The living wage represents the minimum earning rate necessary to live well, not just for subsistence. More employers should take note that a living wage is not just achievable, but beneficial for attracting good staff and ensuring they can live a life that includes some leisure as well as work.

"Minimum wage employers are liable to lose staff more regularly, regardless of the high unemployment rate, and find it harder to attract skilled workers."

The living wage is currently $29.90.

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