New data from recruitment firm Hays reveals 95 percent of businesses expect to raise wages this year.
But 52 percent of employees believe they would be financially better off finding a new job altogether and 48 percent of those thinking about switching jobs say they are pondering a move because they have an uncompetitive salary.
Unite Union assistant national secretary Gerard Hehir told RNZ's Morning Report programme today the rate of inflation - currently around 6.7 percent - was a "base line" and should be a "starting point" when employees entered wage negotiations.
"If you get less than 6.7 percent it's not that you're not getting an increase, it's that you're getting a pay cut."
The Labour Cost Index shows private sector wages increased 4.5 percent in the year to March 2023.
Hehir said the union believed many workers were struggling to achieve inflation-linked pay increases which would allow them to stay where they were, in financial terms.
"We've had so many years of relatively low inflation that I think a lot of employers in particular - and some employees - are having trouble adjusting."
Employees trying to bargain for a pay increase were always playing catch-up, he said.
"It's always in retrospect, if normally you're looking at what you've lost - in this case 6.7 percent... The issue here is just struggling to stand still."
Hehir said a trend in recent years had been for companies to offer new staff higher wages than existing staff but warned that was a "very dangerous path to go down" and it would quickly lead to existing staff seeking other work.
Employers needed to think very carefully not just about what it took to employ someone to fill a job, but about what it took to hang onto the people they already had, he said.
Corporate profit statistics showed businesses were still making a lot of money, Hehir noted.
"The evidence is very, very clear - the largest ever increase in corporate profits was the year to 2022 ... there's plenty of profits continuing to roll in."
'A bit of a mismatch'
BusinessNZ chief executive Kirk Hope told Morning Report employers in some industries had been paying higher wages in order to grow their businesses.
"The question will be what you're doing with those profits in terms of investments and thinking about the future," he said.
"There's going to be a suite of things that businesses are certainly thinking about - particularly in a very tight labour market."
He said some industries - particularly those experiencing skills shortages - would be paying wages far higher than the 4.5 percent increase highlighted in the Labour Cost Index.
However, he said the Hays data showed there was "a bit of a mismatch" between employers and employees - not just in terms of salary expectations but in terms of benefits.
"There's some pretty useful insights there, for example, you know,... roughly 80 percent of employers offer training, and only 61 percent of employees really value that."
Another area where there was a mismatch was with regard to hybrid working, he said.
"Something like 65 percent of people wanted hybrid working but it's not always available, so there are certain things that employers can do to try and bridge that gap where they may not be able to ... meet the salary expectations of the employee."
Hope said it was expensive for businesses to hire staff in such a tight labour market and believed that was why the Hay data showed 95 percent of employers were expecting to increase salaries and wages.
"They're doing what they can in that environment... planning for future investment needs for the business, and for growth."
