Business journalist Susan Edmunds has written a fascinating article, with some clear and thought-provoking themes.
New Zealand’s minimum wage has risen quickly over the past 15 years — up 84% since 2010. But median and average wages have only risen 75% and 72%. As a result, the minimum wage now sits close to the median wage, one of the highest ratios in the OECD.
Economists say this hasn’t lifted overall incomes because raising the minimum wage doesn’t change the productivity of the economy.
What productivity means — and why it matters
Productivity is how much value a worker produces in an hour. When productivity grows, businesses can afford to pay higher wages without increasing prices.
If productivity stays flat — as it has in New Zealand since 2019 — wages tend to cluster near the minimum, creating "wage compression".
Why New Zealand productivity is struggling
Economists highlight several long-term challenges:
● New Zealand exports too many raw commodities, like logs and milk powder, rather than higher-value processed goods.
● Businesses face heavy regulation and rising costs.
● The economy has relied too much on population growth to expand output.
● Many industries lack the scale or technology to improve efficiency.
Because productivity is weak, lifting the minimum wage alone cannot raise incomes across the workforce. This isn’t about people working less, it reflects wider economic settings, not individual effort.
The South Canterbury Chamber of Commerce works in this space to lift productivity through advocacy and pushing for business-friendly policies, in training delivering a wide range of work-focused short and relevant courses and through supporting research and development.
Boosting productivity
Economists suggest focusing on:
1. Adding value to exports instead of relying on raw goods.
2. Streamlining regulations to reduce barriers for businesses.
3. Investing in skills and technology to help workers produce more value.
4. Supporting innovation and research to create higher-value industries.
5. Improving infrastructure and housing, which makes labour markets more efficient.
The bottom line
New Zealanders are paid close to minimum wage not because wage growth is impossible, but because productivity growth has stalled. Higher long-term wages depend on a more productive, innovative economy — not just higher minimum wage settings.
