The minimum wage increase in April will cut into the New Zealand horticultural industry’s already tight margins and 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 this year, the adult minimum wage across New Zealand will rise to $22.70 per hour. The training and starting wage rates will increase 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 CEO Christoph Kistler said today. “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 radio-frequency identification (RFID) technology to create an efficient harvest system (Dataphyll Grow) 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 said the new minimum wage increases would make the Government’s goal more challenging for the horticulture sector since 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.
“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 said.
He said that even before the policy change, wages often constituted 60 per cent or more of a grower’s costs in a sector with slim margins. 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.
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 said the new minimum wage increases would significantly impact growers’ ability to hire seasonal workers.
Kistler said 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 said.
Kistler offered some tips for growers struggling to cope with volatile times:
1. Be transparent
Paying workers correctly works both ways. Depending on which payment structure growers use, there is always a risk of overpaying or underpaying pickers. On the other hand, even slight manipulation of worker picking rates can eat into a grower’s margins, putting the entire farm at risk of insolvency.
“Developing trust and honesty on both sides—workers and growers—will be paramount over the next few seasons. Build trust with workers as a grower, but also workers must be more aware of the risk of having no job if they falsify their pick rates,” Kistler said.
2. Incentivise
It’s an old economic maxim that people respond to incentives. The same will be valid for workers as growers compete for the most trustworthy and productive pickers.
“Workers need to be incentivised to perform well. If margins are tight, incentivisation could include little perks beyond just remuneration. But growers also need systems that incentivise staff to conduct easy and accurate record-keeping,” Kistler said.
3. Automate
Should the wage increases cut deeper into growers’ margins, shuffling costs and trimming where possible is advisable until the broader market absorbs the wage rise.
“Or consider investing in more automation at the orchard level—some growers have been able to halve their picker requirements through automation.
