Shopless Press Release : 2 February 2022
Inflation is always a topic of interest for economists and affects all areas of our lives from the grocery bill to house prices. On January 27 Statistics New Zealand released the CPI index report stating that inflation was at a high of 5.9% for the year ending 2021. The highest annual percentage change in inflation since 1990. Economists have released insights and suggestions into how to be more frugal and save on living costs. But can we be doing more to optimize our living situation? Shopless looks into how inflation affects our employment. And if we should be asking for a raise to match the 5.9% increase in living standards.
What is Inflation, and Why is it so high?
Inflation is the increase in overall living costs. The way that it is measured in statistics, is by looking at the increased prices of consumer factors in New Zealand – such as groceries, rent, petrol etc. This increased inflation affects everyone to varying degrees. For lower income individuals and households the percentage of weekly income that goes into these general necessities is increasing, meaning they have significantly less room for emergency expenses. Some sources suggest that for low income families over 63% of their household income goes towards food, housing and transport. Leaving little to no emergency funds for this demographic. For middle income and high income families, inflation means that non-essential spending may need to be restricted.
There are a few reasons floated as to why inflation jumped so much in 2021. The construction industry is said to have caused the greatest expense increase. With building materials and supplies, labour costs and general house building prices skyrocketing. Having an effect on new home builds, renovations, rental prices and house prices. Increased prices in day to day groceries and rates have also played a major part in the latest inflation number.
How does it affect my employment and workplace?
Inflation also affects businesses, the cost of products and external services increase for many businesses to varying degrees. Some businesses may have put up their prices accordingly to meet inflation, such as building companies accommodating for the inflated materials and cost. However for many of these businesses, employer wage is not met with the same attitude. Additionally if a business exports overseas, or deals with clients internationally the New Zealand dollar also drops with inflation. Sometimes meaning less profit for the business. Meaning a business may focus on where they can cut costs elsewhere rather than if the employees are affected in the same way. A weak New Zealand dollar also has an impact on individual investments such as kiwisaver for you as the employee.
Can I ask for a raise to match the inflation rate of 5.9%?
Asking for a 5.9% raise is definitely a possibility as an employee. With employment rate at a high in New Zealand and limited immigration some sources are suggesting that the current job market is in favour of employees seeking raises and seeking promotions. If you are planning on seeking a significant jump in your salary or wage there are some important factors to consider.
Firstly are other professionals within your expertise receiving similar pay increases? And how does your wage compare to others within my industry? The glass door website provides an insight into wages and salaries of professionals in other companies. It is great to analyze these other areas so that in a pay negotiation you have a strong perspective on your worth as an employee. Additionally, factors such as if your workplace is capable of offering you an increase. And even understanding what other employees within your workplace get as a wage helps to gauge how much to ask.
The Spinoff did an article analysing if it is a good time to ask your boss for a pay rise. It concluded that in 2021 over half New Zealand workers did not receive a pay rise. Suggesting that a profitable business, even if affected by inflation, would distribute their wealth to accommodate reliable and good employees. So, if you are feeling the squeeze of inflation, or feel it has been too long since a pay evaluation it is worth a try. Inflation is expected to continue to rise at a similar rate in 2022.