Wage Growth Dips Below Zero as Cost-of-Living Gap Widens

Auckland, New Zealand, August 17, 2026 — Wage growth has dipped into negative territory for the first time in over a year, according to the latest Employment Hero Jobs Report data.

In July, wages were down -0.1% month-on-month and -0.4% year-on-year, highlighting persistent wage stagnation since this time a year ago.

“It continues the trend of real-term losses for workers, only now the gap below inflation is significantly wider,“ says Neil Webster, Employment Hero General Manager New Zealand.

“Salaries have been struggling for a year, with the downward trajectory starting this time last year when wage growth stood at 4.7% year-on-year. The drop to -0.4% has been rapid,” he says.

The Employment Hero Jobs Report draws on more than 2,000 businesses and 85,000 employees. The data is a strong indicator of how the SME sector is performing and provides a real-time view of the employment and wage environment.

“With wage growth now falling well behind inflation, workers will continue to feel it in the back pocket, which piles more pressure onto an already high cost of living,” says Webster.

Wages key business pressure

This negative growth in wages reflects the latest business sentiment in Employment Hero’s Pulse Data for the second quarter of 2026.

Wages, productivity, and employee burnout were the leading pressures uncovered in the quarterly study, which tracks a number of business measures in New Zealand, Australia, the United Kingdom and Canada.

For small Kiwi companies with fewer than 21 staff, wages were the single biggest pressure for a third (33%) of businesses, compared to less than a quarter (24%) among larger organisations.

Older workers impacted most

The older end of the workforce was hit hardest by wage decline in July with median hourly rate in the 55-64 age group down -1.6% year-on-year and down -1.5% year-on-year among those aged 65+.

In comparison, wage growth for 18-24 year olds was up 1.8% year-on-year.

There was also positive wage growth in some sectors, with agriculture, energy and mining up 5.1% year-on-year and retail, hospitality and tourism up 2.5% year-on-year.

Webster says: “The current employment market favours employers because there are plenty of workers available, staff are sitting tight in their roles, and there’s no pressure to pay more.

“With SMEs under real cost and margin pressure, the result is their headcount stabilises and in some cases increases, while wages stay flat.”

Business resilience mixed with caution

While last week’s unemployment figure of 5.6% – the highest reading in over a decade – reflects a labour market that’s cooling across the board, there is some buoyancy in the SME sector.

Small and medium businesses saw an expansion of 1.7% month-on-month in July, making it the strongest monthly gain for nine months, when October 2025 saw 2.5% growth. Compared to three months prior, headcount in July was up 2.9%.

“The latest unemployment figures signal businesses are being cautious but what we’re seeing in our SME data adds an important layer of nuance to the national picture. So while the national unemployment rate climbs, our figures suggest some parts of the SME sector are still expanding.”

Employment Hero’s Pulse Data found that while more than half (53%) of Kiwi businesses are optimistic about their company’s financial performance in the next six months, New Zealand business leaders are the least optimistic compared to those in Australia, the UK and Canada.

New Zealand also lags behind on business expansion plans with 23% intending to hire more staff compared to 35% of UK businesses with an expansion mind-set.

“With inflationary pressures, oil price challenges and softer consumer demand all still in play, we don’t expect a quick turnaround. It’s fair to say New Zealand business leaders are playing it safe with a focus on keeping costs under control rather than growing headcount.”