Around 164,000 Kiwis will get a boost to their pay packets when an increase in the minimum wage takes effect from April 1.
The minimum wage will rise by 75 cents to $16.50 per hour, which is estimated to inject $129 million into the economy says Workplace Relations and Safety Minister Iain Lees-Galloway.
"People on lower incomes are more likely to spend their wages on essential items like doctor's visits, keeping on top of bills, buying more healthy food - things that far too many Kiwis struggle to afford," he said.
But the Ministry of Business, Innovation and Employment (MBIE) said last week that the increased costs could be passed to customers as business owners look to maintain a profit.
Analysis by the MBIE shows the 'restraint on employment' as a result of the minimum wage hike could be about 3000 jobs.
ACT Leader David Seymour says that by increasing the minimum wage the Government is condemning 3000 young, unskilled workers to the scrapheap.
"In a classic example of good intentions and poor results, some of New Zealand's most vulnerable workers will be stripped of an opportunity to gain valuable skills and work experience," he said.
"The pressure on vulnerable workers will only increase as the Government commits to a minimum wage of $20 an hour by 2021."
Meanwhile Mr Lees-Galloway said it's the best time to raise the minimum wage while the labour market is strong and tightening.
"Government forecasts unemployment will keep falling towards 4 percent over the next three years, while average wages will rise about 3 percent a year over that time due to a tight labour market," he said.
The starting-out rate and training wage will continue to be at 80 percent of the minimum wage, increasing to $13.20 per hour.