Almost 120,000 Kiwis are in line for a pay rise when the minimum wage goes up to $15.75 on April 1 - but 1500 of them could end up out of a job.

Officials have also calculated that the 50c an hour minimum wage hike will cost taxpayers an extra $29.4 million a year.

It will deliver $65m a year in higher wages for the 119,500 people now earning below $15.75 an hour - implying that private employers will have to pay about $35.6m extra on top of the extra cost to taxpayers.

The 3.3 per cent increase from the current minimum of $15.25 a year is at the high end of expectations, considering that consumer prices rose by only 0.4 per cent in the year to last September.


Business NZ urged the Government to keep increases to "no greater than inflation as measured by the consumers price index" until a full review of the minimum wage policy.

"In setting the minimum wage higher than its present level of $15.25 the Government is indirectly but arbitrarily also affecting the wages of at least one-third of all wage and salary earners," Business NZ said in a submission.

"The scope for relativity-based pressures on other wages and rates is inescapable."

But the country's biggest union, E tū , said the minimum should have been raised to equal the "living wage" of $19.80 an hour, a rate calculated by the Living Wage movement as the wage required for "the necessities of life" including housing.

"The 13th annual Demographia International Housing Affordability Survey, which compares housing prices to incomes in 406 metropolitan housing markets put Auckland near the top due to extremely expensive prices but modest pay packets," said E tū campaigner Mat Danaher.

The 3.3 per cent increase means the minimum will rise faster than average hourly wages, which rose 1.7 per cent in the year to September from $29.29 an hour to $29.78.

But the median wage - where half of all wage and salary earners get above that level and half earn below it - rose faster, by 2.9 per cent from $22.83 an hour in June 2015 to $23.49 at last count last June.

The minimum increase to $15.75 an hour keeps the minimum at 67 per cent of the median, the same as last year.

Officials calculated that the increase would cost 1500 jobs.

AUT University's professor of work and employment Erling Rasmussen agreed that the increase would cost jobs, if nothing else changed, "because some employers will have to find efficiencies".

But he said the Government could avoid those job losses by changing other policies such as immigration settings.

"When you think about it, there are 60,000-odd temporary work visas each year. That [1500 jobs] is just a drop in the ocean," he said.

Workplace Relations Minister Michael Woodhouse said the 50c increase struck "the right balance between protecting our lowest paid workers and ensuring jobs are not lost".

The "starting-out" and training minimum wage rates will also increase, from $12.20 to $12.60 per hour, remaining at 80 per cent of the adult minimum.

The adult increase is the fourth successive 50c increase. The rate was raised from $13.75 to $14.25 in April 2014, then to $14.75 in 2015 and $15.25 last year.