The new living wage has been set at $20.55.
The rise from $20.20 of 1.7 per cent is the smallest since the living wage was first announced in 2013.
But the rate could have been significantly higher if it weren't for the Government's Families Package, said Annie Newman, convenor of Living Wage Movement Aotearoa NZ.
"This is a big year for the Living Wage Movement because the new rate follows a full review which includes many more databases and closely reflects what workers need to survive and participate in society," she said.
The new rate takes account of the significant increases for families with dependent children because of the Families Package. Without the package, the rate would have been $22.45 – a difference of nearly $2.00 an hour.
"The increase is the smallest since the first living wage rate was announced because, while costs have increased markedly, the Families Package has softened the impact on households," Newman said.
"Nearly 683,000 workers earn less than a living wage and there is a 24.5 percent difference between the minimum wage and the living wage, so we know people are struggling out there."
Wellington Mayor Justin Lester announced the new rate at an event this evening.
Why would you leave a job that you're so happy in, not only because of your wage but because of the way you get treated in your job? Yeah, it's just basic stuff.
He told the Herald the new rate was "really good", and that the small rise showed the "integrity" of the process.
Wellington City Council already pays its staff and contractors a living wage, and had already budgeted for an increase.
But due to the increase being so small, the rise in wage has come in under budget for the council, he said.
Council had budgeted for a 2.2 per cent rise.
Lester said a living wage was "about supporting families and children".
He said it was "not always easy" for businesses to commit to paying the rate, but it would help reduce turnover and would increase loyalty in staff.
Gwilym Waldren, owner of The Rogue and Vagabond, where the event was held today, pays his employees a living wage.
He said it was good for staff morale, work, and "just for my conscience, basically".
"It's a small difference at the end of the week."
Manager of the bar, Lara Denby, said the biggest thing for her about being paid a living wage was that it gave her "hope" for the future, and the belief that she could raise and support a family when the time came.
"I might even be able to own a house one day, maybe."
Being paid the rate took stress off her, allowed her some "enjoyment of life" and made her feel valued and respected as an employee.
You make a public statement to your colleagues, to your competitors, but also for others in your industry that best business practice lies in taking care of your greatest asset, your workers.
"Why would you leave a job that you're so happy in, not only because of your wage but because of the way you get treated in your job? Yeah, it's just basic stuff."
When the first rate was announced in 2013, Living Wage Movement Aotearoa NZ agreed to review it every five years to ensure it accurately reflected living costs.
In the years between, it rose automatically with wage inflation, but this is the first intensive review to take account of food, rent, power, health, communications, and education costs.
Accreditation programme co-ordinator Felicia Scherrer spoke at the event, thanking businesses that pay the living wage.
"You make a public stand and a public statement that you care for not only your workers, but their families too," she said.
"You make a public statement to your colleagues, to your competitors, but also for others in your industry that best business practice lies in taking care of your greatest asset, your workers."
Newman said there was only one corporate business in New Zealand that was an accredited living wage employer, Vector.
She believed small businesses were more likely to provide the rate because they get to know their own workers and recognised the money would be fed back into the local community.