The Government has announced it will raise the minimum wage by $1.20 from April 1 next year - the biggest boost since the 1980s.

Workplace Relations and Safety Minister Iain Lees-Galloway said on Wednesday the minimum wage will be increased to $17.70 an hour from the current $16.50.

"The Government is determined to improve the wellbeing and living standards of all New Zealanders as we build a productive, sustainable and inclusive economy," the minister said.

"For a full time worker this will mean an extra $48 a week before tax - enough to make a real difference for working people."

The minimum wage increased by 75 cents to $16.50 an hour earlier this year, which was originally announced in December 2017.

Mr Lees-Galloway said the latest move is part of the coalition Government's goal of having a minimum wage of $20 per hour by 2021.

"With the labour market tight and unemployment at the lowest since 2008 at 3.9 percent, now is the right time to lift the wages of our lowest paid New Zealanders," he said.

The increase will benefit approximately 209,000 workers and their families, according to the Government, lifting wages by $231 million per year across the economy. About a quarter of those earning the min wage - 36,000 people - are parents, with children.

"This means the starting-out and training wages will increase from $13.20 to $14.16 per hour from 1 April 2019, in order to stay at 80 percent of the adult minimum wage," said Mr Galloway.

E tū national secretary Bill Newson said together with the recent Employment Relations Act changes and the ongoing work on Fairy Pay Agreements, the Government is "taking us in the right direction".

The Government has proposed a minimum wage rate of $18.90 by April 1 2020 and $20 by the same date in 2021. However, these "indicative rates" are subject to each year's annual review, which will take into account the economic conditions at the time.

Mr Lees-Galloway said the Government consulted with employer and worker representatives, including Business New Zealand and the CTU, and "listened to the need for certainty on our travel toward $20 p/h minimum wage by 2021".

But smaller businesses could struggle to foot the bill of the minimum wage increase. Business New Zealand CEO Kirk Hope said April - after the last time it was raised - that employers would need to have strategies in place to cope with it.

"Some may have to lay staff off. That might just be the reality for them," he told Newshub at the time.

"They don't have any capacity to absorb more costs or pass it on. That's what we've always said - if the minimum wage increases get too big, people will lose jobs."

The last Labour government led by Helen Clark increased the minimum wage from $7.55 to $12 - a 59 percent increase, according to MBIE data.

Over the same period, unemployment fell from almost 8 percent to less than 3.5 percent, before the global financial crisis hit in late 2008.

The last National Government increased the minimum wage 31 percent - from $12 to $15.75. Unemployment peaked in 2012 at 6.9 percent, and fell to 5.8 percent.

Newshub.

A previous version of this article said the upcoming minimum wage increase will be the biggest in its history. But the largest increase was in 1985.

