Many small business owners are nervous about how a rise of more than $4 in the minimum wage will affect their livelihoods.

Photo: RNZ

The new Labour-led government is set to increase the hourly rate from $15.75 an hour to $20 by 2021.

Cafe owner Jacob, who would not give his full name, told RNZ his business operates at a low margin, and there was only so much he could do to increase profit.

He said raising the price of coffee is one option, but he is reluctant to push the price of a latte over the $5 mark.

One way to help his business would be to have a lower youth wage.

"We take on a lot of people who are at school with no experience ... and we invest a lot in them and train them up so they understand how a business works.

"If wages go up for those people then I'll be more likely to look at people with experience instead."

Mag and Turbo Warehouse New Lynn owner Antony Saunders has three full-time staff and said finding the right person was not always easy.

"In this industry ... a lot don't have the skills or mental maturity. They just come in and think it's still lunchtime at high school. They're not worth $20 an hour, at all. You know you've got holiday pay on top of that and all of a sudden for a small business that doesn't make a huge profit, that's actually quite a large burden"

Mr Saunders said he'd like to pay staff as much as possible, but only if they add to the productivity of the business.

Online retailer, The Sleep Store pays all its 16 employees the living wage - which is currently more than $20 an hour.

Louise Tanguay, who started the business 12 years ago, said owners needed to be supportive of their staff not just be in it for themselves.

"If you can't pay your staff a decent wage, maybe you need to look at your business overall ... if you're running your business at a level that can only justify paying people $15 an hour then you need to make some changes to the business.

"If you pay your staff better you can attract better staff which helps you grow and helps you become a profitable business ... I can't see any downside at all in paying people properly."

The new government is aiming to get the minimum wage to $20 an hour by 2021 - though as Ms Tanguay points out the actual living wage will likely be higher than that by then.