You are not permitted to download, save or email this image. Visit image gallery to purchase the image.
Boosting the minimum wage was part of the Government's 100-day plan and is set to take effect at the end of next week, on April 1.
In its regulatory impact statement, officials from the Ministry of Business, Innovation and Employment said an increase "may have negative employment impacts which include lower job growth and reduced work hours".
"The estimated restraint on employment for a minimum wage of $16.50 is 3000," the statement said.
It also noted that the effect on employment "is heavily debated in economic literature ... there is no clear consensus".
The increased cost of labour for employers will be about $129 million, which could be passed on through higher prices for goods and services.
Government departments are expected to absorb the impact within existing baselines.
"There is also a risk of a 'ripple effect' due to wages above the minimum wage also increasing faster than expected income growth. This has the potential to have a larger impact on employment, and the economy-wide wage bill."
The boost will improve wages for 164,100 workers who are currently paid between the current rate of $15.75 and the proposed rate.
About 76,400 are paid the minimum wage. The median wage, as at June 2017, was $24.00 per hour, while the average wage was $30.36.
Workplace Relations Minister Iain Lees-Galloway said workers had not had a fair share of economic growth, and the boost to the minimum wage was only one part of the Government's strategy.
"The Government considers advice alongside a range of other factors, including prior experience increasing the minimum wage – which has always been positive.
"I note that Treasury also advised the best time to raise the minimum wage is while the labour market is strong and tightening.
"Treasury forecasts that the unemployment rate will keep falling towards 4 per cent over the next three years, and that average wages will rise on average at about 3 per cent a year over that time, due to a tight labour market."
Labour and New Zealand First have agreed to increase the minimum wage to $20 an hour by April 2021.
Lees-Galloway said outlining that change now provided certainty for businesses.