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The increase, announced today by Workplace Relations and Safety Minister Iain Lees-Galloway was a step toward to goal of $20 minimum wage by 2021.
The rise would put more money in the back pocket of more than 250,000 New Zealand workers.
"Around a quarter of million workers will be better off next year, thanks to another $1.20 an hour increase to the minimum wage, the biggest equal lift ever," says Iain Lees-Galloway.
Those who will benefit include people working on $17.70 and between $17.70 and $18.90 an hour.
"The new $18.90 rate will mean an extra $48 per week before tax for Kiwis who work for 40 hours on the current minimum wage.
The starting-out and training wages will also see a boost, with a rise to $15.12 per hour from 1 April 2020, remaining at 80% of the adult minimum wage.
Lees-Galloway said New Zealand's unemployment rate was low at 4.2 percent, and the economy predicted to add 43,600 jobs in 2020.
"With our economy doing well, we want to make sure that our lowest-paid workers also benefit," he said.
"The rise in the minimum wage is estimated to boost wages by $306 million a year across the economy. That's a good investment in local economies where workers spend their wages.
The announcement confirms the rates signaled in 2018 and the Government's plan for a $20 minimum wage in 2021.
"Last year, we signaled minimum wages of $18.90 for 2020 and $20 in 2021. By re-confirming these rates, we offer certainty the businesses need for planning and forecasting."
The news was welcomed by New Zealand Council of Trade Unions (CTU) president Richard Wagstaff who said it was "a significant and meaningful increase."
"The minimum wage is currently $17.70 so an increase of $1.20 an hour will mean an increase of $48 a week for someone working full time," he said.
"We have total confidence that the Government is on track to fulfill its promise of a $20 minimum wage by 2021."
The increase would make life easier for Auckland security guard Lavinia Kafoa.
"It really sounds great to me. As a single mother, every bit of extra income makes a lot of difference," Kafoa said.
"For my family, being on minimum wage means I spend many more hours at work than with my boys at home."
Kafoa had to explain to her young sons that she had to work more hours so they could afford everything they needed.
"It's a struggle to keep up the all the rising costs, especially rent," she said.
"It can be especially hard during the school holidays. My boys are at home, so I have to get everything ready for them before I go to work. I wish I could spend more time with them."
E tū Assistant National Secretary Annie Newman said the minimum wage increases were very important but we're only one part of the picture.
"We're very pleased that the Government has kept to their commitment of significant increases to the minimum wage," Newman said.
"However, we're still waiting for the Government to deliver on some of their other promises.
"Time's running out to deliver the Living Wage for the people who need it most."
Newman said it was not just about wage increases.
"If the Government is to oversee fundamental changes to the New Zealand workforce, they need to implement strong Fair Pay Agreement legislation as soon as possible.
"Fair Pay Agreements would put a stop to that by setting minimum standards bargained by unions and employers.
Newman said workers in roles such as security guards, cleaners and retail workers would have their lives transformed by decent Fair Pay Agreement legislation.
"We whole-heartedly commend the Government for lifting wages – now let's see the transformational changes that we need to fix inequality in New Zealand.