All core public service employees are being given a pay rise to at least the living wage of $20.55.

The new hourly rate, which works out to an annual salary of $42,744, will apply to full-time, part-time and casual employees.

It will be implemented on September 1.

KEVIN STENT/STUFF

Minister of State Services Chris Hipkins said the decision was made to support fair pay and employment conditions.

Minister of State Services Chris Hipkins said the decision was made to support fair pay and employment conditions "for a decent standard of living for all New Zealanders".

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 "This government strongly believes that every worker should be in a situation where the pay they receive means they can at least make ends meet," he said.

"Most of the workers who will benefit work in 13 government departments, and work in jobs including clerical and administration workers, welfare workers, contact centre workers and assistant customs officers.

"The departments will meet the estimated $7.23 million cost of the one-off adjustment from within their baselines.

"In subsequent years, the rate will be subject to bargaining between government employers and unions such as the New Zealand Public Service Association."

The "living wage" is set at a level that is needed for workers to cover the basic expenses of life including food, transportation, housing and childcare.

It is calculated independently each year by the New Zealand Family Centre Social Policy Unit.

The living wage is currently $4.05 an hour higher than the minimum wage.

ASB chief economist Nick Tuffley said it could put pressure on other businesses to match the increase.

"It does have the potential to spill over and influence what other people may need to pay to attract and retain people."

But Kim Campbell, chief executive of the Employers and Manufacturers Association, said only 2000 of 38,000 public servants were affected - too small a number to make a difference.

"The government pays better than anyone else, anyway. In many ways what they are trying to do is suggest other people should have the sort of money the government has to spend."

 - Stuff