The Government says heeding calls to increase the minimum wage to $15 an hour could result in the loss of jobs.
Instead, it has announced that the rate will rise by 25 cents to $13 an hour from 1 April.
The Minister of Labour says the increase strikes a balance between protecting jobs and ensuring a fair wage.
Kate Wilkinson says Labour Department modelling shows as many as 6000 jobs could be lost if the rate was pushed above $13.50.
The Labour Party has promised to lift the minimum wage to $15 an hour within three years if it wins this year's election.
But Ms Wilkinson says $15 is unsustainable, while Prime Minister John Key says he is satisfied the increase goes far enough.
Training and new entrants' minimum wages will also increase also by 20c to $10.40 an hour from April.