The expansion of the Warehouse's Red Shirt community programme is corporate welfare that will rob paid staff of valuable hours, says the union representing retail workers.
The Social Development Ministry has announced it is working with the retailer to offer 1000 young people the opportunity to gain work experience and NCEA credits.
But First Union secretary Maxine Gay said the initiative amounted to a direct subsidy to a private employer of just under $2 million annually.
Ms Gay said about half the Warehouse's employees were on permanent part-time contracts and many would love extra hours.
"It's a totally disgraceful idea. It's a direct subsidy by the state to a private enterprise. It's money that is not going into the hands of employed workers."
Social Development Minister Anne Tolley said feedback from a pilot scheme was overwhelmingly positive.
The Warehouse said it did not benefit financially from the programme and it in no way represented free labour.