The Labour Party says there will be a "major crisis" in New Zealand if wages do not rise.
Speaking on TV ONE's Q and A programme this morning, Labour spokesperson Andrew Little said "wages have got out of whack" with the rise in the cost of living.
He said "workers have got about a quarter" of the labour productivity gains of the past 20 years, and businesses 75%.
"The truth is wages and incomes in New Zealand is a big problem," Mr Little said.
"In 20, 25 years time we are going to face a major crisis because there is nothing happening now in terms of investment, in terms of new economic activity, that is going to be able to sustain the sort of living standards we enjoy today. Incomes and wages are part of that problem and we have to do more," Mr Little said.
He says raising the minimum wage to $18.40 per hour in one action would put too much pressure on businesses.
Instead, he suggests combining a gradual increase of the minimum wage with a strategy of putting pressure on businesses to pay a living wage.
"We support the Living Wage Campaign because I think employers - both public and private - need to be able to manage the introduction of a living wage in their own way and in their own time."
A union-led Living Wage Campaign says a living wage would be $18.40 an hour, which would see an employee receive an additional $5 per hour more than the current minimum wage of $13.75.
The estimated $2.5 billion cost would most likely fall to rate-payers.
National Party MP Simon Bridges has estimated adopting a living wage could cost the country 26,000 jobs.
But Mr Little says using the excuse that lifting wages would be too expensive and would mean job losses is not a solution. He said all groups involved need to come to the table.
With just days to go before local body elections close, councils across the country are also debating whether to adopt a living wage.
Councils in Otago and New Plymouth have rejected the scheme for now, while Wellington's already adopted it.
Hamilton and Auckland continue to debate the issue, with Auckland mayor incumbent Len Brown announcing on Friday that he would support the idea.