The coalition plans to scale back the number of rules agencies must follow when tendering contracts, which it says will make it easier for New Zealand businesses to access government contracts worth $50 billion a year.
Minister for Economic Growth Nicola Willis wants to axe one third of 71 rules which include paying the Living Wage in contracts for cleaning, catering and security guard services.
Union E tū says this will send some of those workers into poverty and is "heartless".
Cleaner Liam Shaw said he was concerned as the Living Wage allowed people like him to buy basic things.
"The Living Wage basically allows me to survive. Before the Living Wage came in I was really struggling to afford groceries, especially considering how high my rent was, and the Living Wage has allowed me to thrive in what would be seen as a very basic sense."
It sent the message people in jobs like his weren't "good enough" or the work wasn't worth making a living from "which is really disheartening".
"It makes you feel quite terrible," Shaw told RNZ's Morning Report programme today.
While the government was trying to make it easier for firms to win contracts and thereby encourage productivity and stimulate the economy, he did not believe it was the right course of action.
When people earned a bit more they also spent a bit more, he said.
Not a race to the bottom - Minister
Willis said she wanted to reassure people like Shaw that existing contracts would be honoured and his work was valued.
She rejected a claim it was a race to the bottom and that it sent a message to employers that the lowest paid workers could have their wages cut.
Instead, the aim was to give a larger range of businesses the chance to bid for government contracts, she said.
There was still a minimum wage and additional payments such as Working for Families and the accommodation supplement that could be used to top up workers' wages.
"What this is about is increasing the value that the government spends on economic benefits to New Zealand in order to provide skills and training opportunities for a range of New Zealand workers."
She said it might be a chance for young workers or those who had left prison to get a job.
"Those people get more of a leg up, they get more of an option if we're not determining a particular level of wage."
The key change would be getting rid of 23 specific rules that made it difficult for some companies to apply for a government contract.
Tariff war
On the tariff war that has escalated today between the United States and the European Union and Canada, Willis said the government would be careful in the way it reacted.
"This is not a time for rash action."
US President Donald Trump is threatening to escalate a global trade war with further tariffs on EU goods, as major US trading partners said they would retaliate for trade barriers already erected by him.
Just hours after Trump's 25% duties on all US steel and aluminium imports took effect, Trump said on Wednesday he would impose additional penalties if the EU follows through with its plan to enact counter tariffs on some US goods next month, Reuters reports.
New Zealand already has a tariff on steel and aluminium that was imposed during Trump's first administration (2017-2021) and it has never been lifted.
Foreign Minister Winston Peters heads to Washington next week for trade talks.
"We prefer free trade settings. We don't think tariffs are good for the world, in fact, we don't think that they are good for New Zealand [or] any economies in the world."
