The cabinet has signed off a $2 billion pay settlement for 55,000 aged care workers who will receive significant wage rises over the next five years, starting in July.
Prime Minister Bill English and Health Minister Jonathan Coleman announced the settlement on Tuesday,
"There's never been a pay settlement like this in New Zealand's history," said Dr Coleman.
"It's a great moment for care and support workers."
Mr English said it had been possible because of the strength of the economy.
"We can afford this - it's a fair settlement agreed by the workers' representatives."
Dr Coleman explained that from July 1 the predominantly female workforce, most of them on or around the minimum wage of $15.75 an hour, would receive a pay rise of between around 15 and 50 per cent depending on their qualifications and experience.
"For the 20,000 workers currently on the minimum wage it means on July 1 they will move to at least $19 per hour, a 21 per cent pay rise. For a full-time worker, this means they will be taking home around an extra $100 a week, which is over $5000 a year," he said.
"For these 55,000 workers this funding boost will see wages increase to between $19 to $27 per hour over five years."
The workers provide aged residential care, home support and disability services for around 110,000 people..
Those services are government-funded, and the pay equity claim stems from a case brought by care worker Kristine Bartlett in 2012, in which she argued she and other caregivers were paid less because they worked in a predominantly female industry.
The Court of Appeal upheld a 2013 Employment Court ruling that in female-dominated occupations the Equal Pay Act 1972 required equal pay for work of equal value - different to the way the law had been interpreted in the past.
The government set up a working group in response to the ruling and has been negotiating to settle the case.
The announcement has been welcomed by unions and health sector organisations.
Labour leader Andrew Little says the agreement will have a flow-on effect.
"It will be an overdue spur for pay equity and for lifting low pay in many other areas," he said.
He isn't giving the government any credit.
"Make no mistake, the government has been dragged kicking and screaming to this point," Mr Little said.
"It has had lawyers at each appeal stage of the original case opposing lower court decisions."