The ACTU is urging the Fair Work Commission to increase the national minimum wage by $27 per week, raising it to $667.90, to avoid growing inequality in Australia.
However, industry groups have argued for less than half that amount, saying the union claim is unrealistic and will lead to job losses.
The Australian Industry Group's submission to the Fair Work Commission's annual wage review recommends a 1.6 per cent wage increase, which would raise the national minimum wage, which is currently $640.90 per week, by $10.25. The proposed rise is below the rate of inflation, at 2.2 per cent.
The ACTU's submission to the review of minimum wages argues a greater increase is necessary to avoid creating an underclass of working poor and rising inequality.
AIG chief executive Innes Willox said raising minimum wages beyond a modest amount would further damage Australian competitiveness.
He said the interests of people in secure jobs should not be put ahead of those looking for work and those whose jobs were at risk.
"The unions' proposed minimum wage increase is unrealistic, unsustainable and would be unfair to those whose jobs prospects it would damage," Mr Willox said.
"Equally unrealistic is their claim for awards to include an obligation to pay an additional 0.5 per cent superannuation contribution on top of the 9.5 per cent required by the Superannuation Guarantee. It is nothing less than irresponsible."
However, ACTU secretary Dave Oliver said there were signs that Australia was developing "a working poor with financial stress, deprivation and poverty on the rise among low paid workers".
"The annual wage review is the only chance for 1.86 million of Australia's lowest paid workers to get a pay rise and it helps set the pay and pay increases of many more," Mr Oliver said.
The ACTU will also for the first time make a claim for an increase in compulsory superannuation contributions, along with its request to increase the minimum wage from from $640.90 to $667.90 per week, raising the minimum hourly rate from $16.87 to $17.58 per hour.
The ACTU submission, to be made on Friday, includes an application for compulsory superannuation to rise from 9.5 per cent to 10 per cent to compensate workers for the federal government's decision to freeze superannuation increases until 2022.
Mr Oliver said a full-time worker on the national minimum wage would be $3.20 per week, or $167.09 per year, worse off as a result of the freeze in minimum superannuation entitlements.
"For a 20-year-old minimum wage worker, the Abbott government's decision to not pass on the 0.5 per cent increase in compulsory super until 2021 means they will be $18,401 worse off in retirement," he said.
Compulsory retirement benefits were expected to rise to 10 per cent on July 1 this year under the Superannuation Guarantee before Treasurer Joe Hockey last year announced a freeze on any increases.
Unions have campaigned for compulsory superannuation to eventually increase to 12 per cent.
"Mr Hockey should support the half per cent increase on the basis of his suggestion last year that employers would pass on the cut in superannuation through wage increases," Mr Oliver said.
Kate Carnell, chief executive of the Australian Chamber of Commerce and Industry, said the ACTU's push for a minimum wage increase of more than double the rate of inflation was unsustainable.
She also said the review "has nothing to do with retirement savings".
She said the Australian Chamber of Commerce and Industry would be making a submission arguing for a "cautious and restrained increase" in the minimum wage, given the softer labour market and 12-year high in unemployment.
"A $27-a-week increase in the minimum wage will make it much harder for businesses to hire new staff and may prompt some employers to let go of existing staff or reduce unprofitable hours," she said.
"Such a steep increase would make it harder for employers to afford low-skill workers and young people seeking entry-level positions. With the added proposal to increase compulsory superannuation contributions, the claim is effectively more than $30 per week."
