Businesses whose employees need social welfare to survive are being subsidised by the taxpayer, a leading think tank says.

Business and Economic Research Limited said all New Zealand businesses should pay their employees a living wage of $20.20.

Chief economist, Dr Ganesh Nana said companies whose employees need Working for Families or other assistance are being bailed out by taxpayers.

"They must realise that they are not doing it on the back of a pure market mechanism, they are doing it on the back of a government subsidy. The government is picking up the tab to make sure to make sure people have enough to live on."

BERL itself has recently been approved as an accredited living wage employer.