Abdelmajid Sidi Said, secretary-general of the Union Generale des Travailleurs Algerien (UGTA), told the official APS news agency on Sunday: "This is a big achievement for the Algerian workers."
The government, the main union federation and private-sector employers had agreed on a rise in the minimum salary to 12,000 dinars a month ($166.66), up from 10,000 dinars, starting in January 2007, APS said.
The three parties also agreed on a rise in public-sector wages of between 20 and 25 per cent, and an increase of between 10 and 20 per cent in the private sector, again starting in January.
The government is earning more than $3 billion a month from energy exports because of high oil and gas prices.
Analysts say rising salaries and improving living conditions are crucial for stabilising Africa's second biggest country, which is still recovering from a decade of violence in the 1990s.
Algeria has about eight million civil servants, more than one million employees of state-owned factories and enterprises, and several hundred thousand working in its fledgling private sector.
Of the population of 33 million, 70 per cent is under 30-years old.
Unemployment is estimated at 15.5 per cent, down from 30 per cent in 2002.
Algeria plunged into brutal conflict when the military cancelled legislative elections in 1992 that a conservative Muslim party was poised to win.
The conflict cost up to 200,000 lives and damage has been estimated at $30 billion.