He said while taxpayer-funded pay rises would not be applied «economy-wide», it was not «economically rational or reasonable» to «just ask all the operators to increase their costs.»
Education Minister Dan Tehan said Labor’s childcare plan was «a fast track to a socialist, if not communist economy».
Giving 125,000 aged care workers a similar boost is expected to cost at least another $10 billion over a decade.
Prime Minister Scott Morrison said he was «not going to engage in Bill Shorten’s spend-a-thon» and warned Labor must explain how it was going to deliver the pay rises.
«What about people who are hairdressers? Is he going to subsidise their wages, too?» Mr Morrison said.
Mr Williams said it was perfectly acceptable for the taxpayer to foot the bill for wage increases in social services, saying «these are industries which the government funds … to make our society better».
But employers fear the move will have a snowball effect, pushing up wages across the economy and forcing small businesses to compete with taxpayer-subsidised salaries.
Aged and Community Services Australia chief executive Pat Sparrow said government assistance was needed to enable the sector to triple its workforce by 2050 to meet projected demand.
She said it was not viable to expect providers to fund a 20 per cent pay increase, as more than 40 per cent of residential aged care facilities were operating at a loss.
Key Senate crossbenchers — whose support may be needed to pass legislation to pay for Mr Shorten’s reform agenda — remain opposed to his plans to overhaul franking credits and negative gearing, potentially punching a multibillion-dollar hole in Labor’s policies.
Centre Alliance senator Rex Patrick said Labor’s childcare package would be considered «on its merits» and that the policy would not persuade him to back the franking credit changes.
«If they know they won’t get it through they may need to be prepared to take a hit on the surplus,» Mr Patrick said.
Australian Chamber of Commerce and Industry chief executive James Pearson said Mr Shorten’s plan to boost wages in specific industries risked undermining the independence of the Fair Work Commission.
«Artificially inflating the wages of some private sector workers and not others will have a snowball effect,» Mr Pearson said.
Mr Williams said entry-level disability support workers paid just $20.58 an hour must get a pay rise to enable the industry to attract new workers to meet increasing demand as the National Disability Insurance Scheme rolls out.
He said some disability workers had already won a substantial pay rise when Labor was last in government — and «the sky did not fall in».
The pay rises — said by the ASU to be between 23 per cent and 45 per cent — did not apply to entry-level workers, and were phased in gradually, as is the plan for childcare workers.
Labor is yet to release details of how it would administer the wages boost.
In 2013, the Gillard government established a $300 million Early Years Quality Fund to deliver pay rises to 30 per cent of childcare workers.
An investigation into the fund by the Auditor-General found the $300 million funding cap was reached within the first 13 hours.
Dana is health and industrial relations reporter for The Sydney Morning Herald and The Age.
Eryk Bagshaw is an economics correspondent for The Sydney Morning Herald and The Age.