The national minimum wage will increase by 19p per hour to £6.50, business secretary Vince Cable has announced.
Cable has accepted a recommendation by the Low Pay Commission (LPC) to increase the rate by 3%, representing the first minimum wage rise in six years that is higher than inflation.
The new rates will come into effect in October and should increase the number of jobs covered by the minimum wage by more than one-third, to 1.25 million.
“The recommendations I have accepted today mean that low-paid workers will enjoy the biggest cash increase in their take-home pay since 2008,” said Cable.
“I urge businesses to consider how all their staff – not just those on the minimum wage – can enjoy the benefits of recovery.”
In a report issued this month, the LPC pointed out that higher than average wage increases for low-paid workers have not had an adverse impact on employment levels.
However, it added that a sustained increase in wages would depend on increased productivity.
It recommended: “For wage increases to be sustainable they must be affordable, which generally requires an overall increase in output per head.”
Dave Prentis, general secretary of the union Unison, welcomed the rise – but said that it should be closer to the level of the living wage, an hourly rate calculated according to the cost of living in different parts of the UK. This is £8.80 in London and £7.65 outside of the capital.
He said: “Across the country people are struggling to make ends meet. The sooner we move to a living wage the better. The real winners today will again be payday loan sharks who prey on working people, unable to bridge the financial gap between what they earn and what their families need to survive.”