Ongoing recruitment problems mean a modest minimum wage increase is unlikely to have major impact on wage inflation, according to the Chartered Institute of Personnel and Development (CIPD).
CIPD reward adviser Charles Cotton said: "While it is true that any dramatic increases in the minimum wage risk damaging business and the economy, the reality is that modest increases are unlikely to be the biggest motivator behind pay pressures at the moment.
"Sectors such as social care, retail and hospitality are traditionally seen as likely to find the minimum wage onerous, but with all experiencing difficulties recruiting and retaining staff, the minimum wage is unlikely to be the main upward pressure on wages," he said.
"Official figures show wage inflation remaining subdued, despite a continuingly tight labour market. A modest increase in the minimum wage is unlikely to dramatically change this picture."
The CBI has said business will be ready for a rise to in the minimum wage to £5 by 2006. However, some unions are calling for a £6.50 minimum.