The national minimum wage needs to be raised to £6.94 per hour, according to a government enquiry.
Yesterday business secretary Vince Cable announced an increase in the rate to £6.50 from October, 3% higher than the current £6.31.
But the Resolution Foundation enquiry, chaired by Sir George Bain, who originated the UK minimum wage, says that this is not enough to meet the needs of the working poor after years of below-inflation rises.
He wants to see a bigger role for the Low Pay Commission, which is responsible for the minimum wage, including guidance on how long it will take the rate to recover its lost value.
Bain believes the government should have an "explicit long-term ambition of economic policy to reduce the incidence of low pay", helping make jobs financially viable for unemployed people.
The coalition has made much of its slogan that it wants to 'make work pay', but so far this has been limited to decreasing the value of benefits so even poverty-level work is more lucrative.
Even after this the number experiencing in-work poverty is now higher than the number of workless people experiencing it, and the government has been contributing to this through cutting tax credits as well as the fall in the value of the minimum wage.
It has refused to make the one change which would make a big difference - making the living wage compulsory.
This is set at £8.80 in London and £7.65 outside it, showing how far the minimum wage needs to rise to ensure work really does pay.
The issue of different pay in different sectors is also one the enquiry tackled; it suggests the minimum wage should not be a single rate but should be adapted to the standards of different industries, raising the prospect of higher pay in financial services and others.
As with the living wage, the enquiry recommends a higher minimum wage in London.