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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.
The national minimum wage is to go up to £6.50 per hour in October.
With inflation currently around 2%, the rate will gain value, and this will be a small step towards making work pay for unemployed people.
The level is set by the independent low pay commission, and business secretary Vince Cable has indicated that he will accept its recommendation.
It is currently £6.31, and has been losing value for years as inflation has outstripped the tiny cash rises in its value.
Chancellor George Osborne has called for an above-inflation rise in the minimum wage.
Following Labour's successes in putting the cost of living at the top of the political agenda, Osborne has joined the debate and wants a £7-per-hour minimum by 2015.
After years of smaller rises this would restore the link to inflation.
The minimum wage is currently £6.31 for those aged 21 and over with lower levels for younger workers.
The Conservative party is considering ways of raising the minimum wage, the BBC is reporting.
Options include offering tax breaks to companies that pay more than the minimum and changing the law to force all but the smallest companies to pay a higher rate.
The minimum wage now stands at £6.19 per hour for older workers and will rise to £6.31 in October.
The minimum wage is to rise to £6.31 from October, the government has confirmed.
The new rate will mean a rise of 12p per hour from the current rate of £6.19.
Business Secretary Vince Cable announced the change, and confirmed an increase of 5p in the minimum wage for 18-to-20-year-olds to £5.03.
The new rates were recommended by the Low Pay Commission, although Cable also revealed that apprentices would receive 3p more, £2.68 per hour, despite the Commission recommending no change.
One in five workers is paid less than the minimum amount needed to live on.
Accountants KPMG's report suggests that up to 90% of waiters and bar staff are paid less than this amount.
The living wage is £8.30 per hour in London and £7.20 in the rest of the country.
Unlike the minimum wage, set lower at £6.19 per hour for those aged over 21, the living wage is voluntary, although it has been implemented by a number of companies in London and Manchester City Council.
A new minimum wage level comes in to effect today.
The new rate is £6.19, an increase of 11p over the previous rate of £6.08 per hour.
The minimum wage for those aged under-21 remains unchanged, with 18-20s receiving £4.98, 16 and 17 year olds receiving £3.68, while apprentices will get 5p more at £2.65 per hour.
The increase of 1.8% is below the level of inflation over the last year, and the value of the minimum wage is lower than it was last year for this reason.
It is, however, higher than the average increase in wages at 1.5%.
