Prime Minister Gordon Brown has announced that the national minimum wage will rise to £5.73 an hour in October.
The rise is a 3.8 per cent increase from £5.52. The rate for 18 to 21-year-olds will go up from £4.60 to £4.77, while 16 to 17-year-olds will get £3.53, up from £3.40.
Mr Brown said that the minimum wage had gone up by 60 per cent since the policy was introduced by the government in 1999.
The original level when the minimum wage was introduced was £3.60 an hour. It was last increased in October 2007.
Although unpopular with many small businesses, the minimum wage scheme remains one of the Government`s crown jewels.
Business Secretary John Hutton said: "The national minimum wage remains one of the most important rights introduced by the Government in the last decade.
"Before it was introduced, some workers could expect to be paid as little as 35 pence an hour. Our legislation has ensured that can no longer happen.
"I am proud of the minimum wage. It makes a real difference to the lives of many of our lowest-paid workers and protects them from exploitation. It also creates a level playing field for business and boosts the economy."
Mr Brown also revealed plans to crack down on employers who are not paying their employees the correct amount, with the maximum penalty replaced with an unlimited fine.