The national minimum wage for adults increases by 12p an hour to £6.31 from today (1 October). The rate for 18-to-20-year-olds is increased by 5p to £5.03 an hour, and by 4p to £3.72 for the 16-to-17-year-olds.
The Resolution Foundation, a think tank focusing on standards of living, said that despite the increase, the minimum wage was in effect falling because of the rate of of inflation.
Inflation, as measured by the consumer prices index (CPI) fell to 2.7 per cent in the year to August, from 2.8 per cent in July. Over the same period, wages rose by an average of one per cent.
Rhys Moore, director of the Living Wage Foundation, said: "We believe that a voluntary living wage, working alongside a strong national minimum wage, is the most effective way of getting to grips with the low-wage economy."
The Living Wage Foundation says that companies should pay £7.45 an hour in the UK as a whole, and £8.55 in London.
Frances O'Grady, General Secretary of the TUC said today: "As the recovery takes hold we will need to see far bigger increases to the minimum wage to ensure that ordinary people and not just the super rich benefit from economic growth. This will need more than any one off pre-election boost - we will need sustained stronger rises if the real value of the minimum wage is to be restored.
"In addition, ministers must honour their promise to crack down on minimum wage cheats. Those who break the law must be prosecuted, publicly named and shamed and handed far heftier fines than at present.""
She concluded:'Many abuses are still going unpunished, with interns and apprentices particularly at risk of being underpaid."
The Business Secretary, Vince Cable, said he would ask the Low Pay Commission, to "look at what economic conditions would be needed to allow the national minimum wage to rise in the future by more than current conditions allow".
Research published by the Trades Union Congress (TUC) last month showed that if the minimum wage went up by four per cent to £6.56 an hour, it would free up a quarter of a billion pounds of public spending. The TUC says this shows that tackling low pay is not just good for pay packets but is also good for the public finances.
The analysis also showed that if minimum wage increased to £6.88, which is half way between its current level and the Living Wage, it would return £800 million to the public finances. Full coverage of the Living Wage could save the Treasury £3 billion a year, the TUC says.