The increases announced will support the wages and living standards of low-paid workers at a time when pay growth is robust across the economy. They come against a backdrop of strong GDP forecasts, employment returning to pre-pandemic levels and businesses advertising record numbers of vacancies.
Workers on the minimum wage are set to get a pay boost from April, with the rate for those aged over 23 rising to £9.50 an hour from £8.91; a full-time worker will get £1,074 extra a year before tax.
The government has faced pressure to help younger, lower-paid workers, who are among the worst hit by the pandemic. The 6.6% increase in the minimum pay rate for those aged over 23, is more than twice the current 3.1% rise in the cost of living.
Minimum pay rates for younger workers are also set to go up, those aged 21-22 will see an increase £8.36 to £9.18 an hour and the Apprentice Rate will increase from £4.30 to £4.81 an hour.
Chancellor Rishi Sunak said the rise "ensures we're making work pay and keeps us on track to meet our target to end low pay by the end of this Parliament".
But Labour's shadow chief secretary to the Treasury, Bridget Phillipson, described it as an "underwhelming offer" that would be mostly swallowed up by tax rises, universal credit cuts and higher energy bills.
Bryan Sanderson, Low Pay Commission Chair, said:
“The rates we recommended will put money in the pockets of care-workers, food distributors and many other groups of the lowest-paid members of our society up and down the UK. Many of them have made a vital contribution during the last few difficult months.
The impact on communities is considerable Blackpool for example will benefit by at least £6.1m from pay increases to its low-paid workers.
The pandemic has been an exceptionally difficulty period for businesses and workers alike, but the labour market has recovered strongly, and the economy is expected to continue to grow over the next year. This is attributable in no small part to comprehensive Government support.
Our value as a social partnership is to find a consensus recommendation acceptable to both sides of industry.”