Insisting that the economy can afford it, Chancellor George Osborne has proposed an above-inflation rise in the national minimum wage.
The current rate, which is set at £6.31 for people over the age of 21, has not increased commensurate to inflation since 2008 and has therefore fallen in real terms.
The minimum wage rate is set by the independent Low Pay Commission, which includes representatives of business, unions and academia. It is due to make its latest recommendations on the minimum wage next month.
Business Secretary Vince Cable, who oversees the commission, said 'I want living standards to go up for the whole country as we fix the economy'.
With inflation set at 2%, the Chancellor's proposed minimum wage increase is 10% – raising it to £7 an hour by 2015.