The National Living Wage is to increase by 30p an hour to £7.50 next year, but unions will continue to campaign for the rate to be extended to younger workers.
That was one of the key announcements as Chancellor Philip Hammond delivered his first autumn statement to the Commons today.
Mr Hammond said the increase for over-25s from April was worth more than £500 to a full-time worker.
The TUC countered that workers aged 24 and under would continue to be paid hundreds of pounds less.
Katherine Chapman, director of the Living Wage Foundation, which sets a higher voluntary rate for a living wage, said: “We welcome any pay rise for low-paid workers, especially now in these uncertain times with speculations about food and other prices set to rise.
“The reality, however, is that a fifth of UK workers aren’t paid enough to live on. There’s still a gap between the Government minimum and our real Living Wage of £8.45 in the UK and £9.75 in London, which is based on what families need to earn to meet everyday costs.”
The Chancellor also revealed plans to cut corporation tax, build more houses and continue with devolved powers to regions around Britain.