The national minimum wage for adults is to increase by 15p an hour to £6.08 in October 2011.
The wage for young people will get lower increases: the rate for 18 to 20-year-olds will increase by 6p to £4.98 an hour and the rate for 16 to 17-year-olds will increase by 4p to £3.68 an hour.
The increase comes after recommendations from the Low Pay Commission.
David Frost, director general of the British Chambers of Commerce, said: “The change to the national minimum wage rates announced today is the wrong increase, at the wrong time.
“With over a million unemployed, the priority has to be getting people back into the job market. Youth unemployment is at a record high and we can’t afford to price young people out of work.
“It is clear from speaking to businesses that a significant number are having to freeze wages in 2011. These changes will be a barrier to job creation, and ultimately economic recovery.”
Dr Neil Bentley, deputy director-general at the Confederation of British Industry (CBI), said: “This moderate increase strikes the right balance during a period of economic uncertainty.
“It means that workers on the minimum wage will not fall behind the rest of the workforce in terms of pay rises. A larger rise would have hit businesses hard and could have put many lower paid jobs on the line.
“On the increase to the youth rates of the minimum wage, the decision to adopt a more cautious approach to the youth rates reflects the record levels of young people who are unemployed. We must not put barriers in the way of school leavers getting into work.”
Len McCluskey, general secretary of Unite, said: “This small increase in the minimum wage is completely outstripped by the current rate of inflation. The rise will do little to help the lowest paid in our society keep up with the rising cost of food and fuel.
“The paltry increase in the minimum wage for the under twenties is an insult. There is no reason why younger workers should be paid less and have to struggle more to keep up with the cost of living – it is tantamount to exploitation. Workers should be paid the rate for the job regardless of age.”
Read more articles on increases to the national minimum wage