Teenage workers paid as low as £1.25 an hour will be protected from exploitation under a move to extend the minimum wage to 16 and 17-year-olds, the Government has announced.

The new hourly rate will be £3 from October, bringing the UK into line with other leading industrialised countries.

The adult rate will rise from £4.50 to £4.85, benefiting an estimated 1.6 million low-paid, mainly female, workers.

The rate for 18 to 21-year-old workers will also rise, from £3.80 to £4.10, although unions stepped up calls for a single rate covering all workers irrespective of age.

The Low Pay Commission, which recommended the increases, said that the UK's economic outlook remained favourable and the labour market was robust, so the new rates were affordable.

"Our first priority is to encourage young people to remain in full-time education or training but where they choose to work without training, we have a clear duty to protect them from exploitative rates of pay," said Trade and Industry Secretary Patricia Hewitt.

Adair Turner, chairman of the commission, said the aim was to achieve maximum benefits for low-paid workers without damaging their employment prospects or hitting the economy.

"We recognise the scale of the increase will be a challenge for some businesses and we will need to monitor it very carefully over the coming year."

Business leaders were cautious and warned that 16 and 17-year-olds could now be tempted to find a job rather than stay on in further education.

CBI deputy director-general John Cridland said: "The CBI understands why this has been done but the jury is out on whether it will do more harm than good."

Tuesday March 16, 2004