A new report gives the minimum wage an entirely clean bill of health. Pressure is mounting from unions and low pay campaigners for the government to increase its value this April. BBC economics reporter Chris Giles looks at the future for the minimum wage.

Go back three years to the 1997 election, or even to the 1992 election, and Labour's proposals for a national minimum wage were one of the most important differences between them and the Conservatives.

"Millions of jobs were at risk", the Conservatives claimed if a minimum wage was introduced. But after nearly a year of experience with the minimum wage, talk of job losses has all but disappeared, and the new Shadow Chancellor, Michael Portillo, has said that the Conservatives will not repeal the minimum wage.

Now Incomes Data Services (IDS), a respected research group on employment and pay issues, reported that it could find no evidence of an overall negative impact on jobs.

They also reckon the minimum wage hasn't had much effect on differentials between staff on different grades, didn't cause a sharp upward jump in average earnings and that firms found it relatively easy to implement.

Problem for the government

One of the only things to have stayed the same in the whole debate is that the unions and low pay campaigners are calling for a much higher level than £3.60 for the main adult rate.

And with all the evidence the rate has had little negative impact, they're sure to kick up a huge fuss if the rate is not increased this year.

That leaves the government with a bit of a problem. Sitting on Trade Secretary Stephen Byers' desk is a report from the Low Pay Commission on the economic impact of the minimum wage in its first year.

Rumours are it comes to similar conclusions to the IDS report - and suggests an increase in April would not be a disaster.

Stephen Byers has had it since last December, and says the government will respond soon. But there seems to be a reluctance to publish the report - and that has set the political rumour factory going with the word going round that there will be no increase.

A cautious approach

Putting the rumours to one side, what we know is the government has said it will not uprate the minimum wage annually or link it to an index such as retail price inflation but has not decided yet what to do this year.

In the House of Commons recently, Stephen Byers said: "Any increase will need to be considered in the light of the economic conditions at a particular time.

"I know that this cautious approach will be criticised in some quarters, but it is important that this radical change in the labour market is introduced successfully".

The delay in responding to the Low Pay Commission report seems to indicate there is a vigorous debate within government about whether to increase the minimum wage this year - and what to do about the lower youth minimum paid to 18 to 21-year-olds.

Or, more cynically, the government might be delaying and downplaying the likelihood of an increase to maximise the impact of the new when a small increase is granted.

But the government is right to be careful when it comes to the minimum wage level.

Even though there has been no visible impact on jobs of the £3.60 minimum, it would be madness to assume it's had no effect at all and no one has lost their job as a result.

Economic lessons

Economics is quite clear on the impact of a high minimum wage. If it means paying people much more than they are worth, employers won't, and unemployment will rise.

It's only if employers have been getting away with paying people less than they are worth - or in other words by exploiting them, that a minimum wage doesn't reduce employment.

The research so far finds no net impact on jobs - but there has not been an attempt to disentangle whether that's because people were being exploited or simply because the economy has been doing well.

And the government would like to have a better idea of the truth of this before it raises the wage rates significantly.

As far as winning the next election is concerned, the government's first priority is to avoid any evidence that their policies have led to job losses, even if that means low paid workers lose out.