The national minimum wage is to rise by 17p - about 3% - from £5.35 to £5.52 an hour from October 2007.
The UK minimum wage was introduced in 1999
The rate for workers aged 18-21 will rise by 15p to £4.60 an hour, while workers aged 16 and 17 will get a 10p rise to £3.40 an hour.
The increases will affect 1.3 million workers and are in line with inflation.
Unions said the government should have been "bolder" and increased the minimum wage by a rate above inflation for the eighth year in a row.
The increases in the minimum wage were recommended by the government's Low Pay Commission and were accepted by the Trade and Industry Secretary, Alistair Darling.
MINIMUM WAGE LEVELS FROM OCTOBER
Workers aged 22 and over: £5.52 an hour
Workers aged 18 to 21: £4.60 an hour
Workers aged 16 and 17: £3.40 an hour
However, Mr Darling rejected a recommendation that 21-year-olds should receive the full adult rate of £5.52 an hour, saying that such a move could damage their job prospects.
Overall, Mr Darling said that the establishment of a minimum wage had been a major achievement.
"Just 10 years ago home workers could be paid as little as 35p an hour, cleaners £1.30 an hour and security guards £2.25 an hour, which was bad for families and just plain wrong," he said.
"I am proud of the minimum wage, proud of how it is helping families and proud of the role it plays in the modern economy we are delivering."
When the minimum wage was first introduced in 1999 the adult rate stood at £3.60 an hour, and it has risen at a rate above inflation every year until now.
The Low Pay Commission said that the established pattern of above-inflation rises in the minimum wage would have to come to an end.
"There has been a small fall in the number of jobs in the low paying sectors for the first time since the introduction of the minimum wage," said Paul Myners, chairman of the Low Pay Commission.
"Given these and other factors we concluded that a cautious approach to our recommended minimum wage upratings was advisable."
Employers have warned for a long time that above-inflation increases could damage business and employment prospects.
However, unions have called for a £6-an-hour minimum for adult workers.
"The Low Pay Commission could have been bolder and kept the minimum wage rising faster than pay overall," said Brendan Barber, general secretary of the TUC.
"There is still scope to continue raising the wages of the lowest paid compared to the rest of us without ill effects."