The minimum wage was last increased in October 2008
The UK minimum wage will rise by 7p to £5.80 an hour from October, the government has announced.
The rate for 18 to 21-year-olds will increase by 6p to £4.83 and for 16 and 17-year-olds will go up by 4p to £3.57.
The change will come a year after the statutory hourly rate was increased by 21p an hour.
Business leaders had recently called for the minimum wage to be left at the current levels in 2009 amid the economic downturn.
The government said that nearly one million people would benefit from October's increase.
It also announced that, from October 2010, the adult statutory minimum rate would apply to 21-year-olds. At present their minimum wage is set - together with workers aged 18, 19 and 20 - at a lower rate.
"The Low Pay Commission (LPC) has carefully examined the latest economic data before making their recommendations on the minimum wage rate, balancing the needs of workers and businesses in the current economic climate," said Business Secretary Lord Mandelson.
"The government agrees with this assessment and has accepted the recommendations for these new rates to take effect in October."
The chairman of the LPC, George Bain, said: "These are very challenging times for the UK and unprecedented economic circumstances for the minimum wage.
"We believe that the Low Pay Commission's recommendations are appropriate for this economic climate. They reflect the need to protect low-paid workers' jobs as well as their earnings."
David Frost, director general of the BCC, said: "We pressed for a freeze to the minimum wage because of the severity of the downturn and the daily loss of jobs.
"We are pleased that the increase is only a modest one, and it shows that the Low Pay Commission and the government have largely understood the seriousness of the situation. However, a freeze would have been more help to business."
Dave Prentis, general secretary of the union Unison, said he was pleased the government had ruled out business leaders' suggestions that the minimum wage be frozen.
"We think it should be increased by more than 7p an hour because it is hardly going to help low-paid workers pay the bills," he added.
John Cridland, deputy director general of the CBI, said: "This moderate increase recognises that many businesses are struggling, and helps protect jobs at a time of rising unemployment.
"The inflation-busting rise some unions had called for would have hit firms hard and put many lower paid workers on the dole.
"Over the past decade, the minimum wage has risen faster than average earnings and inflation, and a sensible, cautious approach now will help ensure this landmark piece of legislation continues to improve the lives of low paid workers for many years to come."
The news of the increase in the minimum wage comes shortly after the government said that, from October, employers would be banned from using tips and service charges to "top up" staff pay to meet the minimum wage.
However, tips not left in cash can still be used to pay restaurant's other expenses and may not mean any more money for staff.
The government also said that it would draw up plans based on the LPC recommendation that employers who show "wilful disregard for minimum wage laws" should be named and shamed.