National Living Wage to rise to £7.50 an hour from April 2017
The National Living Wage is to increase by 30p an hour to £7.50 next year, but unions will continue to campaign for the rate to be extended to younger workers.
Chancellor Philip Hammond said the increase for over-25s from April was worth more than £500 to a full-time worker.
The TUC countered that workers aged 24 and under would continue to be paid hundreds of pounds less.
Katherine Chapman, director of the Living Wage Foundation, which sets a higher voluntary rate for a living wage, said: "We welcome any pay rise for low-paid workers, especially now in these uncertain times with speculations about food and other prices set to rise.
"The reality, however, is that a fifth of UK workers aren't paid enough to live on. There's still a gap between the Government minimum and our real Living Wage of £8.45 in the UK and £9.75 in London, which is based on what families need to earn to meet everyday costs.
"We encourage as many businesses who can to join our movement of 3,000 UK employers who are going further to pay a real Living Wage because a hard day's work deserves a fair day's pay."
Louise Boland, managing director at Opus Energy, said the higher rate from next year would put added financial pressures on small businesses, adding: "Ultimately raising the living wage makes good business sense.
"The extra 30p an hour has the potential to reduce staff turnover, close the gender pay gap with more than three million women set to benefit, boost employee engagement, along with the benefits to the economy via an incremental boost to disposable income. This is clearly a step in the right direction for society and business."
The Treasury said one million workers will receive a pay rise because of the higher rate next April, adding that the Government's target was for the Living Wage to reach 60% of median earnings by 2020, subject to sustained economic growth.
The Government will also accept all the recommendations for minimum wage rates from next April, meaning an increase from £6.95 an hour to £7.05 for 21 to 24-year-olds and a 5p an hour rise for 18 to 20-year-olds.
The rate for 16 and 17-year-olds will also rise by 5p an hour to £4.05, and by 10p to £3.50 for apprentices.
An extra £4.3 million a year will be spent to strengthen enforcement of the national minimum wage, including new HM Revenue and Customs teams.
A campaign will be launched to raise awareness among workers and employers of their rights and responsibilities.