Minimum wage plans for under 18s

School-leavers could be protected by the national minimum wage under a government proposal to extend it to 16- and 17-year-olds.

The move won immediate praise from trade unions but there was opposition from business leaders, who said it could add to costs and red tape.

Nevertheless, it could prove a vote-winner and there was speculation that Tony Blair might include it in the next Labour election manifesto.

Trade Secretary Patricia Hewitt has ruled out protecting 16- and 17-year-olds in the past because higher wages could lure teenagers out of school and into work.

But ministers appeared to signal a change of tack in a Low Pay Commission investigation, released on the Department of Trade and Industry website. It said: "The Government introduced the national minimum wage to end exploitation through low wages and to make work pay.

"It would be wrong to allow 16-and 17-year-olds in employment to be exploited through low wages."

Under current laws, workers aged 18 to 21 must be paid at least £3.80 an hour, while the rate for over-21s is £4.50 an hour.

No decision has yet been made on what minimum level would be paid to 16- and 17-year-olds, but it is likely to be below £3.80.

The TUC claims that of half a million 16- and 17-year-olds currently in work, 65,000 earn less than £3 an hour.

Ministers see the minimum wage as one of the biggest successes for Tony Blair's government. Introduced at a time of rising employment, it produced no discernable impact on the jobs market despite dire Tory predictions that it would cost up to a million jobs.

Tory shadow chancellor Oliver Letwin gave a cautious response to the Government's latest move, suggesting that the higher wage might make firms less likely to employ school leavers.

Matthew Knowles, principal policy adviser for the British Chambers of Commerce, said: "There would be three levels of minimum wage and that will be a nightmare.

"We are worried about businesses having their hands further tied by red tape when they should be looking after their customers."