The national minimum wage should rise by more than inflation from £6.31 to £6.50 an hour in October, the Low Pay Commission has recommended.
If the three per cent increase is approved by ministers, it would be the first time for six years that the rise has been higher than inflation.
The Commission said it believed the “economic recovery should this year allow an increase in the real value of national minimum wage”.
But it will still fall short of the £7 an hour rate that Chancellor George Osborne has suggested the wage would need to reach by 2015-16 to make up lost ground since the economic crisis of 2008.
Revealing the recommendation, the Business Secretary Vince Cable said: “It is not dramatic, but it is important.” He said the Commission had balanced “fairness against the risks to employment” if the level was set too high.
It added that the recommendation should be the start of a “new phase” boosting the rate further.
Mr Osborne said last month that the recovery meant “Britain can afford an above-inflation increase in the minimum wage so we restore its real value”.
Treasury analysis has suggested that increasing the minimum wage to £7 by 2015-16 would only have a minor impact on unemployment.
The TUC's general secretary Frances O'Grady said: “This is a welcome increase in the minimum wage, which starts to recover some of the ground it has lost since 2008.