The idea that all wages should be brought up to the UK average is a mathematical nonsense: as the lower pay is boosted the average increases making yet more people eligible for a rise.

If it is an objective that everyone earns at least the average, ultimately we would all be paid the same as the highest footballer of City dealer. It is thus refreshing that the Low Pay Commission has finally decided the minimum wage should not outstrip the general increase in average earnings.

The £5.52 an hour minimum rate that will apply from October 2007 is an increase of only 3.1 per cent – less than the RPI measure of inflation and less than the increase in average pay set by the market.

There is nothing good about low pay, but the way to eliminate it is through a thriving economy that creates wealth, not by forcing companies to pay people a rate artificially subsidised by higher-paid workers or the provides of capital – or which is passed on to the customer, pushing inflation higher and thus eroding the value all wages.

Since the minimum rate was introduced in 1999 at £3.60 an hour it has increased by 53 per cent, far outstripping the pay rises enjoyed by the country’s other workers. Lord Turner, the outgoing chairman of the Low Pay Commission, is thus to be applauded for having conceded that the phase when his organisation was committed to above-average increases is now over. The new rate set by his successor, former Marks & Spencer chairman Paul Myners, is the first tangible sign of the new policy.

It is the market that allows City traders and footballers to receive high wages: the same market must set pay at the other end of the scale. Low pay is not ideal, but it is better than no job and no pay.

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