Statutory minimum pay rates have a stabilising effect on wage levels, according to a Europe-wide study by an employers group.

The Federation of European Employers said in a report published in the UK yesterday that almost half of the 26 countries that have legal rates revised them on January 1.

Most of the changes were "significantly" higher than the level of annual price inflation, such as in the Czech Republic where the minimum wage rose by 12.8% against an inflation rate of 2.6%.

Minimum rates have been frozen by the Dutch government since 2003, while big increases are planned in Russia over the next two years.

The adult rate rose by 35p to £4.85 an hour in the UK last October.

"Although the introduction of statutory minimum rates might create an inflationary ripple throughout a country's economy, there is little evidence to suggest that it causes any lasting economic damage," said the report.

Robin Chater, Secretary-General of the federation, said: "Statutory minimum wage rates appear to have a stabilising effect on pay levels in countries where they are in force.

"However the problem for some states such as Portugal and many poorer eastern European states is that minimum rates remain well below the level of subsistence and do not provide a realistic starting point for company pay scales."