UNION leaders pledged last night to fight for a higher national minimum wage, while condemning the plan to pay younger workers a lower standard rate.

The Prime Minister has received a report which recommends a minimum wage of #3.60 an hour for workers aged over 21 - a figure more than #1 below some demands.

According to union leaders, the proposal to pay workers aged 18 to 21 the lower rate of #3.20 an hour will create a ''two-tier'' system that would turn that age group into second-class citizens.

The 400-page report from the Low Pay Commission also recommends that young workers aged 16 to 18 should be exempted from the minimum wage guidelines.

The business community was yesterday divided over the proposals. But union leaders immediately said they would fight on for a minimum wage of at least #4-an-hour for all workers regardless of age.

Mr John Edmonds, general secretary of the GMB, said Ministers ran the risk of creating social alienation if they brought in a ''two-tier'' wage.

''We are very disappointed that the report is suggesting that over one million young people should be excluded from the minimum wage,'' he said.

''The Government will be making a very large political mistake indeed if it accepts that recommendation.''

A two-tier wage would send the wrong message to young people and would exclude them from a measure specifically aimed at tackling poverty and social exclusion. ''They will be regarded as second-class citizens receiving second-class wage rates.''

Mr Robert Parker, the GMB's Scottish regional secretary, said: ''We are only asking for a fair and decent wage for workers who are in low-paid jobs.''

Mr Peter Hunter, assistant director of the Scottish Low Pay Unit, said: ''It's hard to describe #3.60 as anything more than a token gesture. There is a real danger that this figure will send a message to cooks, cleaners, and other low-paid workers that they neither need nor deserve an increase in their pay.''

The Transport and General Workers' Union also criticised the proposals. General secretary Bill Morris made it plain his union would continue to press for a higher basic pay rate.

''The low-paid need more than #3.60 an hour just to survive and keep poverty at bay. But the real need is incentive, it's about productivity, it's about training, and it's about investment. You won't get too much of that done paying #3.60 an hour.

''We have opted out of the value-added sector of world competitive products, that's what we have done. It's a missed opportunity.''

Mr Rodney Bickerstaffe, general secretary of Unison, Britain's biggest union, said he would carry on campaigning for #4.61-an-hour - half male median earnings.

''Surely at the end of the 20th century, to sweat someone in a rich nation like ours for as little as #3.60-an-hour does not do credit to a people committed to fairness and social justice.

''I will continue to campaign to get the level raised. I hope it doesn't take as long to get a decent level as it took to get the minimum wage established in the first place,'' said Mr Bickerstaffe, who has been campaigning for a minimum wage for 30 years.

Mr John Monks, TUC general secretary, said: ''The figure is a reasonable step in the right direction.

''It's not as much as we would have wanted - we were pitching for over #4 - but getting a minimum wage properly established in a real step towards eliminating poverty pay is very much our objective.''

First hints that the Government might favour a lower rate for the young first emerged at the Labour Party conference last October. At that time, Peter Mandelson, the Minister Without Portfolio, let slip that he favoured exemptions for 18 to 26-year-olds.

The commission, set up by the Government, has spent the past six months touring the country collecting evidence from bosses and workers alike.

Meanwhile, the business community appeared to be more divided over the proposals than when they were first announced on Wednesday evening.

Then, Sir Colin Marshall, president of the Confederation of British Industry, who earns #265,000 a year as chairman of British Airways, said that #3.60-an-hour would be ''acceptable''.

However, yesterday there were warnings from some business people that jobs could be lost, productivity damaged and even beer prices could rise.

Trade and Industry President Margaret Beckett is expected to announce the details of the minimum wage figure to MPs in a Commons statement next month.

Downing Street officials yesterday played down complaints from the unions and said that it represented another Labour manifesto pledge delivered.

''It is one of several measures we are introducing to deal with the poor sections of society, and it is something we are happy to trumpet,'' Mr Tony Blair's official spokesman said. ''There doesn't appear to be an argument anymore regarding the minimum wage, and that's progress.''