Unveiling a 12p rise in the minimum wage, the Business Secretary was asked if he agreed it was "mad" that the band had made £5 million each over the past year.
Vince Cable was forced to issue an embarrassing clarification after appearing to criticise pop group One Direction for earning too much money.
Mr Cable replied that "much of it is downright insensitive and grossly immoral".
However, aides stressed that the Liberal Democrat had "misheard" the question at the central London event, and was referring to the pay of chief executives.
In an interview with Sky News he said: "I don't want to attack One Direction; this is one particular group who are apparently very popular and very successful so I have nothing against them.
"But there is a general issue of chief execs in particular who are paid well beyond what can be justified in terms of the performance of their companies and that's something the Government is now trying to address."
One Direction - made up of singers Zayn Malik, Niall Horan, Harry Styles, Louis Tomlinson and Liam Payne - made a total of £25 million last year, according to the Sunday Times Rich List.