By Barbara Kollmeyer
Ahead of the U.K. budget this week, the government announced Tuesday it would raise the minimum wage for those over 23 years old to £9.50 an hour, which is about a 6.6% hike.
In dollars, that’s about $13.11, and when it comes to how that stacks up with the U.S., fairly competitive depending on where you live. The American federal minimum wage is $7.25, but many states also have their own laws. California and Washington, D.C., offer the highest minimum wages at $14 and $15.20, respectively, while London would have New York’s $12.50 beat. A good chunk of U.S. states hold to a roughly $7.25 minimum wage.
Governments and central banks on both sides of the Atlantic have been keeping a beady eye on wages and rising prices for consumers, with fears that the rises in prices may outstrip the gain in wages.
“This rise is in line with recent annual wage increases in the private sector and probably will not dent employment immediately,” said Kallum Pickeringsenior economist at Berenberg, in a note to clients. “However, in the long-run, policy makers need to take care not to create excessively high wage floors through such policies. Too-high minimum wages can slow the labour market recovery from economic shocks by preventing wages from adjusting downward when unemployment rises.”
The British pound /zigman2/quotes/210561263/realtime/sampled GBPUSD 0.0000% was up another 0.2% to $1.3802 on Tuesday, for a total October gain of 2.4% so far amid hawkish statements by Bank of England officials and many analysts expect interest rates to increase before the end of 2021. The Autumn U.K. Budget and U.K. spending review will be announced by Chancellor Richi Sunak on Wednesday.
“The plan involves a sizable increase in taxes as a percent of GDP to return borrowing to a sustainable level while funding a much-needed multiyear program of public investment as well as higher current expenditure as a % of GDP,” said Pickering.
Elsewhere on Tuesday, the FTSE 100 index /zigman2/quotes/210598409/delayed UK:UKX -0.71% climbed 0.6% to 7,270, the highest level seen since early 2020. The consumer goods sector was the best performer, while utilities struggled. Shares of Reckitt Benckiser /zigman2/quotes/206856088/delayed UK:RKT -0.88% climbed 6% after the maker of Calgon, Lysol, and Finish posted market-pleasing results.
“There’s a lot to like in this morning’s update from Reckitt Benckiser. There is a notable hike in sales forecasts, impressively, every division has outperformed expectations and the company has maintained margin guidance despite the inflationary pressures and supply chain issues which it, like all of its peer group are facing,” said AJ Bell investment director Russ Mould.
Shares of sports betting group Entain /zigman2/quotes/207493593/delayed UK:ENT -4.41% led the decliners with a 7% drop after DraftKings /zigman2/quotes/213120645/composite DKNG -1.85% said it won’t make a firm offer .