Minimum Wage Changes Spell Trouble for Virginians

• The Virginia House of Delegates voted in favor of bill HB1 that would increase the states’ minimum wage to $15 an hour by 2026.
• If enacted the minimum wage increase would lead to job loss between 34,600 and 57,700 jobs
• An increase to a $15 an hour minimum wage would cost the state of Virginia over 83,000 jobs in the three years following enactment.

On February 2nd, the Virginia House of Delegates voted in favor of a bill that would increase the state minimum wage from its current level of $12 an hour to $15 an hour by 2026. While certainly well intentioned and meant as a way to help low wage workers, minimum wage increases such as this one have negative employment effects.

The economic literature is clear on the negative employment effects that come with increasing the minimum wage. Minority communities, especially Hispanics have been found to be hurt by these increases. The Nevada Policy Institute, for example, found that a $1 increase in minimum wage is correlated with a .86 percentage point increase in Hispanic unemployment. The proposed minimum wage increase in Virginia is no exception. If enacted it is lower skilled workers and minority communities who are most likely to bear the brunt of negative employment effects.

In an effort to understand the scope of potential jobs at stake, The LIBRE Initiative used Virginia employment projections and work done by economists Jonathan Meer and Jeremy West (2015) to estimate the number of jobs at stake if the Virginia minimum wage hike goes into effect in 2026. Meer and West (2015), found that a 10 percent increase in the minimum wage is correlated with a 0.3 to 0.5 percentage-point decrease in the net annual job growth. Additionally, over a period of three years after the enactment of a 10 percent increase in minimum wage, employment is .7 percent lower than it would have been had no increase occurred.

To estimate Virginia’s projected employment level three years after a minimum wage is implemented the 10-year Virginia employment projections were used (with the latest Bureau of Labor Statistics employment data for base year 2023) to find the implied compounded annual employment growth rate.

LIBRE finds that the year after the enactment of a $15 minimum wage in Virginia would see job loss between 34,600 and 57,700 jobs. The minimum wage increase would cost the state of Virginia over 83,000 jobs in the three years following enactment.

Other states stand as examples of the consequences that can occur with rapid and drastic minimum wage increases. California for example is already seeing layoffs as employers brace for an incoming minimum wage increase later this year. Attempts to push through minimum wage increases on the federal level have also been proposed such as Senator Bernie Sanders’ bill to increase the minimum wage to $17 an hour. Estimates have shown that this effort would result in over 1.2 million lost jobs with 40 percent of those losses concentrated in the restaurant and bar industries; industries that are typically dominated by Hispanics.

In times of economic uncertainty, recession, or in response to economic shocks, Hispanic unemployment often rises significantly more than other groups as was seen during COVID-19. Virginia’s population is over 10 percent Hispanic. This demographic group supports key industries in the state such as construction, food and dining, as well leisure and hospitality – all industries that will become increasingly important with the movement of sports teams into the state. Irresponsible policy changes to the minimum wage without consideration of their serious consequences place potential employment and economic growth at risk for a state that is otherwise poised to capitalize on future opportunities that stand to benefit all Virginians.

Isabel Soto – Policy Director, The LIBRE Initiative