Minimum wage hikes seem to be all the rage. By 2025, 25 states will mandate minimum wages of at least $12 per hour; 6 states will enforce at least a $15 hourly wage. This year alone, 25 states are scheduled to raise their minimum wages, leaving just 20 states pegged to the federal minimum hourly wage of $7.25.
Virginia is on the precipice of joining the ranks of wage-hikers. House Bill 1 (HB1), which passed the House of Delegates on February 2, schedules a $1.50 per hour increase to Virginia’s minimum wage to $13.50 in 2025 and $15 by 2026.
Despite advocates’ rhetoric in favor of raising Virginia’s minimum wage, the true benefits of minimum wage hikes are questionable. Robust economic literature casts doubt upon historical wage hikes and instead underscores the importance of policies that address structural factors related to earnings. Moreover, while wage hikes are sold as expansive economic reforms, the directly affected population is quite small. Across the U.S., only 1.6 million Americans — just 1.9 percent of all hourly workers — earn at or below the federal minimum wage. Thus, before Virginia joins the parade of state-level wage-raisers, lawmakers ought to assess the implications of a wage hike and consider different approaches to enhance earnings in Virginia.
Adult workers in Virginia rarely report earnings at or below the current $12 per hour state minimum wage. According to the St. Louis Fed, Virginia boasts an over $32 mean hourly wage, and a 2021 study found that just 471,039 employees in Virginia earn at or below the current minimum. Those who do earn Virginia’s wage minimum tend to be teenagers and young adults. The same report concluded that 8 in every 10 Virginians earning less than $15 per hour are between the ages of 16 and 24. Importantly, the study’s $15 per hour figure is a full $1.50 more than the 2025 wage proposed by HB1, suggesting that even the sub-25 cohort may not see any wage increase from the proposed wage hike next year. In short, the first-order outcome of HB1 will mainly change wages for a group overwhelmingly constituted by teenagers and young adults without dependents.
And according to new research by The LIBRE Initiative, there would be negative effects of minimum wage hikes for Virginians. Should Virginia raise its minimum wage to $15 by 2026, the study projects that Virginia will see 83,000 fewer jobs by 2029. Indeed, minimum wage hikes not only increase the wage bill for small firms, but they also increase variable costs related to compliance and bookkeeping, undermining business competitiveness to cause layoffs and deter hiring. Virginia’s Hispanic population will be particularly hard hit. LIBRE notes that Virginia’s population is over 10 percent Hispanic and cites Nevada Policy Institute data, concluding that a $1 increase in the minimum wage results in an almost 1 percent decrease in Hispanic employment.
Finally, minimum wage hikes neglect the larger challenge facing the Virginia workforce: discouraged workers. Virginia’s labor force participation rate is 66.9 percent, meaning nearly a third of working-age adults are neither working nor seeking work. Virginia’s policymakers should focus on elevating these citizens, providing inroads to the workforce through structural reforms to hiring and training.
Indeed, lawmakers may want to look elsewhere if the goal is to raise overall earnings in the Commonwealth. Between December 2022 and December 2023, wages and salaries increased 4.3 percent nationally as businesses tried to fill continued open positions. This upward trend in wages signifies the market’s natural adjustment to labor shortages, suggesting that the key to higher earnings lies not in heavy-handed legislative interventions but in worker skills development.
In Virginia, roughly 60 percent of all workers earning the minimum are in occupations including food preparation, office support, transportation and moving, and building and grounds cleaning. As workers gain needed income and skills in lower-paying jobs, Virginia’s focus should shift towards empirical evidence that equipping these young workers with the skills necessary to command higher wages is the better way to improve their careers.
Virginia is establishing itself as a national leader in prioritizing skill over mere educational credentials by enacting policies that allow skilled individuals without traditional degrees to access state jobs. Governor Youngkin’s executive order last fall changed state hiring practices to focus on skills rather than degrees, and HB 680 just passed the Virginia House without opposition, which would codify this bipartisan skills-based hiring focus for all state jobs.
Virginia’s leaders naturally want to boost labor markets and empower workers to command higher wages. The real solution to economic prosperity isn’t wage mandates. It is enacting flexible work policies and removing barriers to workforce development that build genuine, marketable skills, fostering a more dynamic, skilled, and prosperous workforce.