With Virginia’s governor’s race heating up, the $15 minimum wage is getting some extra attention. But lawmakers interested in trying out this policy should look at the consequences of high-wage policies in neighboring Maryland and Virginia.
Let’s rewind. Virginia lawmakers approved a series of wage hikes in 2020, spiking the minimum wage from $7.25 in 2020 to $12 by 2023. The legislation originally included another hike up to $15 per hour by 2026, but first required another round of lawmaker approval. That plan was halted when Governor Glenn Youngkin vetoed bills to make the final jump to $15 in 2024, citing concerns the mandate would be too burdensome for small businesses and could lead to significant job losses. Now the state’s minimum wage mandate is raised annually based on inflation, currently $12.41 per hour.
Governor Youngkin’s warning was not misplaced. The large majority of studies on minimum wage hikes find they cause job losses. A majority of American labor economists agree that wage hikes contribute to inflation as businesses try to adjust to rising wages through price increases, and agree they especially hurt younger, entry-level, and tipped employees.
For more evidence on the harms of rising minimum wages, lawmakers in Virginia should look to neighboring D.C. and Maryland.
Washington, D.C. has one of the highest minimum wage rates in the country, rising every year based on inflation, up to $17.95 per hour this year. In 2022, D.C. added insult to injury, enacting a new law eliminating the city’s tip credit, creating some of the region’s most aggressive wage policies, which it later amended. In the last five years, Maryland has also spiked its state minimum wage from $11 to $15 per hour, but unlike D.C., has protected its tip credit, freezing the tipped minimum wage at $3.93 per hour.
Both of Virginia’s higher-wage neighbors are case studies on the negative impacts of raising hourly wage mandates, especially when they target tipped restaurant workers.
In the last five years, Virginia’s restaurant sector employment has been more resilient against economic trends, while Maryland and D.C. have seen larger losses during the pandemic, and sluggish growth in recovery. The latest quarterly jobs data shows Virginia restaurant employment declined by 0.8% – but that was roughly half the job loss impact in Maryland and D.C. Looking back further, Virginia’s restaurant industry experienced losses during the pandemic, but the losses were smaller than the high wage markets of Maryland and D.C. In fact, Virginia’s restaurant industry is the closest out of its neighbors to reaching pre-pandemic jobs numbers.
This data suggest that while there are many economic factors that contribute to industry growth, raising wages only exacerbates negative impacts on businesses, causing them to shed jobs.
For Washington, D.C. in particular, having the most extreme wage mandates in the region began to quickly take a toll on restaurants. Under such a high wage mandate while eliminating its tip credit, D.C. shed thousands of job losses and saw waves of restaurant closures. It got so bad, city officials enacted a fix – restricting future tipped wage hikes and protecting a portion of the tip credit to limit the pain for full-service restaurants. Maryland’s minimum wage remains at $15 per hour, but state lawmakers continue to reject attempts to eliminate the state’s tip credit, citing concerns about the losses in D.C.
Virginia lawmakers should proceed on any wage hike proposals with caution. Raising the minimum wage may sound enticing, but for Virginia’s economy, it risks being a costly repeat of losses experienced in Maryland and D.C. Economists from Miami and Trinity Universities estimate a $15 mandate in Virginia would threaten over 12,000 jobs, and even more if a proposal includes tip credit elimination.
Rather than repeating D.C.’s aggressive approach, state leaders should focus on keeping Virginia’s economy competitive and expanding opportunities for workers and small businesses to thrive.