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New report: Virginia-North Carolina comparison shows value of raising the minimum wage

Be sure to check out a new report that the good folks at Carolina Forward have published this morning about the minimum wage. As it notes, the fact that Virginia raised its wage substantially and that North Carolina has not, provides a handy experiment to see which of two very similar neighboring states is making the best policy choice.

Not surprisingly, it’s Virginia.

Here are some excerpts from “The Great Wage Experiment”:

In 2019, Democrats won control of the Virginia state legislature, sealing unified Democratic control of the Commonwealth for the first time in 26 years. Among their very first priorities upon assuming office in 2020 was raising Virginia’s state minimum wage. Democrats promptly passed a phased-in minimum wage hike, which will bring the state minimum to $15 an hour by 2026. As currently structured, the phase-in looks like this:

  • $9.50 effective May 1, 2021
  • $11.00 effective January 1, 2022
  • $12.00 effective January 1, 2023
  • $13.50 effective January 1, 2025
  • $15.00 effective January 1, 2026

(Republicans, who won control of the Virginia State House and governorship in 2021, have vowed to repeal the minimum wage hike. But because Democrats still control the Virginia State Senate, it is unclear whether they’ll actually be able to do so.)

Virginia’s conservative big business community, led by its state Chamber of Commerce and most Republicans, loudly opposed the 2020 minimum wage hike by predicting dire consequences for job growth, calling higher wages a “job killer.” They warned of massive layoffs, a cratering of small businesses, and a dimmer “business climate” that would send jobs to lower-wage states – like North Carolina, Tennessee, or Georgia. “The Chamber,” as it is known in most states, spent heavily on advertisements opposing the increase, only to see Democrats pass it anyway.

This set up a large-scale natural experiment between Virginia and North Carolina, two states with comparable demographics and economic conditions, and which share deep and obvious historical similarities. North Carolina’s minimum wage has not budged, while Virginia’s has and will continue to do so. One may therefore examine each state’s economic track record for signs of impact.

On May 1, 20201, Virginia’s minimum wage rose 30%, from $7.25 to $9.50. Employment data is now in from the second half of 2021, which allows us to evaluate the minimum wage opponents’ claims that raising the wage would cost the Commonwealth jobs.

The result? Higher wages actually led to more job growth – not less.

The report goes on to explore several data points and show that unemployment fell lower, and that growth in industries that employ low wage workers rose faster, in Virginia than North Carolina.

The obvious early conclusion here is that Virginia’s minimum wage hike did not lead to job losses. It’s difficult to conclude that Virginia’s wage hike caused faster job growth all on its own (though we also cannot rule it out) – but we can, at least, conclude that it clearly did not hurt growth. On January 1st of this year, the Commonwealth’s minimum wage rose again to $11 per hour, from $9.50. We should continue to watch employment data to see if this trend continues.

In conclusion, the report points out that several states have raised their minimum wage of late and none are seeing the job losses forecast by the doom and gloomers in the GOP and its business community allies. As the report concludes:

The debate over minimum wage hikes has never been primarily about real-world evidence, but rather over philosophical beliefs. Empirical economic evidence can do little to sway beliefs like these. Folks with a more pragmatic viewpoint, however, may find the real-world evidence for wage hikes compelling.

Higher minimum wages grow the economy and jobs, lead to more broadly shared prosperity, and a better society for everyone. And best of all, raising the wage is extremely popular. Why not learn from Virginia’s example?

Why not indeed. Click here to explore the full report.

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