Summary:
- Still no evidence that higher minimum wages have hurt job growth in Virginia
- Unemployment in Virginia is lower and job production is higher than in North Carolina
- Even disproportionately low-wage industries have seen no adverse affects
In the third of our series examining the grand-scale “natural experiment” of higher minimum wages on job growth, we find that North Carolina still trails Virginia in providing high wage jobs for its people.
First, some background: in 2020, the Democratic majority of the Virginia state legislature passed a bill to increase the Commonwealth’s minimum wage. The increase was scheduled in a stepwise fashion: first to $9.50 an hour, effective in May of 2021, and then to $11/hour, effective in January 2022. It will rise again to $12/hour in January 2023, and so forth each year until it reaches $15/hour in January of 2026. (See “The Great Wage Experiment” for more information.)
Business interests commonly argue that higher minimum wages – or indeed, any minimum wage at all – lead to slower job growth, and fewer jobs available overall. Virginia’s minimum wage hike, compared to North Carolina’s unchanged wage, provides a perfect “natural experiment” to test this claim in the real world. Were increased minimum wages in Virginia the “job killer” that right-wing critics predicted?
Results so far
In the 17 months since Virginia raised its minimum wage in May of 2021 (the latest available data is through October of 2022), the number of total unemployed workers in Virginia has dropped by 58,332, while North Carolina’s figure is only 53,166. Thus, even with two increases to its minimum wages in the interim, the Commonwealth has plainly seen no adverse affect on unemployment:
Bear in mind that North Carolina has roughly 2 million more residents than Virginia (10.5 million vs. 8.6 million). So comparing the unemployment rate between both states provides a better apples-to-apples comparison of their respective positions. But even there, Virginia outperforms. Even while raising their state minimum wage to $11 an hour, Virginia has cut its unemployment rate 1.4 points (from 4.1% to 2.7%) since May of 2021, while North Carolina has cut its rate only 1.2 points (5% to 3.8%).
Finally, because low-wage workers are very disproportionately affected by changes in the minimum wage, it's important to examine effects on that group specifically. Does a higher minimum wage hurt job growth at the bottom of the ladder?
The data continues to demonstrate that it does not. Since May of 2021, Virginia has produced (and retained) more low-wage jobs than North Carolina has. We measure this by examining two industries where low-wage workers are heavily concentrated: Leisure and Hospitality, and Retail.
In the Leisure and Hospitality industry, Virginia has generated 63,300 net-new jobs since May of 2021, while North Carolina has generated only 57,000. This, again, is particularly remarkable, because Virginia's total workforce is somewhat smaller.
The difference in Retail employment is almost non-existent. Both states had almost identical job performance in Retail (with Virginia just slightly over-performing). But this alone is noteworthy, given that Virginia's performance included a significant increase in the minimum wage.
What we can learn
In summary, the real-world results of Virginia's minimum wage hike is devastating to the argument that such a policy hurts job growth. This plainly has not been the case in the Commonwealth.
In reality, higher minimum wages actually help fuel local economies, because low-wage workers are disproportionately likely to spend disposable income on necessities. Volumes of economic research have exhaustively studied this topic, and largely come to the same conclusion. Even better? Voters are strongly in favor of raising the wage as well. Raising North Carolina's minimum wage - and indexing it thereafter to inflation - would be a slam-dunk measure for state lawmakers.
Our Daily Bread: The Hourly Workers Package examines North Carolina's enormous hourly workforce. These workers are frequently ignored by state lawmakers. In this paper, we propose 6 key reforms lawmakers could enact to put hourly workers back at the front of the line for economic growth.
