(The Center Square) – Virginia business leaders are worried that a minimum wage increase set to go into effect on May 1 of next year could become a roadblock for recovery from COVID-19.
The Virginia Senate and House of Delegates approved an amendment on legislation that would increase the minimum wage from $7.25 per hour to $9.50 on May 1, 2021, rather than the original date, which was Jan. 1, 2021. Although this is a year away, some businesses are worried the extension doesn’t go far enough to protect small business owners.
“We believe that businesses need more time to recover from the COVID-19 pandemic before the minimum wage increase takes effect next year,” Barry DuVal, president of the Virginia Chamber of Commerce, told The Center Square. “Small businesses, which account for 50 percent of all employment in Virginia, face unprecedented economic headwinds, and increases to their operating costs, like the minimum wage hike enacted earlier this year, only add to their struggles.”
DuVal said the increase would disproportionately hurt rural parts of Virginia, where businesses already are struggling because of restrictions related to the state's response to the COVID-19 pandemic. Rural Virginia is seeing high unemployment rates, a loss of its tax base and an out-migration of residents. Businesses that would struggle more include retail, hotels, restaurants and other tourism-related businesses, which are already facing problems, he said.
Nicole Riley, Virginia state director for the National Federation of Independent Business, had similar concerns. She said in a phone interview that more than 50 percent of NFIB’s business partners think they won’t be back to pre-crisis performances until 2021, and some fear that it won’t be until 2022.
May 1, 2021, is going to be too soon for some businesses, she cautioned.
A minimum wage increase could discourage businesses from hiring new people, which would slow down the economic growth necessary for a speedy recovery, Riley said. A $2 increase for base minimum wage pay is a lot of money itself, and it will lead other workers to demand raises, which will increase operating costs even further, she said.
Although their members are against an increase in general, Riley said that a longer delay would be better than nothing.
Janet Muldoon, chief of staff for Senate Majority Leader Dick Saslaw, D-Fairfax, told The Center Square that Saslaw thinks it’s premature to comment on legislation with a May 1 enactment date when the economic picture caused by the pandemic is unclear. Saslaw introduced the Senate’s version of the minimum wage hike.
Del. Jeion Ward, D-Hampton, who sponsored the House version of the bill, told The Center Square that raising the minimum wage will energize the economy, rather than slow down the recovery.
“History shows us that minimum wage increases stimulate our economy, which is powered by consumer spending, and help us rebound from downturns,” Ward said. “In fact, the origins of the minimum wage trace back to our country’s response to the Great Depression in the 1930s. In the decades that followed, the minimum wage has been an indispensable tool to promote economic stability and growth, especially during recessions.”
Ward said that increasing the minimum wage also reflects Virginia’s values and shows appreciation to minimum wage workers who have put their lives on the line during the COVID-19 pandemic.
After the scheduled May 2021, increase, the legislation boosts the minimum wage two more times: to $11 per hour on Jan. 1, 2022, and $12 per hour on Jan. 1, 2023.