Virginia's minimum wage will increase on Saturday to $9.50 an hour. While economists say the typical trade off of higher wages is higher unemployment, that increase in unemployment could be delayed and the economic effects of the pandemic may interfere with measuring how many people aren’t working due to cost-cutting employers.
The increase from $7.25 an hour to $9.50 is a difference of 31% difference. For a full-time worker clocking in 40 hours a week, that's $180 for a biweekly pay period.
Generally economics research says that higher wages mean employers might hire fewer people or give workers fewer hours. Leslie Stratton, the Chair of the Economics department at Virginia Commonwealth University, said that adjustment could take time.
“It takes firms a while to adjust to higher costs,” she said. “There was some evidence that it could take one, two, even three years, for firms to cut back on employment sufficiently to make a change in employment evident.”
The effects of COVID-19 and higher than normal unemployment benefits make it hard to tell how the higher minimum wage will affect the unemployment rate in the near term, she said.
“Given the situations with COVID and the current relaxation of requirements for obtaining unemployment insurance there's some more wiggle room there in some sense,” Stratton said. Job vacancies relative to the number of unemployed are high, she said. "Thus, labor demand appears to be quite robust. Some individuals who are currently classified as unemployed may seek to accept jobs if offered jobs at higher wages. Thus, the number of unemployed could also decrease."
The average wage in Virginia is $21.74, more than double the new minimum wage, according to the Bureau of Labor Statistics.
The next scheduled increase in the minimum wage is to eleven dollars an hour. That goes into effect on January 1, 2022.