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Minimum wage in Virginia rises to $9.50, after 10-month delay during pandemic

Virginia Gov. Ralph Northam (D) gestures during a coronavirus briefing at the Capitol in Richmond.
Virginia Gov. Ralph Northam (D) gestures during a coronavirus briefing at the Capitol in Richmond. (Steve Helber/AP)

RICHMOND — Virginia's hourly minimum wage, stalled for more than a decade at the federal floor of $7.25, rises Saturday to $9.50 under a law that passed early last year but was paused as the coronavirus pandemic threatened to crush the state's economy.

The rate will gradually increase to $12 an hour by Jan. 1, 2023, under the law, which lays out a plan for it to reach $15 three years after that if the General Assembly signs off.

Senate Majority Leader Richard L. Saslaw (D-Fairfax), who has long paid workers well above minimum wage at the gas stations he owns in Northern Virginia, said the state has fallen behind many others.

“It’s a little overdue,” he said. “Hell, Arkansas is like $10 or $11 an hour.”

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The higher minimum wage takes effect along with several other pro-labor laws that Virginia Democrats pushed through in early 2020 after flipping the state Senate and House of Delegates. Also new on the books is a law giving teachers and other public employees the right to engage in collective bargaining.

The laws were initially meant to take effect in July 2020. But Gov. Ralph Northam (D) and the legislature postponed the effective dates for 10 months as the pandemic first gripped the commonwealth. They said they wanted to avoid burdening businesses already struggling with the economic crisis brought on by the health emergency.

As it turned out, Virginia weathered the pandemic better than expected. After bracing for a projected $1 billion shortfall in its two-year budget, the state wound up with a $730 million windfall as tax revenue came in higher than anticipated.

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Yet some business leaders say the changes are still coming too soon.

“This could have a bit of a chilling effect on Virginia’s economy, especially for businesses that are trying to recover from the pandemic,” said Nicole Riley, Virginia director of the National Federation of Independent Business.

Virginia joins 29 other states plus the District in setting a higher minimum wage than the national floor. Many of the others — including Alabama, Georgia, Louisiana, Mississippi, South Carolina, Tennessee and Wyoming — are conservative strongholds that seem to bear little resemblance to increasingly blue Virginia.

Even bright-red Arkansas, as Saslaw noted, reached $11 an hour in January, after several incremental hikes dictated by a 2018 ballot initiative.

Virginia’s new $9.50 minimum is lower than in neighboring states to the north ($11.75 in Maryland, $15 in the District), but higher than in those to the south and west ($8.75 in West Virginia and $7.25 in Kentucky, Tennessee and North Carolina).

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Virginia’s minimum wage will rise again to $11 in January 2022 and then to $12 in January 2023.

At that point, the minimum would stay put at $12 for a year while legislators consider whether to approve further increases envisioned — but not dictated — by the law: $13.50 in January 2025 and $15 in January 2026. If legislators do not vote for those increases by July 2024, the minimum wage would be adjusted annually to reflect increases in the consumer price index.

The plans for repeated hikes worry businesses most, Riley said.

“We’re really concerned about the pressure this is going to put on small businesses that are trying to get back on their feet,” Riley said. “In just eight short months, there’s going to be another increase to $11. That’s a significant increase for small-business owners to absorb.”

But Northam and other Democrats say the state has remained attractive to business even as it has become more friendly to workers. Amid the pandemic last year, the state created 18,000 jobs and attracted $10.7 billion in capital investment, according to Northam administration figures.

“We have made tremendous progress on bold policies that protect and support workers,” Northam said in a statement. “And as the number one state in which to do business, Virginia’s economy remains strong despite COVID — with more and more industries, companies, and talent continuing to flock to the Commonwealth.”

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One of the other laws going into effect Saturday requires state public works contractors and subcontractors to pay their workers prevailing wages on state contracts worth over $250,000. It applies to local government contracts only if the locality has adopted a prevailing-wage ordinance.

Another allows local governments the option to require companies bidding for public construction contracts to enter into project labor agreements, deals that typically dictate work rules.

Yet another new law allows localities to recognize collective bargaining rights for public employees, including teachers. James J. Fedderman, president of the Virginia Education Association, said the measure has the potential to be “a turning point” for the state’s schools.

“Contract negotiations lead to the high-quality schools our children deserve,” he said. “Negotiations benefit everyone — students, communities and educators.”

Riley thinks those measures will also hurt businesses, as governments cover their higher labor costs by raising taxes.

“I think broadly, these pieces of legislation, in one shape or form, are going to increase labor costs,” she said.

But Northam said pro-labor laws do not threaten the state’s strong economy.

“We’re proving that a strong business climate goes hand-in-hand with respecting and supporting workers,” he said.

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