Days after an effort to put an end to Virginia’s right-to-work status ended in the Senate, House Democrats successfully pushed through on another pillar of their 2019 platform and approved a minimum wage increase that would go into effect on July 1.
At the beginning of the 2020 session, Gov. Ralph Northam included increasing Virginia’s minimum wage from the federal level of $7.25 at the top of his legislative priority list. Democrats dominated the 2019 election cycle running on two major themes — enacting gun control legislation and raising the minimum wage. On Tuesday, House Bill 395 passed through the House of Delegates by a 55-45 vote along party lines.
The bill is an amalgam of three bills submitted during the session. At the beginning of the session, Democrats had pre-filed 12 bills related to increasing the minimum wage ranging from targeting tipped workers to general minimum wage increases.
Sharon Baroncelli, executive director of the Shenandoah County Chamber of Commerce, said that the chamber is opposed to both the House and Senate bills that aim to increase the minimum wage.
“We have heard from many of our members that are extremely concerned in the restaurant industry, In the farm and agriculture industry. In our small businesses,” Baroncelli said. “They are extremely concerned about raising the minimum wage and the effect it will have on how many employees they will be able to hire and or keep.”
Tuesday’s bill sets out a scale that would increase Virginia’s minimum wage to $10 on July 1 and increase every year on the same date. The scale moving forward would be: $11.25 on July 1, 2021; $12 on July 1, 2022; $13 on July 1, 2023; $14 on July 1, 2024 and $15 on July 1, 2025.
After 2026, the minimum wage would be adjusted according to a combination of the current minimum wage and the increase in the Consumer Price Index for all items for all urban consumers.
Employers would be required to pay employees either the Virginia minimum wage as set out in the bill or the federal minimum wage, whichever is greater.
The last time the federal minimum wage rose was in 2009 when it increased from $6.55 to $7.25 an hour.
The bill also removes some exceptions from the list of people who were not considered “employees” for the purposes of the bill. Those exceptions would no longer include farm laborers, employees who are paid based on the amount of work done and minors under the jurisdiction and direction of a juvenile and domestic relations court, among others.
In an ideal world, Baroncelli said, businesses would have the flexibility to increase employee pay as they become more skilled.
Baroncelli said that a study commissioned by the chamber and its affiliates showed that many industries are paying their employees more than the $7.25 minimum wage to stay competitive, an increase across the board will cause deep cuts to smaller businesses. The study showed that manufacturing businesses are paying between $15 and $18 an hour, she said.
“It’s happening there,” Baroncelli said about manufacturing industries, “but it’s happening to the point of allowing the business to decide the wage. Not the state.”
Increasing the minimum wage will take a toll on the state’s coffers as well as businesses.
According to the fiscal impact statement accompanying the House bill, the state has hundreds of millions of dollars of expenses coming its way to cover the costs of the proposed increase.
Beginning in fiscal year 2021, the Department of Labor and Industry will need to hire five new employees, four officers and an assistant compliance officer, to enforce the new law. Right now, the federal Department of Labor’s Wage and Hour Division monitors payrolls for compliance with minimum wage laws. According to the fiscal impact statement, the federal department conducts roughly 750 inspections a year. With Virginia’s minimum wage moving above the federal minimum wage, responsibility for those inspections falls to the state.
The $515,231 price tag year-over-year between 2021 and 2026 to fund the new obligations of the Department of Labor and Industry are small compared to the impact the wage increase will have on the budget for state agencies.
Data collected by the Commonwealth’s Personnel Management Information System, combined with the projected wage increase, shows that the state will be responsible for $7.86 million in fiscal year 2021, split between the general and non-general fund budget. That figure will climb as high as $71.28 million in fiscal year 2026, according to the impact statement.
An increase as proposed will also gouge the budget for the Department of Medical Assistant Services — climbing as high as $400 million in fiscal year 2026.
The bill may also affect public education budgets, according to the fiscal impact statement. Initial impacts will fall to local governments to cover the costs associated with the increase, though state funds would flow in when costs are assessed. The impact statement did not determine how much those costs might be.
Sen. Mark Obenshain, R-Harrisonburg, said Tuesday night that the Senate hadn't finished discussing amendments to its own minimum wage bill but predicted that it would pass with a vote of 21-19, along party lines.
"I'm so confident," he said, "you can print that."