A little-noticed state report explored the idea of regional minimum wages

When Travis Hackworth opened a chain restaurant in Richlands in 2015, he was surprised when the Huddle House corporate brass asked him what tier the franchise should be classified under. It turned out the company has different pricing structures, depending on the economy of the community.

The difference in tiers was “significant,” Hackworth says. “For example, an item could be $1 more in another tier because of cost-of-living differences. We chose a lower tier because our cost of living was lower.”

Hackworth sold the restaurant when he was elected to the General Assembly, but the experience stuck with him. When the state Senate recently debated a bill to raise Virginia’s minimum wage to $15 per hour, the Republican state senator from Tazewell County cited the differing cost of living across Virginia as a reason to oppose a “one-size-fits-all” minimum wage increase.

Hackworth’s argument wasn’t successful; neither was the argument by state Sen. Chris Head, R-Botetourt County, that increasing the minimum wage would push up labor costs for businesses, which would then pass them on to customers, setting off inflation and not leaving lower-income workers any better off. The minimum wage bill from state Sen. Louise Lucas, D-Portsmouth, passed on a party-line 21-19 vote. Meanwhile, the House version, from Del. Jeion Ward, D-Hampton, passed the House on a similar party-line vote of 51-49. 

Democrats feel very strongly that workers at the lower end of the income spectrum aren’t making enough money and need a boost. Republicans feel just as strongly that raising the minimum wage has unintended consequences that would hurt the state’s economy. If this bill stood on its own, I’d expect that Gov. Glenn Youngkin would waste no time in vetoing it. However, it doesn’t. Youngkin very much wants a sports arena in Alexandria — which he says would benefit the whole state by generating more tax revenue — and Democrats will want something in return. Youngkin’s acquiescence to a higher minimum wage might be one of the many bargaining chips on the table.

Feelings about the minimum wage are as much ideological as they are economic; you can find economists on both sides of the question. Hackworth, though, is demonstrably correct on one point: Virginia doesn’t have a single economy, it has multiple ones, and the cost of living varies from one end of the state to the other. That raises the question: What would be the regional impacts of an across-the-board increase in the minimum wage?

A little-noticed state report that came out in December might tell us. That report found that a $15-per-hour minimum wage still wouldn’t be enough for someone making that amount to afford “the basic necessities” in Northern Virginia, while that amount would be slightly more than enough in some rural areas. Specifically, the report found that a single adult with no children would need $22.42 per hour in Arlington County to meet those “basic necessities” but the same single adult with no children would need $14.65 per hour to get by in Accomack County — with those two localities being at the two extremes. By that measure, increasing the minimum wage would seem to have the most impact in rural areas but perhaps not do much to help lower-income workers in the state’s most populous areas.

The report suggested that increasing the minimum wage might have an especially big impact in Southside Virginia since that part of the state has the biggest percentage of workers presently making under $15 per hour, with Southwest Virginia ranking a close second and the Northern Neck/Middle Peninsula third. “Approximately 41,000 — or 41% of payroll workers in the Southside Virginia Nonmetropolitan area — would fall under the $15 per hour threshold compared to the lower rate of approximately 28% to 30% percent in metropolitan areas like Charlottesville, Richmond, as well as statewide,” the report found. Furthermore, the report found that the state average to meet those “basic necessities” would be $19.04 per hour, so the $15 per hour being pushed now would still be too low in some places.

If that’s so, that means the politics of the minimum wage are out of whack with economic realities — Republicans from rural areas perhaps ought to be backing the bill as a way to give a pay raise to a lot of their constituents while Democrats from urban areas ought to be pushing for an even higher minimum wage. Of course, that ignores the arguments that Head and others cited — that businesses might not be able to afford those pay raises and would either pass them on to consumers or eliminate jobs. And when has business ever not passed costs on to consumers?

We could thrash around those arguments over raising the minimum wage, pro or con, all day long — does a higher minimum wage really help low-income workers or does it trigger economic responses that wind up hurting them? Instead, let’s explore something else, something Hackworth alluded to in his floor remarks: Does a statewide minimum wage make sense in a state where the cost of living differs so widely?

It turns out that this question has been asked before — and by Democrats. 

Let’s cycle back to 2020. That’s when when the General Assembly set in motion an annual series of minimum wage increases that have resulted in the current legislation, because that 2020 law authorized increases for the first few years but then required a future legislature to reenact the scheduled minimum wage increases to $13.50 per hour in 2025 and $15 per hour in 2026 before they actually took effect. That 2020 law — sponsored by then-state Sen. Richard Saslaw, D-Fairfax County, in the Senate and Ward in the House — also included a provision directing the Virginia Department of Housing and Community Development, the Virginia Economic Development Partnership Authority and the Virginia Employment Commission to conduct a report on the potential of instituting a regional minimum wage.

That mandated report, whose findings I’ve already mentioned, came out in December and seems to have attracted little, if any, attention — Google turns up nothing. I love nothing more than a report so let’s fix that by taking a closer look.

Before we get to the main question — is a regional minimum wage a good idea? — let’s look at some of the stats the report offers up because they’re useful no matter where you come down on the issue. Among them:

• Almost 1.4 million Virginians earn less than $15 per hour.
• The region with the highest percentage of minimum wage jobs is Southside (Region 3, if you’re going by the GO Virginia economic development regions), with the lowest percentage in Northern Virginia (Region 7):

• Of those making minimum wage, 89% are adults, not teenagers. Those adults tend to be young adults — and women, mostly because minimum wage jobs are concentrated in fields where women dominate.

• It’s unclear how many of those making less than $15 per hour are the main breadwinners for their household, but one demographic category clearly is: Of those making less than $15 per hour, 20% are single parents and a $15 per hour wage still leaves them well below the amount necessary to pay for “basic necessities.”

If we’re talking about a single adult with one child, the report says that single parent would need $30.74 in Accomack County — and $48.30 in Arlington County. In the case of a single adult with two children, then $38.35 in Accomack County and $66.59 in Arlington County. Put another way, we could raise the minimum wage to $15 and even if a single adult with children is working, they’re still going to need assistance. There’s no way we can raise the minimum wage to those levels, which underscores the importance of finding ways to move those workers into higher-paid occupations — but that’s another topic, likely one about the importance of Virginia’s community college system. For now, let’s stick to this: If you’re trying to picture a minimum wage worker in Virginia, you probably want to picture a young woman in Southwest or Southside, perhaps one working in food service (that sector has the highest number of workers making under $15 per hour) or health care support. 

With that basic understanding, we can now look at the question the report set out to explore: Does it make sense to have different minimum wages in different places to account for different costs of living?

Only two states have tried this and both are Democratic-run states. Both New York and Oregon adopted a three-tier system of regional minimum wages in 2016. In New York, the three regions are New York City, its suburbs of Westchester County and Long Island, and the rest of the state. In Oregon, the three regions are Portland, West Oregon and East Oregon. New York also wrote in some provisions to take into account the worker’s occupation and the size of the employer; Oregon set up a system where Portland’s minimum wage is always $1.25 higher than West Oregon (which is considered the “standard region”), and East Oregon is always $1 less than in West Oregon. Let’s not get bogged down in the details. The point is that each state tried to account for differences between an expensive urban metro (New York City in New York, Portland in Oregon) and less expensive parts of the state. In that broad sense, they’re not that different from Virginia, and the economic differences between Northern Virginia and rural parts of the state.

The real question is how has this worked out? The Virginia report doesn’t offer a clear answer. “There is not conclusive evidence demonstrating the clear advantage or disadvantage of a regional minimum wage over a statewide minimum wage,” the report said. 

Yes, I realize you’ve read all this way hoping to get a definitive answer to support whatever your position might be but, as the great philosophers Mick Jagger and Keith Richards once said: “You can’t always get what you want.” Note that they also said: “But if you try sometime you’ll find you get what you need.”

Instead, the report simply reiterates the arguments for and against regional minimum wages. “While a regional minimum wage may be able to better reflect varying cost of living, opponents have argued that different minimum wages might exacerbate inequalities between regions rather than promoting convergence between them,” the report said. “Proponents of a regional minimum wage have argued, to the contrary, that a lower minimum wage in less expensive regions may make it more feasible for businesses to operate, potentially fostering economic growth in those areas.”

In short, those are simply the regional equivalents of the larger arguments over whether raising the minimum wage hurts or helps workers. If they have more money, they’re better off. If rising costs eat up that pay raise, they’re not. I’m in no position to adjudicate what whole faculties of economics departments still argue over, with the modernists on one side and the classicalists on the other.

However, I will point out two things, one on each side.

On the negative side, the report said that implementing regional minimum wages can be complicated and confusing — because there’s always somebody on the border between two economic regions. 

On the plus side, there’s this curious alignment. Nationally, it’s been left-of-center groups that have been the most interested in talking up regional minimum wages. In 2014, a University of Massachusetts economist proposed regional minimum wages as part of The Hamilton Project, an endeavor by the left-leaning Brookings Institution to come up with “innovative policy proposals on how to create a growing economy that benefits more Americans.” In 2019, The Third Way — a center-left think tank — proposed its own regional minimum wage plan, laying out a five-tiered system. Of course, some on the left might scoff at those proposals as being too much center-left and not enough actual left. Still, if Youngkin wanted to find some way to reach a compromise with General Assembly Democrats on the minimum wage, he could embrace regional minimum wages and claim, quite correctly, that he’s endorsing a Democratic idea. Of course, Democrats could also claim, quite correctly, that a statewide minimum wage increase mostly helps low-wage workers in Republican areas. (Again, Republicans would counter that it doesn’t really help if those employers wind up reducing their workforce or automating as many jobs as they can. Go into some McDonald’s and you’ll likely wind up ordering not with a cashier but with a touchscreen machine that never calls in sick.)

We could go into overtime discussing that, but then we’d have to pay time and a half, no matter what the wage rate is.