Virginia’s $15 per hour minimum wage law could cost 12,000 jobs, report shows

A $15 per hour minimum wage law signed Thursday by Virginia Gov. Abigail Spanberger could cost the commonwealth 12,000 jobs, a study shows.

The conservative Employment Policies Institute estimated that the Democratic governor’s plan to raise the wage floor for hourly workers from $12.77 to $13.75 next year and to $15 in 2028 will increase service-industry operating costs.

The D.C. think tank predicted that many retail, sales, hospitality and administrative employers will raise prices or downsize staff to cope.

“Economists have been clear for decades: Drastic wage hikes like this kill jobs and shutter businesses,” said Rebekah Paxton, the Employment Policies Institute’s research director.

Ms. Paxton highlighted economic data in the report showing that the law will push “the cost of living even higher in the commonwealth,” despite Democrats saying that it would improve affordability.

The governor’s office did not respond to a request for comment.

Ms. Spanberger said in Richmond on Thursday that the law is “putting more money in the pockets” of workers.

“If you work full-time in Virginia, you should be able to afford to live in Virginia,” the governor said in a signing statement. “You should be able to keep up with your rent or mortgage, fill your medications, and save for your kids’ futures.”

Under Ms. Spanberger, Virginia joins more than a dozen other states that pay service workers at least $15 an hour, bolstering a decades-long “fight for $15” campaign by progressive activists.

The left-leaning Economic Policy Institute projects that 17 states pay at least $15 an hour this year, from $15.15 in Arizona to $17.13 in Washington.

“I don’t agree that raising Virginia’s minimum wage will kill jobs or hurt the economy,” Holly Sklar, CEO of the advocacy group Business for a Fair Minimum Wage, said in an email. “Minimum wage increases boost consumer spending, which boosts businesses and the economy.”

Other states are considering measures that could push wage floors to more than $20 an hour. But they have faced intense pushback from business groups.

In Maryland, a bill to bump the state’s minimum from $15 to $25 an hour recently stalled in committee and missed a legislative deadline.

Advocates argue that minimum wage hikes foster economic growth, reduce employee turnover and mitigate rising living costs, despite economists insisting they reduce jobs and add to inflation.

“The real question is not whether $15 is too high,” said Angelica Gianchandani, a New York University marketing professor who noted that her state’s economy still grew after increasing the wage floor to $16. “The real question is why it took this long.”

Years of research indicate that minimum wage increases lead employers to automate jobs and reduce work hours to cope with increased labor costs.

A January 2021 analysis published by the National Bureau of Economic Research found 79.3% of studies linked higher minimum wages to fewer jobs.

“A move like [Virginia’s $15 law] will accelerate the adoption of AI in low-skill workplaces,” Peter Earle, a senior economist at the free-market American Institute for Economic Research, said Monday. “The real economic question is not just ‘who gets more,’ but who now never gets hired at all and how many future jobs will be automated away at a faster pace.”

Since 2009, when the federal minimum wage rose to its current level of $7.25 per hour, dozens of states and cities have periodically raised their minimum above it.

As of this year, 20 states still pay only the $7.25 federal rate — Georgia, Indiana, Iowa, Kansas, Kentucky, Pennsylvania, Texas, Utah and Wisconsin.

Job losses

Critics point to California, the nation’s most populous state, as an example of how wage hikes affect local economies.

In December 2024, the Bureau of Labor Statistics estimated that California fast-food restaurants lost 6,166 jobs after Democratic Gov. Gavin Newsom signed a $20 minimum wage law in September 2023. That’s 1.1% of positions lost in the industry.

By comparison, the Employment Policies Institute noted that California added 17,528 fast-food jobs — a 3.1% gain — during the previous comparable period.

Reached Monday for comment, the advocacy group One Fair Wage acknowledged studies showing that large minimum wage hikes in California and New York helped big companies and hurt small employers.

“Also, instead of job cuts, employers would hire fewer part-time workers and focus on full-time workers,” One Fair Wage said in an email. “But overall jobs remained steady, and incomes rose.”

The Bureau of Labor Statistics estimates that only about 1% of workers earn the federal minimum wage or less.

Sean Higgins, an analyst at the libertarian Competitive Enterprise Institute, noted that employers cut entry-level jobs and work hours after wage hikes as a simple matter of supply and demand.

“The notion that many minimum wage advocates push that you can just mandate higher wages for workers and that will have no ripple effects is naive,” Mr. Higgins said in an email. “Note how many restaurants now encourage online ordering even when you’re sitting down inside the restaurant.”