Since the mid-1930s, the U.S. federal government has set a minimum wage. This wage level is intended to provide a “minimum standard of living necessary for health, efficiency, and general well-being of workers" (§ 202 of the Fair Labor Standards Act, as amended), and is the lowest wage level employers can legally compensate employees.(*1) Currently, 30 states have a minimum wage above the federal minimum, while the remainder of states adhere to the federal minimum wage. In April 2020, Governor Ralph Northam signed the Virginia Minimum Wage Act into law which raised the minimum wage to $9 per hour upon enactment and provided a set schedule of additional increases. Virginia’s current minimum wage is $12 per hour, $4.75 above the federal minimum wage of $7.25 per hour.(*2)

The Virginia Minimum Wage Act, in addition to increasing the state’s minimum wage and setting prescribed increases, also directs the Virginia Department of Housing and Community Development (DHCD), the Virginia Economic Development Partnership Authority (VEDP), and the Virginia Employment Commission (VEC) to convene a work group (the "working group") to conduct a joint review to assess options for utilizing a minimum wage in the Commonwealth, the feasibility and economic advantages and disadvantages of a regional minimum wage, and review the implications of the proposed minimum wage increases per subsections E and F of § 40.1-28.10 of the Virginia Code, as amended by the act.

This report contains the working group’s efforts to fulfill the mandate set out by the Virginia Minimum Wage Act. The first sections provide a brief overview of the historic development of minimum wage legislation in the United States and in Virginia, as well as a high-level review of the academic literature on the impacts of minimum wage legislation. The next sections overview the challenges and limitations faced by the working group in conducting its research and then go on to detail the adopted methodological approach and data sources. The following sections provide the results of analysis undertaken by the working group to characterize Virginia’s minimum wage population – including demographics, industry, occupation, region – before a discussion of the impacts of minimum wage increases to date. The subsequent section features various perspectives on the regional minimum wage debate, provides brief case studies of other states having adopted a regional minimum wage, and a discussion of various other specific questions raised by the study mandate, such as the exemption of agricultural workers from the minimum wage.

The final section of the report presents an overview of the working groups findings and considerations. The working group did not find sufficiently compelling evidence to make recommendations related to the state’s minimum wage, the feasibility or implementation of a regional minimum wage, or the increases in Virginia’s minimum wage. However, the working group was able to make several findings related to these subjects, as follows:

1) Estimating the size and makeup of Virginia's minimum wage workforce is challenging in the current environment. However, the working group was able to make broad generalizations through leveraging different data sources, methodologies, and areas of expertise, including:

o Approximately a half million Virginians made $12 per hour or less and one million made $15 per hour or less in 2021;

o Minimum wage workers are younger, more likely to be female, less educated, and more likely to belong to a racial or ethnic minority than the total labor force; and,

o The Accommodation and Food Services, Retail Trade and Health Care and Social Assistance industries are the most reliant on minimum wage labor.

2) The prevalence and nature of minimum wage work varies across the state, although it is present in all regional economies. Minimum wage labor is most prevalent in GOVA (GO Virginia) Region 1 and least prevalent in GOVA Region 7.(*3) Furthermore, the cost of living varies greatly across the state, ranging from the highest cost in Alexandria City (where a family must earn at least $22.42 per hour to afford basic necessities) to the lowest cost in Tazewell County (where the same family must earn only $14.55 per hour).

3) There is not conclusive evidence demonstrating the clear advantage or disadvantage of a regional minimum wage over a statewide minimum wage. While a regional minimum wage might reflect regional variations in standards of living and economic need, in practice, there are substantial barriers in implementing and enforcing a regional minimum wage.

4) Should policymakers consider enacting a regional minimum wage, there are several important factors to consider. These involve determining the number of wage regions, the method and maintenance of wage differentials between regions, and the communication and enforcement of different wages to relevant stakeholders, among others.
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(*1) The Fair Labor Standards Act provides notable exceptions for certain employers and employees, who are not required to adhere to the federal minimum wage. These exceptions are discussed in detail through this report.
(*2) States may set a minimum wage above the federal minimum and may expand the application of the minimum wage standard to employers excluded from the federal minimum wage. In states where there are two minimum wages, the greater of the two wage rates applies. U.S. Department of Labor, 2023.
(*3) Throughout the report, the working group used GO Virginia economic development regions as the basis for its regional analysis. Please see Appendix E for a listing of each region’s member localities, and a map of these regional groupings.