In 2017 there was a significant shift in the composition of the Virginia House of Delegates. Prince William County experienced some of the most sweeping changes in representation, with five of eight incumbents losing their seats. With so many newly elected members, the state legislature will, without a doubt, take a different approach on many important issues. One of the biggest concerns that the business community has is how they will handle the issues that are impeding economic growth in the commonwealth.
For years, the General Assembly has worked to build a consistent and predictable business environment. While the commonwealth has fallen from its designation as the “Best State for Business,” it is slowly rising once more in both Forbes and CNBC’s rankings, thanks largely to strengths such as its talented workforce and competitive regulatory environment. That being said, the commonwealth will not continue to rise in the ranks without addressing its high business costs.
At a recent event hosted by the Prince William Chamber of Commerce, several of Prince William County’s newly elected members of the House of Delegates suggested that raising labor costs would be the best way to stimulate the local economy and support businesses--this couldn’t be further from the truth.
As a matter of fact, raising labor costs will not just be detrimental to employers but to the employees--especially ones that are young and low skilled--our well-intentioned elected officials are seeking to help.
Small businesses, when defined as those that employ nine or fewer individuals, are a significant component of Prince William County’s employment base and economy. These businesses, according to the Virginia Employment Commission, account for roughly 74 percent of all employers in Prince William County and support just over 17,000 jobs. These employers will be among the first to feel the impacts of policy decisions increasing labor costs and among the least likely to be able to adjust their business model to absorb the additional expenses.
Looking at the impact a different way and examining industries that are more likely to rely on hourly employees, a recent study conducted by the Harvard Business School shows that there is suggestive evidence of a correlation between increases in the minimum wage and increases in the rate of exit or closings of restaurants. Once more we see a potential negative impact to another significant Prince William County employment sector.
The Virginia Employment Commission shows that the accommodation and food service industries account for 11 percent of all employment in Prince William County, or 14,311 jobs. While the Harvard study does not speak to the retail industry, it is worth noting that when combining retail with accommodation and food services employment, the industries account for nearly 28 percent of all employment in Prince William County.
Focusing on the labor side of the equation, the Employment Policies Institute highlighted the effects of minimum wage increases on teenage employment in spring of 2017 and concluded “Inside the labor market, higher minimum wages affect the composition of the minimum wage work force, reducing the employability of less skilled workers.” This should not be a surprising conclusion. When you raise the cost of employing less skilled workers, particularly those that are younger and still working to gain experience, you are dis-incentivizing an employer’s willingness to create and support those jobs.
With a national economy that is steadily growing and the commonwealth’s unemployment rate hovering around 4 percent (closer to 3 percent in Prince William County), employers cannot hire quickly enough.
However, from construction, to sales, to the information technology sector, employers are struggling to find qualified employees for jobs that pay well above the minimum wage. The commonwealth’s newly elected state representatives should remain focused on bridging this skills gap by working with institutions such as Northern Virginia Community College and George Mason University to fill these vacant positions rather than looking to simply legislate pay raises.
Brendon Shaw is director of government affairs at the Prince William Chamber of Commerce.