West Virginia Desperately Needs A Higher Minimum Wage

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Americans uniformly believe that workers deserve a basic standard of living free from employer exploitation. All states and the federal government have minimum wage laws. These laws do more than prevent exploitation. They also stimulate the economy, reduce poverty and inequality, and contribute to solving social and health problems.

Unfortunately, the West Virginia legislature seems uninterested in the benefits of advancing our minimum wage and cold to the life difficulties of minimum wage workers. West Virginia’s minimum wage has been stuck at $8.75 per hour since 2016.

The purchasing power of $8.75 in 2016 has eroded almost 35% since then. That means that today’s minimum wage worker has actually taken a huge pay cut versus the same minimum wage worker in 2016. To provide the same purchasing power now, West Virginia’s minimum wage would have to rise to $11.78.

Two other ways show how shameful the problem has become. If today’s minimum wage worker works a full schedule of 2080 hours – without unpaid time off – she would earn only $18,200 before taxes. While this is above the federal poverty level of $15,560 for a single person with no children, the income necessary to escape poverty with one child is $21,150. Both our minimum-wage worker and her child are consigned to poverty simply because the legislature won’t act.

A better way to evaluate West Virginia’s minimum wage is to compare it to the “living wage,” a concept developed at MIT in 2003. The living wage is what a full-time worker requires to cover the costs of her family’s basic needs in the place where they live. It includes the specific local costs for food, childcare, health care, housing, transportation, clothing, personal care items, broadband, and taxes. The 2025 living wage before taxes for one adult in West Virginia without children is $40,415. With one child, the living wage rises to $68,660.

Raising the Minimum Wage Will Make Working More Attractive 

The labor force participation rate is the percentage of people aged 16 and older who are employed or actively looking for work. West Virginia’s LFP rate is 54.3%, the absolute worst in the nation. It isn’t the availability of jobs in West Virginia that is the problem. It is their attractiveness. One obvious way to increase the value and attractiveness of work is to raise the minimum wage.

Low-wage workers are no different than the rest of us. Each one evaluates the economic choices in front of them. For example, is it better to stay home and take care of the kids or to get a job? A higher minimum wage tilts that calculation in favor of working.

Both Democrats and Republicans want to see more West Virginians working. But “poverty shaming” low-income people or threatening to remove public benefits unless they take bad jobs isn’t a sustainable policy. Attracting more people to work through raising the minimum wage and making work more dignified is the better approach by far.

Raising the Minimum Wage Will Help Save Children’s Lives

A higher income for low-wage workers leads directly to better health for expectant mothers and a higher survival rate for newborns. It also reduces the frustration and anger among low-wage workers that lead to child abuse and neglect.

Infant mortality in the United States is driven almost entirely by excess infant deaths among low-income mothers. In 2023, approximately 9.8% of live births in West Virginia were low birthweight babies, defined as those weighing less than 5.5 pounds. Low birthweight is a significant contributor to infant mortality.

If a child in a low-income family survives their first year of life, they are still at risk for abuse and neglect. Family income is strongly associated with risk for child maltreatment. A study from Indiana University reported a 9.6% decrease in reported child neglect cases for every $1 increase in the minimum wage.

Foster care is often where abused and neglected children end up, but West Virginia’s foster care system is in shambles. Increasing the minimum wage is a smart policy means of saving children and reducing the strain on our foster care system.

Raising the Minimum Wage Will Help Save Adult Lives

In 2020, sociologists Angus Deaton and Anne Case identified a troubling trend they called “deaths of despair.” These are deaths from suicide, drug overdose, and gun-related violence. They found that while wealthier people tend to be healthier and live longer, those with lower incomes often struggle with feelings of depression and hopelessness, leading to an earlier death.

Not only would increasing the minimum wage help people move out of poverty and rely less on government assistance, but it could also reduce these “deaths of despair.”

People under financial stress are more than 20 times more likely to attempt suicide. In 2022, West Virginia had a suicide rate of 18.3 per 100,000 people, which is 65% higher than the national average and has increased by nearly 23% over the last 20 years. In fact, suicide is the second leading cause of death for young people in the state.

A 2020 study found that for every $1 increase in the minimum wage, there was a 3.4% to 5.9% decrease in suicide rates among adults aged 18 to 64 who had a high school education or less. Raising West Virginia’s minimum wage can save lives. 

Raising the Minimum Wage Will Benefit the Whole Economy

Raising the minimum wage not only benefits those workers whose wages were below the new minimum, it would also benefit many other workers in the economy. This is because employers want to avoid wage compression. If a minimum wage worker suddenly receives an increase because of a change in the law, workers above him in the employer’s pay scale are usually given an increase so they remain above. This ripples up the chain of compensation, even to salaried employees.

The overall economy directly benefits from an increase in the minimum wage because of the difference in the way low-wage employees spend additional income versus higher paid workers. More money in the pockets of low-income people results in more spending for necessities, rather than in saving. As a result, an increase in the minimum wage directly increases the amount of money circulating in the overall economy. This has a wealth-creating effect for everyone else.

Raising the Minimum Wage Will Save Taxpayers Money

Medicaid, food stamps and other forms of public assistance are funded with tax dollars. Increasing the minimum wage reduces dependence on all forms of public assistance, thereby lowering the general tax burden.

What’s more, raising the minimum wage is “revenue-neutral” for governments since the increase in wages is not paid for with tax money. In fact, an increase in the minimum wage creates more tax revenue for governments because it creates more taxable income and stimulates more taxable economic activity.

Not only is raising the minimum wage the right thing to do in the world’s wealthiest economy, but for all these reasons it is also a powerful economic and social policy.

The Value of Increasing the Minimum Wage

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One obvious way to increase the value and attractiveness of working is to increase the minimum wage. The federal minimum wage has been $7.25 per hour since 2009 but Congress does not seem interested in increasing it. Individual states, however, can set a higher minimum wage. West Virginia’s minimum is now $8.75, having been increased in stages over several years. Many other states have done the same. Increasing the minimum wage puts more money in the pockets of low-income people who will spend it in the economy, reduces dependence on public benefits and costs taxpayers nothing. This is seriously good policy.

The Benefits

Raising the minimum wage not only benefits those whose wages were below the new minimum, it benefits most all workers in the economy. Let’s take the example of a hypothetical gas station and convenience store operation open 24 hours, similar to Sheetz. Suppose that before an increase in the minimum wage the store employs a total of four stock clerks paid at the federal minimum of $7.25 to stock shelves and clean up. The store also employs five cashiers at $8.50, two assistant managers at $10 and one manager on salary.

Now suppose that state raises the minimum to $9. Obviously, the stock clerks who were receiving the previous minimum wage will get an hourly raise of $1.75. In addition, the cashiers’ prior wage would be below the new minimum so they will also receive at least a $.50 raise.  But, more likely, the employer will want to maintain the spread between the wages of the stock clerks and the cashiers so the latter will receive an even bigger bump – let’s say to $10.25.

Now the assistant managers will also have to receive a bump to keep them better compensated than the cashiers. The salaried manager will have to be paid more than the new total compensation of the assistant managers, which would include higher hourly pay plus overtime, so even salaried employees might benefit. In this way an increased minimum wage ripples through the employee ranks and the larger economy.

Raising the minimum wage thus puts more money into the pockets of low and middle income workers who will actually spend the money rather than save it. The more money in circulation, the greater the wealth-creating effect. This wealth creation is also “revenue-neutral” for governments since the increase in wages is not paid for with tax money. In fact, an increase in the minimum wage creates more taxable income for governments and fewer government costs in the form of Medicaid, food stamps and other forms of public assistance.

A 2016 report by the Economic Policy Institute concluded that an increase in the federal minimum wage would “unambiguously” decrease government spending on public assistance:

Among workers in the bottom three wage deciles, every $1 increase in hourly wages reduces the likelihood of receiving means-tested public assistance by 3.1 percentage points. This means that the number of workers receiving public assistance could be reduced by 1 million people with a wage increase of just $1.17 an hour, on average, among the lowest-paid 30 percent of workers.

The Costs

Business groups are the typical opponents of increasing the minimum wage. The reason, of course, is that wages are a significant component of the cost of operating a business, particularly restaurants. But businesses constantly have to deal with increasing costs of all kinds, including labor costs. Successful businesses develop strategies for dealing with these increasing costs.

Rarely will a business go under because of a rise in the minimum wage and if one does it was probably not a viable, long-term business anyway. And an increase in the minimum wage applies to all employers so there is no one who will have a competitive advantage, unless it is one that operates more efficiently.

Perhaps in recognition that their business reasons for opposing a higher minimum wage are a bit selfish and unconvincing, opponents argue that the workers themselves will suffer from an increase in the minimum wage. According to this argument, if employers are required to pay employees more they will hire fewer employees or will give existing employees fewer work hours.

But this has never made sense to me. Assuming the employer has a constant level of work, employees paid at the minimum, whatever that is, will still be the least expensive way of doing that work. Hiring fewer employees at the bottom would simply mean that existing workers will get more hours, not fewer.

Opponents are fond of pointing to one-off studies that show employment loss as a result of increasing the minimum wage. A study after the recent Seattle wage increase did find some employment loss among the lowest-skilled portion of the workforce. There the minimum wage was raised from $9.47 to $13 in two years. But usually employment loss is found only when there is a large increase in the minimum wage like this. 

Meta-studies allow us to put these one-off studies into perspective. Meta-studies use a set of well-defined statistical techniques to pool the results of a large number of separate studies. A comprehensive meta-study in 2013 revealed that there is no statistically significant employment effect created by moderate increases in the minimum wage. In the last decade, influential studies using restaurant industry data in many U.S. counties and regions have concluded that minimum wage increases have “strong earnings effects and no employment effects.”

This conclusion has an explanation, or rather several explanations. The natural impulse of employers to hire fewer or fire more expensive employees is balanced by several “adjustment channels.” Some of these involve reducing other employment costs, such as reducing work hours, non-wage benefits or training costs. While the empirical evidence is not conclusive, it suggests that employers don’t adjust by cutting hours or other forms of compensation. If an employer has a steady volume of output it must generate, cutting hours is not an option – unnecessary hours would have been cut before. 

Another adjustment channel is simply to increase prices to pass along to consumers the added costs of new wage levels. While some of this does happen, employers do not substantially pass on to consumers the higher costs of employment. Studies have shown that a 10% increase in the minimum wage will result in between a .4% and .7% increase in prices. 

An increase in the minimum wage does not result in the termination of existing employees because the cost of recruiting, hiring and training even low-wage workers is so high that employers would rather retain even higher paid current employees. And a worker who is paid more is less likely voluntarily to leave a job. A 2012 study found “striking evidence” that separations and turnover rates for teens and restaurant workers fall substantially following a minimum wage increase.

Some argue that increasing the minimum wage will hasten the replacement of workers by technology. For many types of work automation is inevitable. This is no argument to underpay workers in the meantime.

Congress does not seem in any shape to increase the federal minimum wage, although the new Democratic majority in the House may take a run at it. Instead, the progress is being made in the states. In early November 2018, voters in two red states approved ballot initiatives raising the minimum wage – to $11 in Arkansas and $12 in Missouri. Perhaps the West Virginia Legislature will see the wisdom of making a similar change. Doing so will cost taxpayers nothing and the benefits to working people and the economy are clear.