As of 2018, the state of Virginia has among one of the lowest minimum wages in the country at $7.25 an hour. In 2017, about 15,000 hourly-paid workers earned $7.25 an hour out of 1.97 million hourly paid workers in Virginia, with another 55,000 making even less. Only employers with four employees or more are required to pay the Virginia minimum wage. But just how did Virginia’s state minimum wage get here, and is paying the minimum wage ideal for a small business? Here are some critical aspects small business owners can take into account:

Why the Virginia Minimum Wage is So Low

Since 1938, the U.S. government implemented a federal minimum wage as a way to ensure workers were able to afford the basic needs for living during the Great Depression. However, as the country grew out of the Great Depression, some states held on to the federal minimum wage as a reference point even though inflation has outpaced this rate, including Virginia. Because the state of Virginia lacks a state-mandated minimum wage, the state references the federal minimum wage rate. As a result of the political climate surrounding Virginia’s minimum wage, the state’s minimum wage is low in comparison to other states.

Top Industries in Virginia Paying Minimum Wage

While the state’s minimum wage is low, there are a few industries that stand out among the rest as some of the top industries in Virginia that pay minimum wage. Some of the top industries that pay minimum wage or near-minimum wage rates in Virginia include the individual and family services industry, the home health care services industry and the restaurant and other food services industry. Individuals who work in these industries often hold jobs, such as fast food cooks, fast food preparation and serving workers and personal care aides. Many of these employees work at lower wages due to industry standards. Also, some of the tasks may be physically laborious but requires little or no creative thinking or extra skills, which can easily increase the rate of hourly paid workers who have these skills.

Advantages and Disadvantages of Paying Employees Minimum Wage

Paying employees minimum wage offers both advantages and disadvantages. It’s important for employers and small business owners to assess the pros and cons that come with paying a minimum wage to determine if that is the best rate to offer an employee. Here are some important factors to consider:

Pros of Paying Minimum Wage

Paying employees minimum wage offer employers important benefits they can leverage. One of the most important advantages of paying employees minimum wage is that it helps them to save on labor costs. Employers can save on operational costs by paying a wage that is within their budget and one that still allows them to make a profit. Paying a minimum wage also ensures workers are getting a pay that enables them to afford basic necessities to live, such as food, housing and clothing. Paying minimum wage is also a way to minimize income disparity and may even work in an employer’s favor as workers to training costs and turnover as workers paid a minimum wage are less likely to leave to find a job that pays more.

Cons of Paying Minimum Wage

While paying employees minimum wage saves on labor costs for employers, there are also disadvantages involved. One primary disadvantage of paying a minimum wage is that it may not attract the type of employee a business needs. Typically, higher wages are often required to attract employees with high-level skills or who are required to do extensive or high-level, strategic work, such as creating software applications or managing an e-commerce site’s marketing analytics. If an employer requires a high-level employee, experience and expertise must be taken into account, and they should expect to pay and negotiate a competitive wage. Also, paying a minimum wage still may be too high for some small business owners to pay, especially when they are just starting out but require the help to operate effectively. This may encourage some companies to forgo hiring hourly workers altogether and outsource their team instead. This is often the case when it comes to services, such as customer service.

While paying a minimum wage is an option that small business owners can take, they can also consider options to compensate for paying a low wage, such as offering benefits that are attractive to the employee that costs less than increasing each employee’s hourly rate. By considering all of these alternatives and knowing what rate works best for the business and the employee, small business employers can ensure they are paying a fair rate their employees can enjoy without sacrificing the business’ ability to grow and remain operational.

Final Thoughts

While the minimum wage of Virginia is all employers are required to pay hourly employees by law, it doesn’t mean that this is the best or ideal rate to pay. The rate of pay small business owners choose is a personal choice, but it’s important for small business owners to assess their financial situation and consider how pay and other benefits impact employee morale and performance over time.