Economists: There’s room for improvement in Virginia unemployment

By Kaitlyn Speer | Watchdog.org, Virginia Bureau

ALEXANDRIA, Va. — Unemployment numbers in Virginia aren’t too bad, but economists say there’s still room for improvement.

Virginia’s jobless rate stood at 5.3 percent in June, down from 5.7 percent a year ago and lower than the national rate of 6.1 percent, according to the Virginia Employment Commission. That most recent number is a slight bump up from 5.1 percent in May, however.

Keith Hall, a senior research fellow at George Mason’s Mercatus Center in Fairfax, said he thinks Virginia needs continued growth in the labor market and he’s worried what the government is doing to raise the cost of hiring.

“That doesn’t help. That doesn’t encourage businesses,” he said. “There’s talk about the minimum wage. It’s well-intentioned, but if it’s raised, it raises the cost of hiring with people with low skills. It’s going to be hard for companies to keep hiring them. We all want to see wage growth, but it can have an effect on the low-skilled people.”

The unintended consequences of any increase in the minimum wage could be disastrous for Virginia’s economy, according to experts who spoke with Watchdog.org in December.

“It’s perverse in that the people that most need our help are the people who are most hurt by this minimum wage,” said Antony Davies, a senior scholar affiliated with Mercatus Center and an associate professor of economics at Duquesne University in Pennsylvania.

When business owners have to pay higher minimum wages, they tend to select the more educated and experienced applicants, Davies told Watchdog.org.

Another economics professor said the key to combating unemployment is instead focusing on economic growth.

“We need to be making sure those who create jobs, small businesses, are in an environment friendly to them,” Brian Baugus, professor of economics at Regent University in Virginia Beach, told Watchdog.org.

To do that, Baugus said Virginia can work on its occupational licensing by making it easier for people to get a business license.

“If it takes longer to get a license and requirements are more severe, it protects those who are already licensed and drives prices up and keeps those who may want to engage in that profession out,” he said.

If the supply is low, Baugus continued, that drives the prices up and forces people to look elsewhere.

Virginia has taken some steps to create jobs, Gov. Terry McAuliffe’s office said. The most recent deal reported Core Health and Fitness LLC, a leader in developing and marketing advanced strength and cardio equipment for the fitness industry, will invest $2 million to expand the former Med-Fit operation in Grayson County.

This will create 250 new jobs, according to a press release.

Those kinds of investments aren’t always in the state’s best interest, some say.

Baugus said businesses will often come to the state for special benefits and tax breaks, but they’ll later leave because their business doesn’t remain sustainable.

“This is cronyism that’s floating around, it goes back to the problems mentioned,” he said. “The governor is first in line for all of this stuff. (It’s) having a negative effect on economic activity in general.”

But there is hope, according to Baugus. “The market economy is an extremely resilient thing. Even when (you) throw a number of things at it, and caused it to slow down, or skew it in some state or form. The economy is the people, and the people want to start businesses. That’s the core of it all.”

Kathryn Watson contributed to this report.

-Kaitlyn Speer is an intern for Watchdog.org, Virginia Bureau. She can be reached at kspeer@watchdog.org, or on twitter at @KSpeer11