Category Archives: Economic development

How National Monopolies Drain Rural Economies

Dilapidated buildings along Main Street in Pamplin City, Prince Edward County. Photo credit:

Virginia’s rural communities suffer from huge disadvantages when competing for job-creating corporate investment. Low density makes it expensive to install high-bandwidth Internet service. The small size of rural communities makes it difficult to support the amenities that skilled, educated workers are looking for. And, most important, corporations prefer locating in metropolitan areas with “deep” labor markets where they can tap employees with specialized skills.

Perhaps we can add one more disadvantage to the list: a national economy increasingly dominated by monopolies and cartels. So suggests Lillian Salerno, a former Texan who served as deputy under secretary for rural development in the Obama administration.

“For decades,” she writes in a Washington Post op-ed, rural America has been punished by bad policy that places too much power in the hands of distant financiers and middlemen through the formation of monopolies, which undermines small, local businesses and drains communities of resources.”

New business formation has plunged since the Great Recession, and nowhere more dramatically than in counties with fewer than 100,000 people. Why? Because, Salerno says, the federal government stopped enforcing monopoly laws.

This slow-rolling wave of corporate mergers has left almost all major markets — airlines, telecommunications, health care, retail, milk, seeds for growing crops, hardware, even cowboy boots — dominated by a cluster of mega-corporations, cloaked behind a plethora of brand names. These behemoths now hold unprecedented power over thousands of once-thriving community economies.

Corporate concentration has hit farmers, ranchers and agricultural workers especially hard, she writes. Many markets are monopolized by a single company that dictates the terms of business to suppliers. The seed industry has dwindled from 600 independent companies two decades ago to six today. Similar levels of concentration exist in the pork, chicken and dairy industries.

I don’t know if Salerno is right or not — I would like to see more specifics — but her argument is worth close examination. If her theory holds up, it is discouraging indeed for rural economies, for a decades-long drift toward a cartel-dominated economy is not easily reversed. If it’s any consolation, monopolies are not good for most metropolitan economies either.

Creative (Class) Destruction

Richard Florida in Washington, D.C., last week. Photo credit: Washington Post.

In the inaugural edition of the Bacon’s Rebellion newsletter (back before there were blogs), I reviewed Richard Florida’s book, “The Rise of the Creative Class.” I was certain his work would spark a revolution in how Americans understood economic development in the Knowledge Economy, and I became an early follower.

The then-dominant paradigm of economic development focused on corporate recruitment, as epitomized here in the Old Dominion by the Virginia Economic Development Partnership. In that model of economic development, what corporations needed were utilities, Interstate access, low taxes, inexpensive real estate, and inexpensive, semi-skilled labor. But Florida documented that corporate investment was increasingly driven by a need to access human capital. Corporations, especially fast-growth technology companies, were expanding in locations where they could find skilled, educated, tech-savvy employees — an occupational cluster he dubbed the creative class.

In a break with the past, Florida observed, creatives weren’t attracted to regions with symphonies, operas, and ballets. They were moving to metros noted for openness to newcomers, social diversity, cultural tolerance, and a rich “street” culture. Instead of employees migrating to where the corporations were, corporations were migrating to where the employees were. To attract corporate investment, communities needed to attract the creatives.

Among other insights, Florida foresaw the decline of suburban office parks, which he disparagingly called “nerdistans,” which young people rejected in favor of the city experience of walkable neighborhoods and vibrant, participative cultural institutions. Through a series of books and publication of the “CityLab” blog, Florida transformed the nation’s thinking about economic development — especially in liberal, Democratic cities where talk of tolerance and openness came naturally.

I followed Florida for several years, but slowly lost interest as his shtick became increasingly political. Not only did liberal, Democratic cities embrace him, he embraced them in turn. The new Creative Class paradigm seemed to relegate smaller, less ethnically diverse, more culturally conservative cities to the dust heap of the economy, and Florida seemed to overlook obvious flaws in the Blue State model such as excessive regulation, high taxes and unfunded pension liabilities. To my mind, he had captured important truths but had shot way past the mark.

Well, it seems that Florida has written a new book, “The New Urban Crisis.” I have yet to read the book, but Florida appeared at a panel discussion at the Union Market in Washington, D.C., a week ago to discuss his latest thinking. From the Washington Post:

Somewhere along the way … Florida realized that the workers he so cajoled were eating their cities alive.

In places like New York, San Francisco, Seattle and arguably Washington, the mostly white, young and wealthy “creative class” has so fervently flocked to urban neighborhoods that they have effectively pushed out huge populations of mostly blue-collar and often poor or minority residents.

“I think, to be honest, I and others didn’t realize the contradictory effect,” Florida said Tuesday at a panel discussion. He said he realizes now that prompting creative types to cluster in small areas clearly drove living costs to such heights that low-income and oftentimes middle-income households have been forced elsewhere, creating a divide he did not anticipate.

“We are cramming ourselves into this limited amount of space. And at the same time that the super-affluent, the advantaged, the creative class — we could go on and on [with what to call them] — the techies, global super-rich, absentee investors, invest in these cities, they push others out … and it carves these divides,” he said. …

Although he still champions investments in urban areas, at the panel event Florida said the criticism had made a mark. “To be seen as the neoliberal devil, foisting gentrification on cities, is not a situation I like to be seen in,” he said.

Bacon’s bottom line: Members of the creative class may be tolerant, open, hip and edgy, but they, like everyone else, are NIMBYs. Once they move into a neighborhood, they like things the way they are, and they don’t want greedy developers building new projects that block their views, generate traffic, alter the architectural character of the neighborhood or otherwise inconvenience them. In Creative Class enclaves, NIMBYism restricts residential development, which aggravates housing scarcity, which drives up prices, which displaces the poor, the working class, and increasingly the middle class.

Members of the Creative Class happily wield government power to mold a world to their liking. They have no compunction about enacting laws and regulations that encumber economic activity — usually the economic activity of others — as long as it furthers their own goals. Thus has California transformed the coastal ribbon into an environmental paradise attractive to the Creative Class while devastating the farming and manufacturing economies of inland cities. Gross inequality is not the inevitable result of wealth creation, it is the inevitable result of wealth creation in a liberal Democratic political/cultural setting.

That’s the way I see it. I doubt Florida will see it the same. But I have enough respect for his thinking that I will read his latest work, and I reserve the right to change my mind.

Plumbing the Depths of Economic-Development Stupidity

Rendering of Main Street Station train shed.

Rendering of Main Street Station train shed.

Sometimes I wonder if anyone in Richmond city government ever learns anything about anything. The city has experienced a string of failures over the decades, starting with the grandiose Sixth Street Marketplace that was supposed to revitalize downtown retail in the mid-1980s and came to an end in 2007 when most of the structure was unceremoniously torn down. Undeterred by what should have been a searing memory, the city has squandered millions on several other high-profile revitalization projects of dubious value, the most notorious of which has been the Washington Redskins training camp.

The most recent folly is the $45 million renovation of the Main Street Station train shed, part of a larger, $90 million renovation of iconic station in downtown Richmond. The end result, though visually splendid, fulfills no clearly demonstrated need. The bottom floor will be dedicated to retail space, of which there is no shortage in the Richmond region, and the top floor to meeting space, of which there is an outright abundance.

“Free” federal and state money is covering for most of the up-front cost of the project, but the train shed facility will require $1.7 million in operating subsidies in just the first year. The city already subsidizes the Coliseum to the tune of $1.7 million a year and the Convention Center by $8 million a year, as the Richmond Times-Dispatch reports. In other words, the city will spend millions of dollars to support an event facility that will to some degree compete with, and cannibalize, other event facilities that it is subsidizing.

That’s about as stupid as it gets. Kudos to City Council members Parker Agelasto and Chris Hilbert for asking questions.

Stephen Moret: Aiming to Restore Virginia as Jobs Leader

Stephen Moret, CEO of the Virginia Economic Development Partnership

Stephen Moret, CEO of the Virginia Economic Development Partnership. Photo credit: Washington Business Journal.

Stephen Moret, the new director of the Virginia Economic Development Partnership (VEDP) has been on the job long enough to tour the state, meet business leaders and regional economic development officials, and summarize impressions of his first 100 days. In a letter he broadcast widely through the economic development community, he articulated five aspirational goals and enumerated eleven projects he hopes to see accomplished by the end of 2017.

The five broad goals include:

  • Position Virginia to achieve an employment growth rate among the top three Southern states (and top five in the United States). This will require creating 20,000 jobs per year over and above existing forecasts.
  • Ensure that every region of Virginia participates in that growth. Over the past five years, nearly half of Virginia’s counties and cities have lost population. “While we can’t ensure that every county will grow, we can ensure that every region will grow.”
  • Restore Virginia’s standing to the top rankings (average in the top three) of the best states for business.
  • Re-establish VEDP as “America’s premier state economic development organization.” Other states have stepped up their game. “We are going to clearly describe where we are behind and articulate what it will take to get back on top.”
  • Emphasize the “P” in VEDP — develop strong relations with local and regional economic developers, the Port of Virginia, GO Virginia, the Tobacco Region Revitalization Commission, the Virginia Chamber of Commerce, railroads, utilities, and the State Council of Higher Education for Virginia.

This year, Moret said he will focus upon implementing Joint Legislative Audit and Review Commission (JLARC) recommendations for the administrative reform of VEDP as well as the following:

  • Develop a target-industry economic development strategy and action plan for the state and each of its regions.
  • Create a marketing/branding, site-consultant cultivation, and lead-generation program, and introduce a legislative proposal to fund it.
  • Launch a “world-class, turnkey, customized workforce recruitment and training program modeled after such programs in Georgia and Louisiana.”
  • Launch a targeted business retention and expansion program.
  • Develop a comprehensive strategy to position rural Virginia for growth.

“I’ve been amazed by the physical beauty of Virginia; the incredible human capital, higher education, infrastructure, and geographic assets here; the high-quality companies making world-class products and/or delivering world-class services; and the professionalism and passion of Virginia economic development practitioners,” wrote Moret, who ran Louisiana’s economic development program before moving to Virginia. “Based on what I’ve seen so far at VEDP and across the Commonwealth, I’m even more enthusiastic about the opportunities facing us than I was when my appointment was first announced.”

Bacon’s bottom line: Stephen Moret is bringing new energy and a fresh eye to an economic development apparatus that grew complacent from previous successes. As VEDP chief, however, his job is bringing outside capital investment and jobs to Virginia, which is only one leg of a diversified economic development strategy. Most jobs will be created by existing Virginia businesses and new start-up businesses, which are outside of Moret’s portfolio. But I think Virginians can feel reassured that the corporate-recruitment function is in good hands.

Retirees, Restaurants and Boutiques

Julien Patterson and Terri Wesselman in their art gallery. Photo credit: Virginia Business magazine.

Julien Patterson and his wife Terri Wesselman spent two decades building their Chantilly-based company, Omniplex World Services, into a security and investigative services firm employing more than 3,500 and generating annual revenue of more than $100 million. After selling the company in 2012, they “retired,” dividing their time between Florida and Virginia’s Northern Neck.

But it wasn’t in their temperament to spend their free time playing golf or mahjongg. According to Virginia Business magazine, the couple has started four small businesses in the Northern Neck: an art gallery, a home decor store, a coffee shop, and a clothing boutique.

“For me, I think retirement is the change in venue that allows you to do the things you want to do that benefit others and brings you satisfaction and a sense of well being,” says Patterson, now 65.

As Virginia Business notes, Virginia, like the United States as a whole, is on the verge of a retirement wave. Virginia is home to 1.4 million people who are over the age of 65. By 2030, the over-60 crowd will reach 2.3 million. Thousands of them will be successful corporate executives, entrepreneurs and professionals. And, like the Pattersons, many might be ready to slow down, but they’re not prepared to drop out.

Rural economic development has been a recurring theme of Bacon’s Rebellion. It’s clear to most people that the traditional strategy of clinging to Virginia’s mill-town roots has done little to reverse the decline in jobs and opportunity in Virginia’s rural economy. There’s nothing wrong with recruiting light manufacturing, but economic developers need to look at other strategies as well. One such strategy is exploiting the retirement boom.

Retirement represents a stage of life when people are more willing to consider relocating to a rural community than when they were pursuing career and raising families. Quality of life matters more than career opportunities or good schools. Retirees are drawn to scenery — waterfronts, rolling hills and mountains — all of which Virginia has in abundance.

But wealthier retirees can’t live on scenery alone. They also want amenities — precisely the kind of amenities that the Pattersons were providing in their Northern Neck community. (Virginia Business did not identify the specific town where they live.) Coffee shops and art galleries don’t create a lot of jobs, or even especially high-paying jobs, but they do provide employment that didn’t exist before. Affluent retirees also create a market for personal services such as handyman repairs, landscaping and the like, which locals can turn into business opportunities. Equally important, retirees and small businesses bolster the tax base of local jurisdictions — without adding to the burden of local school districts.

One nice thing about the retiree market is that you don’t have to bribe newcomers with subsidies and tax breaks. What a retiree-focused economic development strategy does require is a sharp focus on place making — creating the kinds of places where affluent people like to hang out. It gets old staring at the mountains or sailboats all day long. People crave places to go and interact with others. More specifically, they want charming, walkable/bikable places — not roads lined with gas stations and fast food joints where there aren’t any sidewalks and cars whiz past at 40 miles per hour.

The good news is that it doesn’t take a lot of money to create charming, walkable/bikable  places — sidewalks and bicycle trails are not expensive — but it does require zoning codes and comprehensive plans that don’t mandate rural sprawl. In my profile of Aspen, Colo., last year, I described the virtuous cycle that can take place when small towns invest in walkable/bikable places, attract visitors and second homes, stimulate the restaurants-and-boutiques economy, and boost property values and the tax base. Virginia communities really need to give this strategy a look.

Ed Gillespie Tax Plan Checks All the Right Boxes

Ed Gillespie addresses the GOP convention in Roanoke.

Ed Gillespie addresses the GOP convention in Roanoke. Photo credit: Washington Post.

Republican Ed Gillespie has issued a blueprint for tax cuts that could define the terms of debate for Virginia’s 2017 gubernatorial campaign. It is a fiscally credible plan. It offers a well-articulated vision for how to jump-start Virginia’s economy. That’s not to say the plan is unassailable, but it is too big and bold to be ignored. Indeed, Republican rival Corey Stewart rolled out his own tax cut plan just a few hours after Gillespie’s announcement. Democratic candidates likewise will be forced to respond.

There are two parts to the Gillespie plan. The first is an across-the-board cut of 10% to state income tax rates, which the campaign says will put nearly $1,300 per year back into the pockets of an average family of four. Gillespie would phase in the tax cut over a five-year period, paying for it out of an anticipated $3.4 billion in state revenue growth, leaving about 60% of the new revenue to fund core services.

The second part would sunset three anti-business, “job-killing” taxes levied by local governments: the Business and Professional Occupancy License tax (or BPOL), the machinery & tools tax, and the merchants tax. To replace lost revenues, he would allow local governments to utilize alternative revenue streams from an unspecified “menu of options” that will be “collaboratively developed.” One option the menu will not include is a local income tax. Localities would be free to re-enact the business taxes or choose from the options.

Not only will the tax restructuring boost disposable income for an average household for four when fully phased in, Gillespie claims, it will stimulate $300 million a year in new economic activity, create 50,000 additional private-sector jobs (25% more than would be created otherwise), and help recruit and retain talented workers. These economic estimates are based upon the work of the Thomas Jefferson Institute for Public Policy using economic modeling tools of the Beacon Hill Institute.

The vision. The underlying premise of the plan is that Virginia’s economy is sluggish and needs a jolt to get moving again. Says the plan overview:

Our approach to economic development is antiquated and tired, and Virginia is losing ground to other states. Our economic growth rate has trailed the national average for five straight years. … Virginia’s antiquated ta code was designed in a bygone era and our income tax rates have never been lowered since they were established in 1972. Our tax climate ranking fell to 33rd in 2017, falling behind neighboring states like North Carolina, Tennessee, and West Virginia. Our business rankings are falling, and more people are moving out of Virginia than moving in.

What won’t revive Virginia’s economy, says Gillespie, is picking winners and losers with subsidies, tax breaks and other preferences.

The plan will raise take-home pay for hard-working Virginians squeezed by stagnant wages and higher costs, orient our economy toward start ups and raise ups, entrepreneurs and small businesses, and make Virginia more competitive and attractive to businesses, retirees and veterans. …

Instead of solely focusing our efforts on throwing taxpayer dollars at big corporations and hoping they move to Virginia, this plan is crafted to foster natural, organic economic growth over the long term through a more patient approach that will help start ups, entrepreneurs, and existing small businesses. …

The path to diversifying our economy will be charted by entrepreneurs given greater freedom to invest and innovate. They will identify the new sectors, services and products to flourish in Virginia, not a top-down government approach that picks winners and losers in the marketplace, and too often makes the wrong bets with your tax dollars.

The fiscal math. Gillespie has structured the plan to fend off the inevitable criticism that his plan will crimp funding for critical government services. First, he says, he will offset revenue reductions by eliminating “special interest tax preferences, cutting wasteful spending, and conducting a full review of economic development programs.” Second, he will build in revenue triggers to protect critical investments in education, health care, transportation, public safety, and other core revenues.

Gillespie’s plan is vague about exactly which “special interest tax preferences” he would cut — and he’s vague about the “revenue triggers.” Virginia’s tax code is larded  with tax breaks, but the big ones are political popular and eliminating the small ones yield only modest savings. In effect, Gillespie is punting some of the tough political choices until later. As for the tax revenue triggers, presumably, they would limit the tax phase-out in any given year if revenues fail to meet expectations. Undoubtedly, there would be considerable discussion over how sensitive to revenue shortfalls those triggers should be. Continue reading

Virginia Beach, Emerging World-Class Data Hub

Speaking of Virginia Beach…. Here’s a more promising approach to economic development than building arenas in the hope of wrangling big-name concerts and basketball tourneys for 30 years into the future. Reports the Virginian-Pilot:

A Dutch company wants to create a new data center park to draw the likes of Snapchat, IBM and Uber. NxtVn will spend $1.5 billion to $2 billion to build a hub off General Booth Boulevard to attract companies that seek high-capacity connections from the U.S. to Europe.

The company also plans to invest in a third trans-Atlantic high-speed data cable – Midgardsormen – that would link Virginia Beach to a data center park in Eemshaven, Netherlands.

This news follows an announcement made last year that a consortium including Facebook, Microsoft and Telefonica would build a 4,000-mile trans-Atlantic cable capable of transmitting 160 terabytes of data per second, the first transoceanic fiber cable station linking to the Mid-Atlantic. The existence of these two transoceanic cables, plus a third connecting Brazil and Virginia Beach, could spur development of the city into one of the nation’s largest data-center hubs.

How has Virginia Beach scored this economic-development coup? By handing out subsidies and tax breaks? No, by tending to basics. Writes the Pilot:

Over the past two years, the Virginia Beach Broadband Task Force has laid out steps that appeal to technology-driven companies, including advancements to a high-speed fiber optic network connecting municipal buildings and laying a fiber ring across the city, said Councilman Ben Davenport, chair and founder of the task force.

“We have worked with Dominion Virginia Power to make sure all power requirements could be met at these sites, which is very important because these data centers are huge power users,” said Davenport, who said that when NxtVn was told about the task force’s work on the fiber network, “this sealed the deal.”

There is no mention in the Pilot article of how much it cost to lay that fiber ring across the city. Perhaps the expenditure represents an implicit subsidy for broadband companies like NxtVn. If so, the project certainly appears to be paying off. I’m willing to wager that the Return on Investment is vastly superior to payback from an events arena.

(Hat tip: Paul Yoon)

Is Virginia Beach Arena Deal Good or Bad for Taxpayers?

Mayor Will Sessoms announces a $220 million Virginia Beach arena deal

Mayor Will Sessoms announces a $220 million Virginia Beach arena deal at a Chamber of Commerce function. Photo credit: Virginian-Pilot.

Virginia Beach City Council has approved a financing plan to build a $220 million sports and entertainment center near the Oceanfront, reports the Virginian-Pilot.

“Game on,” said Mayor Will Sessoms in announcing the deal. There is “a real possibility now” of hosting part of the NCAA basketball tournament. “Picture March Madness two years from now. Wouldn’t it be amazing to have that happening right across the street at our new Virginia Beach arena?”

I’ll tell you what would be amazing — if Virginia Beach taxpayers don’t take a drubbing.

The deal has gone through multiple iterations over more than a year. More than a year ago, City Council approved a plan submitted by the arena developer, United States Management involving $170 million in loans and $40 million in equity. A second plan would have entailed a $240 million loan. Under the latest plan, approved by City Council, the developer will borrow $150 million and invest $70 million in equity.

The city has committed to a $476 million in incentives over 33 years, as described by the Pilot: 1 percentage point of the city’s lodging tax, construction tax incentives, and tax revenue generated by the arena. Also, the city will shell out $76.5 million in hotel and discretionary taxes for infrastructure in the area.

Sessoms described the agreement as “a very good deal,” and other council members agreed.

Bacon’s bottom line: Maybe it is a good deal, I don’t know. There isn’t enough information in the Pilot article to tell. One positive sign: The developer is putting in $30 million more of its own money and borrowing $20 million less under the final deal than under the original deal. That puts the developer at greater financial risk, as is proper, and provides an extra financial cushion if, surprise, surprise, revenue projections don’t meet forecasts, the developer goes bust and the city has to step in. I hate to sound like Debbie Downer, but it’s been known to happen.

It’s more difficult to assess whether or not the city is giving away the store. We need to know how much tax revenue the Virginia Beach arena is expected to generate directly in property, sales, and hospitality taxes, and how much it is expected to generate indirectly through increased hospitality taxes at Virginia Beach hotels and restaurants. Then we need to match up those numbers year by year against the value of the incentives and give-aways. Presumably, that will yield a positive number, in which the city and its taxpayers gain each year more than they lose.

But, wait, what about the $76 million in taxes spent on infrastructure? Presumably, that will be front-end loaded. The city will have to build the infrastructure (street improvements, sidewalks, utilities, whatever) right away as part of the arena project, not phase it in over 30 years. Here’s how city council persons should be thinking about the deal: In exchange for an up-front investment of $76 million in tax dollars, the city will generate an increased stream of net tax revenue (gross revenues minus cost of incentives) from the project.

If the city’s return on investment is, say, six or seven percent, then taxpayers are getting a decent deal to compensate them for the risk they’re taking on. If the return is close to zero, one wonders why the city is pursuing the project when it could put its resources to work to better effect elsewhere. If the city is actually generating negative net taxes, then the developer took it to the cleaners.

In making the announcement, the mayor did not release any such numbers (at least none that were reported) and offered instead a lot of gassy talk about how great it will be if, maybe, just maybe, the NCAA tournament chooses Virginia Beach as a venue. That makes me suspect that either the numbers look shaky or, worse, Virginia Beach officials don’t even know what kind of return they’re getting. If I were a city taxpayer, I’d be demanding answers.

Autonomous Cars — a Cheap Economic Boost?

Who needs to build new roads or create tolled express lanes when the driverless car revolution is almost upon us? Clifford Winston and Quentin Karpilow suggest that autonomous cars will reduce traffic congestion by boosting highway throughput, creating a huge boost to economic productivity and output.

In a new paper published by the Mercatus Center, “A New Route to Increasing Economic Growth: Reducing Highway Congestion with Autonomous Vehicles,” Winston and Karpilow write:

Widespread adoption of autonomous (driverless) vehicles —- which American and foreign technology companies and automakers are actively developing, testing, and perfecting, with some industry leaders and US Secretary of Transportation Anthony Foxx expecting driverless vehicles to be available to the public by 2021 —- could reduce highway congestion by greatly improving the flow of traffic and by reducing vehicle accidents without significantly increasing the monetary cost of commuting.

Using our estimation results for California and conservatively extrapolating to the nation, we find that the adoption of autonomous vehicles could have potentially large macroeconomic stimulative effects. Specifically, in a given year, a 50 percent penetration rate for autonomous vehicles (i.e., half of the vehicles used by motorists would be driverless) could add at least $214 billion in GDP, 2.4 million jobs, and $90 billion in income to the US labor force.

Read the paper and decide for yourself if this analysis holds water. If it does, Virginia needs to jump on board the autonomous-automobile train (pardon the ironic metaphor). Early-adopter states will enjoy tremendous economic advantages over the laggards. It could be the least expensive economic boost ever.

The Northam/Perriello Rural Poverty Plan

Let there be higher wages! Ralph Northam (left) and Tom Perriello on the campaign trail in Northern Virginia where they promoted a $15 minimum wage.

Let there be higher wages! Ralph Northam (left) and Tom Perriello on the campaign trail in Northern Virginia where they promoted a $15 minimum wage. (Photo credit: Washington Post)

Both Democratic candidates for governor, Ralph Northam and Tom Perriello, have endorsed a statewide $15-per-hour minimum wage, a sign, says the Washington Post, of how much momentum the national “Fight for $15” is achieving. (Virginia hews to the federal minimum wage of $7.25 per hour, which has not increased since 2009.)

Perriello backed the $15 minimum wage shortly after declaring his candidacy, and Northam followed the next day. Both candidates reiterated their support earlier this week when aligning themselves with striking workers at Reagan National Airport. Reports the Post:

“I would challenge anyone out there to go try to support themselves and support their families on $7.25 an hour,” Northam said Wednesday after his meeting with workers. “It is impossible. You can’t do it.” He said he would push to raise the minimum wage as governor by campaigning to unseat Republican lawmakers opposed to it.

“We know we have a long way to go,” Perriello told a wheelchair handler during his Thursday visit, wearing a purple Fight for $15 scarf. “This is about the dignity of work, but it’s also about economic growth in our community.”

Bacon’s bottom line: Economists have haggled endlessly for decades over the effects of the minimum wage, with neither side dealing a knockout blow. But it’s safe to say that the minimum wage would have the greatest impact on labor markets in areas where prevailing wages are the lowest — and in Virginia, those are rural areas.

Start by asking the following question: Why not raise the minimum wage to $30 an hour? Or $100 an hour? Because, even liberal economists will concede, employers will lay off workers who don’t deliver $30 or $100 in economic value. At some point the wages lost by those who lose their jobs will exceed the wages gained by those who received a pay raise. At that point the minimum wage becomes indisputably destructive. The question is at what hourly wage that threshold is crossed.

It is conceivable that a $15 minimum wage will work in the Washington metropolitan area in the sense that wage gains for lower-income workers will exceed the wages lost from employees who lose their jobs. That’s because Washington is already a high-cost-of-living, high-wage labor market, and the differential between prevailing market wages and the $15-per-hour minimum wage is relatively modest. The picture is very different in economically depressed Southside and Southwest Virginia communities where one of the few competitive advantages in the economic-development arena is a lower cost of living and a lower wage base.

The Virginia Employment Commission publishes labor market profiles of the Southwest Virginia Workforce Investment Area here and the Northern Virginia Workforce Investment Area here. Below, I extracted the average weekly wages for the largest occupational categories in Southwest Virginia (excluding government and mining/oil and gas/extraction).

For purposes of comparison, someone earning the current minimum wage and working 40 hours a week would earn $290 per week, while a $15-per-hour minimum wage would equate to $600 per week.

Clearly, such a minimum wage would have a greater impact on SW Virginia workers than NoVa workers where the average weekly wage (and by implication the average hourly wage) is 50% to 75% higher. On the plus side, the pay of SW Virginians would jump more… if they could hang onto their jobs. And there’s the rub. How many could hang onto their jobs after such a massive disruption to labor markets? While some SW businesses might survive by laying off marginal employees, one has to ask, others couldn’t even stay in business. Would a Pizza Hut franchise be able to keep the doors open if its cost of labor doubled? If not, how many business owners, store managers and others earning above the minimum wage also would lose their jobs?

Beyond the immediate impact, what would be the consequences for long-term job development? Would any corporation consider investing in SW Virginia, a region in which 11% of the workforce has an 8th grade education or less and another 12% has “some” high school, if the minimum wage were $15?

The idea of a $15-per-hour minimum wage was born in affluent urban areas with a high cost of living. It is totally inappropriate for poor rural areas with low living costs, low wage structures and high unemployment. I can think of no economic policy that would be more disastrous for Virginia’s rural regions.