The U.S. Virgin Islands legislature recently approved an increase of the territory’s minimum wage to $10.50 per hour by the end of 2018.

The bill, which was sponsored by Sen. Jean Forde, has the more immediate impact of hiking the USVI minimum wage from the federal minimum wage of $7.25 to $8.35 an hour 90 days after the bill was enacted. It will then rise to $9.50 an hour on June 1, 2017, and then ultimately to $10.50 on June 1, 2018. Additionally, the new legislation encourages Gov. Kenneth Mapp to appoint nominees to revive the U.S. Virgin Islands Wage Board, a body that has been nonexistent since the 1990s.

Many business owners throughout the territory might be wondering exactly how these steady increases in minimum wage will affect their operations. With many states also increasing their minimum wages in the recent past, we are starting to see answers emerging.

Minimum wage increases happening across the United States

The state of New York made headlines in July 2015 after Gov. Andrew Cuomo announced a plan to increase minimum wage in the state for foodservice employees to $15 an hour over the course of the next several years. For the most part, however, other states that have decided to make changes will not see such dramatic increases.

In 2014 and 2015, the following states approved increases to their minimum wages: Alaska, Arkansas, Connecticut, Delaware, Hawaii, Maryland, Massachusetts, Michigan, Minnesota, Nebraska, Rhode Island, South Dakota, Vermont, West Virginia and the District of Columbia. The only one of them to increase minimum wage to more than $10 per hour was the District of Columbia, where the local minimum wage is now $10.50.

One study from the Congressional Budget Office is applicable to business owners here in the U.S. Virgin Islands. It looked at the impact of raising minimum wage to either $10.10 or $9. In the $10.10 scenario, the report indicates there would be a drastic reduction of workers in the business market as companies cut jobs (500,000 on a national level), but 16.5 million low-wage workers nationwide would receive substantial gains in their average weekly earnings.

This is, obviously, on a much larger scale than what would happen in the U.S. Virgin Islands, but it at least gives us an indication of the potential challenges facing business owners. Employers could be forced to downsize in the wake of the minimum wage increase, but there are still potential benefits for the overall labor market to consider.

Prepare for all potential outcomes

If you own or operate a business, it’s important to be prepared for any of the possible effects of the USVI minimum wage hike. At this point, there is not much precedent to accurately predict the exact impact the increase will have on the territorial economy, but most experts seem to agree that there will at least be some challenges for business owners to overcome in the near future.

You can help prepare for these challenges by consulting a knowledgeable employment law attorney to determine your company’s new obligations under the law.

BoltNagi is an established and respected corporate and labor law firm proudly serving clients throughout the U.S. Virgin Islands.