Wages, Prices, & Demand


Wages, Prices, & Demand
Added on March 12, 2024 by Jolie R. Spiers to Chamber Voices

Wages, Prices, & Demand

Last issue we got micro with a conversation about how to create the perfect elevator pitch (I still want to hear your unique value propositions!). This issue we are going macro to take a larger look at an important issue in Hampton Roads and the entire Commonwealth: employee wages.

Much remains to be seen but a bill that is steadily making its way through the Virginia General Assembly is legislation to raise the state minimum wage. Sponsored by Hampton Roads legislators Senator Louise Lucas and Delegate Jeion Ward, Senate Bill 1 and House Bill 1, respectively, increases the minimum wage from its current rate of $12 per hour to $13.50 in January 2025 and to $15 in January 2026.

We could spend an entire edition of CoVa Biz magazine debating the pros and cons of these bills but the bottom line is that small businesses would do well to start looking at their own bottom line. The time to prepare for a potential increase of 25% in wages to hourly employees in less than two years’ time is now.

I was talking recently with the owner of a popular Oceanfront attraction who is concerned about compression. He already pays above minimum wage but notes that as hourly wages increase due to market demands or legislation, his hourly workers start to bump against his salaried employees who expect their wages to increase accordingly. Increasing hourly wages effects all employees as they compare their salaries and wages to an established threshold.

How to counter increased costs? Increase prices and increase demand.

Pricing can be a tricky.  If you’ve gone out to eat lately you know that prices are already on the rise. Not to pick on restaurants – increases are happening across all industries – but restaurants are among the businesses who are most affected by changes to minimum wage along with much of the hospitality and tourism industry (see Oceanfront example above). We talk a lot about the three-legged economy of Hampton Roads – tourism, military and the Port of Virginia – but it doesn’t take an ODU economist to figure out which sector will be hit hardest by minimum wage.

If there is less room for prices to hike, then we need to focus on demand. Luckily this is an area where there seems to be more room for increase as in increased customer service, increased online presence and increased employee engagement.  These areas all offer opportunities for no-to-low cost tweaks that can help increase your business’s profile and drive new and repeat customers.

Even if HB 1/SB 1 doesn’t pass, the wage issue remains. Ask your friends in workforce development and they will tell you that it isn’t just minimum wage but overall wage rates that impact the business climate. Too many business owners don’t know where they stand among industry peers and competitors, especially if they are behind the curve, and it effects their ability to hire and retain a competitive workforce.

I realize I’ve skimmed a bit over the implementation strategies particularly with my breezy advice about tweaking your customer service and online presence. That’s partly a space issue and partly an opportunity for me to encourage you to connect with the small business champions that are already in your corner. Now is the time to reach out to your insurance broker, banker, accountant, human resources contacts, Chamber (ask about Wise Choice, a new program for healthcare savings), and, of course, the Hampton Roads SBDC. We are all available to support small businesses as you navigate wage issues and other business realities.