Why This Matters:
Virginia’s minimum wage is currently set to rise from $12.41 to $12.77 on January 1, 2026, and policymakers continue to debate further increases. Some proposals suggest raising the floor even higher, such as to $15/hour. While these changes aim to improve worker pay, they often create ripple effects for businesses through a phenomenon known as wage compression.
What is Wage Compression?
Wage compression happens when the pay gap between entry-level workers and more experienced or supervisory staff shrinks. As base wages increase, businesses may feel pressure to raise wages across the board to preserve incentive structures, avoid turnover, and maintain morale.
What the Data Shows:
According to VirginiaWorks’ 2023 Occupational Employment & Wage data:
- Average wage for cashiers: $12.50/hour
- Average wage for lead cashiers: $13.80/hour
- Average wage for assistant managers: $15.00/hour
Scenario:
Raising Entry-Level Pay to $15/hour To maintain meaningful wage differentials, businesses may adjust other wages accordingly:
| Job Title | Current Wage | Adjusted Wage | % Increase | Added Cost per FTE (Annual) |
| Cashier | $12.50 | $15.00 | +20.0% | $5,200 |
| Lead Cashier | $13.80 | $16.30 | +18.1% | $5,200 |
| Assistant Manager | $15.00 | $18.00 | +20.0% | $6,240 |
Why It Matters for Your Business:
If you employ 10 full-time staff across these roles, the total annual added payroll cost could exceed $50,000 just to maintain internal equity. These costs can be even higher when benefits and payroll taxes are included.
What Employers Can Do:
- Model impacts early. Understand how proposed wage floors affect your full compensation structure.
- Communicate transparently. Staff often value understanding the “why” behind pay decisions.
- Get involved. Stay informed about legislative proposals and share your business’s perspective.
Stay Informed, Stay Prepared.
This communication is part of our commitment to provide clear, nonpartisan information to help local employers navigate legislative changes. For more data, tools, and updates, visit https://virginiaworks.gov/oews/.
