Seattle just raised its minimum wage to $15/hour, but apparently that wasn’t good enough for Dan Price, founder of Gravity Payments.
Price is going to pay 120 employees $70,000 per year, while taking a big cut of his own.
Yes, every single employee, from a customer service representative on up to himself!
From the New York Times:
The idea began percolating, said Dan Price, the founder of Gravity Payments, after he read an article on happiness. It showed that, for people who earn less than about $70,000, extra money makes a big difference in their lives.
His idea bubbled into reality on Monday afternoon, when Mr. Price surprised his 120-person staff by announcing that he planned over the next three years to raise the salary of even the lowest-paid clerk, customer service representative and salesman to a minimum of $70,000.
The paychecks of about 70 employees will grow, with 30 ultimately doubling their salaries, according to Ryan Pirkle, a company spokesman. The average salary at Gravity is $48,000 year.
If this is a publicity stunt to grow his company, it will definitely attract some attention.
Take a look at the financial breakdown of Price’s proposal…
Mr. Price, who started the Seattle-based credit-card payment processing firm in 2004 at the age of 19, said he would pay for the wage increases by cutting his own salary from nearly $1 million to $70,000 and using 75 to 80 percent of the company’s anticipated $2.2 million in profit this year.
I mean, Price owns the company, so go ahead, pay them the high salaries, that’s your right. The thing he needs to keep in mind is that minimum wage jobs are meant to be kept for a short time before one can move on to something better.
What happens if a low-level employee is fired from his $70k job? Clearly that person won’t see that kind of cash at any other minimum wage job he or she applies for.
Maybe Price feels embarrassed by his success at such a young age, but it’s not greedy to want to keep the profit you earned from a business you took the chance on starting up.
From Kimberly Morin at Federalist Papers:
Essentially Price is giving everyone a ‘trophy’ even if they don’t deserve it.
He’s paying low-skilled workers a much higher salary than they’d ever earn elsewhere which means they’ll end up being stuck in the same job for years rather than leave.
He’s cutting the profits of his company to do so which means he won’t have the money to grow like he would before which will end job creation. This will also stop the company from growing which in turn will make it so the employees he has now can’t move up the food chain internally.
There is a value placed on workers that is based on demand and skill level. By increasing the value of lower skilled workers to one that doesn’t come near what is reality, Price sets his own employees up for failure down the road.
The other issue is this company will ultimately go out of business as competitors with lower cost structures offer customers lower prices and better service.
Morin isn’t wrong. It would be difficult to sum up any better.