How About a $70,000 Minimum Wage?
With all the talk about minimum wage being set at $15 per hour, how about a $70,000 minimum wage?
This isn't a commentary about whether companies should be required to pay a minimum of $70,000 per year per employee. It's about an actually company, Gravity Payments whose CEO took a massive pay cut to equalize pay of his employees.
Gravity Payments is a Seattle-based company. Dan Price is the CEO and founder. He read an article that the optimal amount any person should be making is $70,000. According to the article he read, less than that leaves people feeling stressed out. They can't be the best they can be when they are stressed.
Interestingly, according to what he read, making more than this amount does not lead to huge increases of happiness. This is why it's considered optimal.
How Did He Fund This Pay Increase?
This happened in 2015. At the time, his salary was close to $2 Million. He reduced his salary and used the reduction to pay for the salary increases.
Did It Work?
I think it depends on who you speak to. He lost a couple of clients who were under the belief that the increase in salaries would result in higher prices. He also lost some key employees who thought it was unfair to reward some employees and not others. Also, many employees at the upper end of the pay scale were hired and compensated for their experience and training. Their pay was not adequately adjusted during this experiment.
Outsiders believe it's a publicity stunt to draw attention to his company. This some truth to this as you are reading about him and his company right here (have you heard of him or the company before?)
CEO's of other companies think the move makes them look bad. I suppose that is their problem, however. He doesn't owe them anything, although these kinds of actions can get you snubbed at business networking events.
In an interview on Fox News, Dan Price stated that he believes the move will help his company and that he has received several leads from potential clients that want to do business based on the values he has set by implementing this payment plan. He also denies the move was made for publicity, although he admits that the company received a lot of buzz due to it.
In another Fox News interview, a panel discussion points to Price struggling with the move and is having a difficult time because his salary is set at the same $70,000 as the other employees.
The main reason why two of his star employees quit was because they felt the move overly rewarded weaker employees and didn't reward those in the skilled labor camp.
In another twist to the story, shortly before the announcement of the salary increases, Lucas Price served his brother with a lawsuit claiming he was hoarding profits. Lucas started the company with Dan. The criticism is that Dan was using the increase in salaries as a way to show that he is generous and to tie up the money to keep it from Lucas.
Why Not Apply to Gravity Payments Yourself?
If you're making less than $70,000 you may be tempted to put in an application to the company. Not so fast. You'll be among several tens of thousands of applicants, a number that jumped threefold since the company announced this plan.
The good news is there are other companies who are following suit and increasing rates of pay for employees. It's unclear if they are doing because they believe in helping their employees or if they just want the publicity pump to prime.
After all, Gravity's sales and profits have both increased due to the move. Whether or not that is sustainable is anybody's guess that we will see over time.
O'Brien, Gael. "It's Not Easy: The Challenge of Paying Employees a $70,000 Mininum Salary" Business Ethics RSS. Business Ethics, 03 Aug. 2015. Web. 11 July 2016. <http://business-ethics.com/2015/08/03/0830-its-not-easy-the-challenge-of-paying-employees-a-70000-minimum-salary/>
Becker, Sam. "The $70,000 Minimum Wage Experiment Reveals A Dark Truth." Cheat Sheet. CheatSheet.com, 04 July 2016. Web. 11 July 2016. <http://www.cheatsheet.com/money-career/the-70000-minimum-wage-experiment-reveals-a-dark-truth.html>
Davidson, Paul. "Does a $70,000 Minimum Wage Work?" USA Today. USA Today, 26 May 2016. Web. 11 July 2016. <http://www.usatoday.com/story/money/2016/05/26/does-70000-minimum-wage-work/84913242/>
Here is a link for more references for you to check out.
What Do You Think?
Do you believe setting a minimum salary as described here can work? Do you think it will encourage too much contentment and allow the weaker employees to coast? Or do you think as the CEO does, that it helps people to concentrate more on their work by not struggling to pay bills? Let me know in the comments below. I'd love to hear from you!
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