CEO who raised workers’ minimum pay to $70K hits predictable problems

[Wilikon]

Do you remember that millennial CEO from Seattle who raised the salaries of all of his employees to at least $70K to combat income inequality? That was a really inspirational story for many in the SJW movement and made Dan Price a sort of sainted figure among liberals as he paved the way toward a more fair and equal future. Unfortunately, as many conservative, free market analysts predicted at the time, such generosity can come at a cost. And now the young entrepreneur seems to be hitting the reality wall.


The Seattle CEO who reaped a publicity bonanza when he boosted the salaries of his employees to a minimum of $70,000 a year says he has fallen on hard times.

Dan Price, 31, tells the New York Times that things have gotten so bad he’s been forced to rent out his house.

Only three months ago Price was generating headlines—and accusations of being a socialist — when he announced the new salary minimum for all 120 employees at his Gravity Payments credit card processing firm. Price said he was doing it, and slashing his $1 million pay package to pay for it, to address the wealth gap.

“I’m working as hard as I ever worked to make it work,” he told the Times in a video that shows him sitting on a plastic bucket in the garage of his house. “I’m renting out my house right now to try and make ends meet myself.”



The fact that Mr. Price himself is cutting corners in his personal life really has nothing to do with this story. It was his own choice to slash his salary and he is the only one responsible for his home budget. So be it. But he describes a number of other woes which were not only predictable, but probably unavoidable. First of all, some of his higher performing workers have quit. Why? Because people who were “just clocking in and out” with the “least skills” (as one former employee put it) got huge raises while the top talent got little or nothing. This is similar to a theme we’ve discussed here before, such as the backlash we can expect from people who have skilled labor jobs paying 15 or 16 dollars an hour when they suddenly see the guy running the fry machine getting the same thing.

Long time customers also bailed out on Gravity either because of disagreements with his politicized business policies or fears that he was raising his rates to cover his generous employee compensation package. The other person who is up in arms is the CEO’s own brother who is currently taking him to court. The sibling is a 30% partner in the firm and is watching the value of his investment (and his own income) melting away before his eyes. What is an investor supposed to do when the CEO suddenly appears to lose their mind and begins giving away all the company profits and crashing their revenue forecasts?

I’m sure Mr. Price is a very nice man and he clearly cares about people in general. But his move to push his generous nature into his business model is returning precisely the sort of results which the free market predicts.


http://hotair.com/archives/2015/08/02/ceo-who-raised-workers-minimum-pay-to-70k-hits-predictable-problems/

[Sourgummies]

Interesting to watch this evolve,figured there would be issues but did not expect so many from within. Sure did not take long to start eating itself.

[Wilikon]

Interesting to watch this evolve,figured there would be issues but did not expect so many from within. Sure did not take long to start eating itself.

I was shocked to see how fast that experiment collapsed. Indeed.

[criptix]

why did the high skilled workers leave? they didnt got less salary right?
i mean the people that left will get the same salary somewhere else right?

greed and jealousy.

we need the singularity asap.
(of course only if it isnt going to kill us)

[koshgel]

why did the high skilled workers leave? they didnt got less salary right?
i mean the people that left will get the same salary somewhere else right?

greed and jealousy.

we need the singularity asap.
(of course only if it isnt going to kill us)

All incentive goes out the door when the minimum is 70k. The lazy workers will get paid the same as the hard-working ones. There is no room to expand and move forward.

[criptix]

why did the high skilled workers leave? they didnt got less salary right?
i mean the people that left will get the same salary somewhere else right?

greed and jealousy.

we need the singularity asap.
(of course only if it isnt going to kill us)

All incentive goes out the door when the minimum is 70k. The lazy workers will get paid the same as the hard-working ones. There is no room to expand and move forward.

i can accept this argument if they would get a higher salary somewhere else and if it is a comparison between lazy and hardworking.
but if this is not the case i can only assume it is just simply emotional reasons.

i mean for example the less skilled worker on machine x, which is easier to handle, would still need to give 100% to do his work, exactly like the skilled worker on machine y, which is more difficult to handle.
in this example the working for both of them would be the same.

i hope i could make my thinkings somewhat clear.

[CEG5952]

Interesting to watch this evolve,figured there would be issues but did not expect so many from within. Sure did not take long to start eating itself.

I was shocked to see how fast that experiment collapsed. Indeed.

It was so predictable. I'm pretty sure he's done the math. I don't even think Virgin company would be wiling to pay that much despite the fact that they're a huge company.

[MakingMoneyHoney]

why did the high skilled workers leave? they didnt got less salary right?
i mean the people that left will get the same salary somewhere else right?

greed and jealousy.

we need the singularity asap.
(of course only if it isnt going to kill us)

All incentive goes out the door when the minimum is 70k. The lazy workers will get paid the same as the hard-working ones. There is no room to expand and move forward.

i can accept this argument if they would get a higher salary somewhere else.
but if this is not the case i can only assume it is just simply emotional reasons.

greed and jealousy.

I think it may have been emotional. But you're shooting in the wrong direction: Contempt, feeling belittled and annoyance at the boss.

If you do the best, and you see those sliding by now getting the same amount. You're not going to be jealous, you have what they have. You're not going to feel greed, again, you have what they have.

You're going to feel belittled and contempt and annoyance at the boss for not recognizing your good job versus a bad job.

[Wilikon]

why did the high skilled workers leave? they didnt got less salary right?
i mean the people that left will get the same salary somewhere else right?

greed and jealousy.

we need the singularity asap.
(of course only if it isnt going to kill us)

All incentive goes out the door when the minimum is 70k. The lazy workers will get paid the same as the hard-working ones. There is no room to expand and move forward.

i can accept this argument if they would get a higher salary somewhere else and if it is a comparison between lazy and hardworking.
but if this is not the case i can only assume it is just simply emotional reasons.

i mean for example the less skilled worker on machine x, which is easier to handle, would still need to give 100% to do his work, exactly like the skilled work on machine y, which is more difficult to handle.
in this example the working for both of them would be the same.

i hope i could make my thinkings somewhat clear.

There will be no need to go to college and pay off loans if you can dip french fries in hot oil for $15/hr (until the robot takes over your job, but that's in another thread of mine). Why the extra stress? OK, nice chair, A.C. all day long. You still have to deal with clients and stuff... You learn all your life hard work brings more reward. You watch your favorite sport team and you get it.

[TheButterZone]

All his victims though... 

[Wilikon]

All his victims though... 

When the CEO is...

[stevegreer]

That's almost as funny as all those poor liberals in Seattle who got their wish for $15/hr and then almost immediately asked for their hours to be cut because they found themselves making too much to qualify for welfare anymore.

[Linuld]

Same amount of money for very different work is not fair. Understandable. Since those higher qualified persons mostly spent years learning what they now know. If they would have earned the same anyway at the end then they would not have to go study.

So really, i think the guy running the company did not create the company. He simply should have known how this will turn out when he would have had the least bit of imagination. So i think he got this business from his dad or so.

[Linuld]

why did the high skilled workers leave? they didnt got less salary right?
i mean the people that left will get the same salary somewhere else right?

greed and jealousy.

we need the singularity asap.
(of course only if it isnt going to kill us)

All incentive goes out the door when the minimum is 70k. The lazy workers will get paid the same as the hard-working ones. There is no room to expand and move forward.

i can accept this argument if they would get a higher salary somewhere else and if it is a comparison between lazy and hardworking.
but if this is not the case i can only assume it is just simply emotional reasons.

i mean for example the less skilled worker on machine x, which is easier to handle, would still need to give 100% to do his work, exactly like the skilled worker on machine y, which is more difficult to handle.
in this example the working for both of them would be the same.

i hope i could make my thinkings somewhat clear.

Then when you come out of school. You know that you will earn the same like everyone other... why should you go to university and study for years really hard? There is simply no incentive since you would get the same like the person washing the windows.

And when someone is stupid for whatever reason, he only can put together some simple tasks, then why should it be fair that the rocket scientist who creates value for many will get the same? You know, it is simply killing incentive. A state running like that would have no rocket scientists anymore. Or very few. Because regardless of what you do, you will get the same as all. You would not get rewarded for puttin in more effort.

So i can understand that.

[Linuld]

why did the high skilled workers leave? they didnt got less salary right?
i mean the people that left will get the same salary somewhere else right?

greed and jealousy.

we need the singularity asap.
(of course only if it isnt going to kill us)

All incentive goes out the door when the minimum is 70k. The lazy workers will get paid the same as the hard-working ones. There is no room to expand and move forward.

i can accept this argument if they would get a higher salary somewhere else and if it is a comparison between lazy and hardworking.
but if this is not the case i can only assume it is just simply emotional reasons.

i mean for example the less skilled worker on machine x, which is easier to handle, would still need to give 100% to do his work, exactly like the skilled work on machine y, which is more difficult to handle.
in this example the working for both of them would be the same.

i hope i could make my thinkings somewhat clear.

There will be no need to go to college and pay off loans if you can dip french fries in hot oil for $15/hr (until the robot takes over your job, but that's in another thread of mine). Why the extra stress? OK, nice chair, A.C. all day long. You still have to deal with clients and stuff... You learn all your life hard work brings more reward. You watch your favorite sport team and you get it.

In such a world i would become the nightwatchman. Sitting around and doing nothing. And i would get my notebook with me and browse the forum to learn how to make money with bitcoins.

See... even such stupid laws, if it would be one, could be circumvented easily with the globalized world we have now.

[Wilikon]

why did the high skilled workers leave? they didnt got less salary right?
i mean the people that left will get the same salary somewhere else right?

greed and jealousy.

we need the singularity asap.
(of course only if it isnt going to kill us)

All incentive goes out the door when the minimum is 70k. The lazy workers will get paid the same as the hard-working ones. There is no room to expand and move forward.

i can accept this argument if they would get a higher salary somewhere else and if it is a comparison between lazy and hardworking.
but if this is not the case i can only assume it is just simply emotional reasons.

i mean for example the less skilled worker on machine x, which is easier to handle, would still need to give 100% to do his work, exactly like the skilled work on machine y, which is more difficult to handle.
in this example the working for both of them would be the same.

i hope i could make my thinkings somewhat clear.

There will be no need to go to college and pay off loans if you can dip french fries in hot oil for $15/hr (until the robot takes over your job, but that's in another thread of mine). Why the extra stress? OK, nice chair, A.C. all day long. You still have to deal with clients and stuff... You learn all your life hard work brings more reward. You watch your favorite sport team and you get it.

In such a world i would become the nightwatchman. Sitting around and doing nothing. And i would get my notebook with me and browse the forum to learn how to make money with bitcoins.

See... even such stupid laws, if it would be one, could be circumvented easily with the globalized world we have now.

In such a world mining bitcoin would not make any sense as everyone would be paid the same... In such world everyone would be as happy, as sad as everyone else. What would be the incentive of browsing the web then or to have a faster internet connection? In such world the Sun would never die one day so there would be no need to escape to somewhere else.

[Lethn]

Watch anybody who supports this find some way to blame those people who left, oh wait, people are already trying to, some people really don't understand how the real world fucking works until it hits them in the face, much like this CEO.

[bryant.coleman]

What an idiot.... income inequality will be there as long as differences in experience and skills exist. Someone who is working in the McDonald's with less than two years of experience can't expect to get the same salary, which is given to someone else who is having 30-years of experience and working as an electrician.

[wxa7115]

What an idiot.... income inequality will be there as long as differences in experience and skills exist. Someone who is working in the McDonald's with less than two years of experience can't expect to get the same salary, which is given to someone else who is having 30-years of experience and working as an electrician.

This and not only that, there is no way to lower the salaries, the employees will not accept that, so the business will bankrupt, all of this was very predictable.

[Snail2]

The fact that Mr. Price himself is cutting corners in his personal life really has nothing to do with this story. It was his own choice to slash his salary and he is the only one responsible for his home budget. So be it. But he describes a number of other woes which were not only predictable, but probably unavoidable. First of all, some of his higher performing workers have quit. Why? Because people who were “just clocking in and out” with the “least skills” (as one former employee put it) got huge raises while the top talent got little or nothing. This is similar to a theme we’ve discussed here before, such as the backlash we can expect from people who have skilled labor jobs paying 15 or 16 dollars an hour when they suddenly see the guy running the fry machine getting the same thing.

Surprise, surprise . Actually this is where all communist experiments are ended until today, regardless of the size and budget of the experiment, and exactly because of the reasons above. Unluckily for him, apart from his own household and his brother there wasn't more "exploitative capitalist" and other "reactionary element" to cover the costs of his revolution.