The boss who put everyone on $70K

[ProudVirgin69]

In 2015, the boss of a card payments company in Seattle introduced a $70,000 minimum salary for all of his 120 staff - and personally took a pay cut of $1m. Five years later he's still on the minimum salary, and says the gamble has paid off.

At 31, Price was a millionaire. His company, Gravity Payments, which he set up in his teens, had about 2,000 customers and an estimated worth of millions of dollars. Though he was earning $1.1m a year, Valerie brought home to him that a lot of his staff must be struggling - and he decided to change that.

Raised in deeply Christian, rural Idaho, Dan Price is upbeat and positive, generous in his praise of others and impeccably polite, but he has become a crusader against inequality in the US.

"People are starving or being laid off or being taken advantage of, so that somebody can have a penthouse at the top of a tower in New York with gold chairs.

"We're glorifying greed all the time as a society, in our culture. And, you know, the Forbes list is the worst example - 'Bill Gates has passed Jeff Bezos as the richest man.' Who cares!?"

Before 1995 the poorest half of the population of the United States earned a greater share of national wealth than the richest 1%, he points out. But that year the tables turned - the top 1% earned more than the bottom 50%. And the gap is continuing to widen.

In 1965, CEOs in the US earned 20 times more than the average worker but by 2015 it had risen to 300 times (in the UK, the bosses of FTSE 100 companies now earn 117 times the salary of their average worker).

Breathing in the crisp mountain air as he hiked with Valerie, Price had an idea. He had read a study by the Nobel prize-winning economists Daniel Kahneman and Angus Deaton, looking at how much money an American needs to be happy. He immediately promised Valerie he would significantly raise the minimum salary at Gravity.

After crunching the numbers, he arrived at the figure of $70,000. He realised that he would not only have to slash his salary, but also mortgage his two houses and give up his stocks and savings. He gathered his staff together and gave them the news.

He'd expected scenes of celebration, but at first the announcement floated down upon the room in something of an anti-climax, Price says. He had to repeat himself before the enormity of what was happening landed.

Still, a third of those working at the company would have their salaries doubled immediately.

Since then, Gravity has transformed.

The headcount has doubled and the value of payments that the company processes has gone from $3.8bn a year to $10.2bn.

But there are other metrics that Price is more proud of.

"Before the $70,000 minimum wage, we were having between zero and two babies born per year amongst the team," he says.

"And since the announcement - and it's been only about four-and-a-half years - we've had more than 40 babies."

More than 10% of the company have been able to buy their own home, in one of the US's most expensive cities for renters. Before the figure was less than 1%.

"There was a little bit of concern amongst pontificators out there that people would squander any gains that they would have. And we've really seen the opposite," Price says.

The amount of money that employees are voluntarily putting into their own pension funds has more than doubled and 70% of employees say they've paid off debt.

But Price did get a lot of flak. Along with hundreds of letters of support, and magazine covers labelling him "America's best boss", many of Gravity's own customers wrote handwritten letters objecting to what they saw as a political statement.

At the time, Seattle was debating an increase to the minimum wage to $15, making it the highest in the US at the time. Small business owners were fighting it, claiming they would go out of business.

The right-wing radio pundit, Rush Limbaugh, whom Price had listened to every day in his childhood, called him a communist.

"I hope this company is a case study in MBA programmes on how socialism does not work, because it's going to fail," he said.

Two senior Gravity employees also resigned in protest. They weren't happy that the salaries of junior staff had jumped overnight, and argued that it would make them lazy, and the company uncompetitive.

This hasn't happened.

Rosita Barlow, director of sales at Gravity, says that since salaries were raised junior colleagues have been pulling more weight.

"When money is not at the forefront of your mind when you're doing your job, it allows you to be more passionate about what motivates you," she says.

Senior staff have found their workload reduced. They're under less pressure and can do things like take all of the holiday leave to which they are entitled.

Price tells the story about one staff member who works in Gravity's call centre.

"He was commuting over an hour and a half a day," he says. "He was worried that during his commute he was going to blow out a tyre and not have enough money to fix that tyre. He was stressing about it every day."

When his salary was raised to $70,000 this man moved closer to the office, now he spends more money on his health, he exercises every day and eats more healthily.

"We had another gentleman on a similar team and he literally lost more than 50lb (22kg)," he says. Others report spending more time with their families or helping their parents pay off debt.

"We saw, every day, the effects of giving somebody freedom," Price says.

He thinks it is why Gravity is making more money than ever.

Raising salaries didn't change people's motivation - he says staff were already motivated to work hard - but it increased what he calls their capability.

"You're not thinking I have to go to work because I have to make money," Rosita Barlow agrees. "Now it's become focused on 'How do I do good work?'"

Barlow has been with Gravity since the early days and knows that Price wasn't always so generous.

He acknowledges himself that there was a time in the wake of the 2008 financial crisis when he was obsessed with saving money.

The downturn in the US economy decimated Gravity's customer base and its income fell by 20%. Business logic would have dictated letting go about 12 of the company's 35 staff, but instead Price focused on cutting costs.

After five tense months, the company started turning a profit again, but Price was profoundly spooked, and kept salaries low.

At this time Rosita Barlow was experiencing her own financial problems, and secretly working at McDonald's outside work hours. When McDonald's offered her a promotion, she accidentally left a training manual on her desk at Gravity, and someone spotted it.

Her bosses called her in for a meeting.

"They sat me down and my immediate reaction was to cry," Barlow says. She thought she was being fired.

Instead they told her to figure out how much money she'd need to stay on at the company and they raised her salary to $40,000.

"I was very impressed and proud of her and mad at myself," Price says.

It took him a few more years to grasp the scale of the problem among his staff.

"Most were too intimidated to come to me and tell me how a lack of pay was hurting them," he says.

Before 2015, he had already begun giving employees 20% annual pay rises. But it was his conversation with Valerie that convinced him to go further.

Price had hoped that Gravity's example would lead to far-reaching changes in US business. He's deeply disappointed and sad that this hasn't happened.

Some did follow suit, PharmaLogics in Boston raised their minimum salary to $50,000, and Rented.com in Atlanta raised theirs too. He believes that, by means of online lobbying, he also influenced Amazon's decisions to raise their minimum wage.

But he had hoped for widespread, structural change.

"Boy, was I wrong," he says. "I've really failed in that regard. And it's changed my perspective on things because I really believed that through the actions that I did and that other people could do, that we could turn the tide on runaway income inequality."

The change has had a profound effect on Price and his lifestyle.

Before taking a pay cut, Price was the cliché of a young white tech millionaire. He lived in a beautiful house overlooking Seattle's Puget Sound, he drank champagne in expensive restaurants.

Afterwards, he rented his house out on Airbnb to help stay afloat.

Five years later, Price is still on Gravity's minimum salary. He says he's more fulfilled than he ever was when he was earning millions though it's not all easy.

"There's tests every day," he says.

"I'm the same age as Mark Zuckerberg and I have dark moments where I think, 'I want to be just as rich as Mark Zuckerberg and I want to compete with him to be on the Forbes list. And I want to be on the cover of Time magazine, making lots of money.' All these greedy things are tempting."

"It's not like it's easy to just turn down. But my life is so much better."

[ProudVirgin69]

TL;DR:  CEO institutes minimum wage of $70,000 for his company, doubling the salary of 30% of staff.  Instead of profits shrinking, the company becomes more successful than ever. 

Thoughts?

[che]

TL;DR:  CEO institutes minimum wage of $70,000 for his company, doubling the salary of 30% of staff.  Instead of profits shrinking, the company becomes more successful than ever. 

Thoughts?

Are you a commie ?

[SOMEPARTS]

TL;DR:  CEO institutes minimum wage of $70,000 for his company, doubling the salary of 30% of staff.  Instead of profits shrinking, the company becomes more successful than ever. 

Thoughts?

Bernie Sanders would have doubled the salary of all the employees. Sounds like this CEO might be a racist/sexist/bigot/homophobe.

[funk51]

why that's downright un-american.  he should have cut their salaries in half and given himself a raise.  when debts occur offer to pay pennies on the dollar to outside vendors. then start a fraudulent charity and use it like a personal piggy bank. that is the true blueprint for success in today's business world.

[joswift]

so everyone earns the same, great how do you incentivise staff?

Why put in extra effort if some twat is kicking about doing half the work for the same money?

[IroNat]

Good for him.

Every company owner should have the right to do exactly what he did.

How much does this guy pay himself now?  Did he say he pays himself $70,000 too?

[joswift]

Good for him.

Every company owner should have the right to do exactly what he did.

How much does this guy pay himself now?  Did he say?

70k, 1 million pay cut

[IroNat]

70k, 1 million pay cut

Thanks, Joe. 

[OneMoreRep]

I think it's honorable.

Keep your employees financially happy and you reduce internal theft and staff turnovers. It also makes everyone feel happier to make a respectable salary that allows for personal growth and debt payoff.

Ultimately, the owner of a company can do whatever they want. Sometimes, you have to make these types of sacrifices in order to keep your company healthy. Other companies have great incentives as well. Google used to do similar with their compensation packages and long-term incentives.

I see nothing wrong.

"1"

[joswift]

would you like a promotion?
Nah fuck it, I get 70k doing this job, why would I want more work and responsibility?

[funk51]

so everyone earns the same, great how do you incentivise staff?

Why put in extra effort if some twat is kicking about doing half the work for the same money?

                                                   it's all about pride. you should autograph your work with excellence.

[ProudVirgin69]

so everyone earns the same, great how do you incentivise staff?

Why put in extra effort if some twat is kicking about doing half the work for the same money?

Yes, these are great points you make.  Funny thing is though, the staff at this company had zero issues being 'incentivised' once they received their pay raise. 

It's almost as if people work harder for a company that treats them well and pays them a livable wage.

[Irongrip400]

The shit thing about it, is if he’s only making $70k a year, why would he carry all that exposure for nothing in return? Unless he gets stock options or something?

The owner of a company that actually performs a service or manufacturers something should get more than his/her employees. Some of these airline CEOs and dudes like Roger Goodel who make money by just hiking prices and don’t actually own anything, I could see getting a lot less than they get.

[joswift]

The shit thing about it, is if he’s only making $70k a year, why would he carry all that exposure for nothing in return? Unless he gets stock options or something?

The owner of a company that actually performs a service or manufacturers something should get more than his/her employees. Some of these airline CEOs and dudes like Roger Goodel who make money by just hiking prices and don’t actually own anything, I could see getting a lot less than they get.

Shapiro explains it best..

[joswift]

                                                   it's all about pride. you should autograph your work with excellence.

Really, people go to work to earn a living, some enjoy their work, some hate it, but at the end of the day you want a wage, you wouldn't go for an apple and an orange at the end of the week...

I go to work and do my job, do I go over and above, no, not any more, I once did over and above my role and did additional work to assist the company.
We had a performance related pay scheme, I was awarded an "outstanding" score, my colleagues gained "met all", two scores lower...

I ended up with £200 extra for the entire year.

My time as a keen eager employee were over.

I now go to work, do my job , no more no less, I was recently asked about another role within the company getting an extra £10k a year, I turned it down because it would have likely increased my hours by a third, so I would have just ben doing extra hours for pretty much the same pay.

[Irongrip400]

Shapiro explains it best..

Thank you for that.

[harmankardon1]

so everyone earns the same, great how do you incentivise staff?

Why put in extra effort if some twat is kicking about doing half the work for the same money?

This^

It's a bullshit article, it clearly has a strong propaganda element.

I guarantee the workers that should be at at the higher end of the pay scale (more talent) walk out real fast and the lower end workers (less ability) love sticking around mooching of this sucker. There would be many problems with this type of arrangement, as has been shown consistently in the past with communism in general.

[Irongrip400]

This^

It's a bullshit article, it clearly has a strong propaganda element.

I guarantee the workers that should be at at the higher end of the pay scale (more talent) walk out real fast and the lower end workers (less ability) love sticking around mooching of this sucker. There would be many problems with this type of arrangement, as has been shown consistently in the past with communism in general.

The article I read said two of his executives left after the announcement. It also said he hoped it would start a movement of sorts. Again, he’s the inventor of a technology, so I think at this point it kind of runs itself and all that is needed is a sales force. Which I assume, will be commissioned. It would surprise many here what a great salesperson can make.

[harmankardon1]

The article I read said two of his executives left after the announcement. It also said he hoped it would start a movement of sorts. Again, he’s the inventor of a technology, so I think at this point it kind of runs itself and all that is needed is a sales force. Which I assume, will be commissioned. It would surprise many here what a great salesperson can make.

Yeah ok, if commission is true then that sort of changes the whole point of the thing also.....

can't blame the execs I'm sure he hasn't replaced them when only offering 70k...

[Irongrip400]

Yeah ok, if commission is true then that sort of changes the whole point of the thing also.....

can't blame the execs I'm sure he hasn't replaced them when only offering 70k...

I’m not disagreeing with you, just quoting you to keep it a conversation. I own a business and I realize that if it is solely dependent on the owner, it’s not really worth anything if selling out is your exit plan. But, the owner should take the lions share for his/her risk and exposure. This dude I think feels bad for his excess spending in the beginning. Like others have said though, it is his to do with it how he pleases.

[mazrim]

I think it works in a very, very small scale with certain circumstances.

This would not work as a mandated system. I don't know of many owners who would actually be willing to lower their salary to the same scale. That kept costs the same overall.

[SF1900]

I think it works in a very, very small scale with certain circumstances.

This would not work as a mandated system. I don't know of many owners who would actually be willing to lower their salary to the same scale. That kept costs the same overall.

Vince Goodrum did this for his multiple employees at Caliber Fitness Solutions, The Leader in Human Evolution since 2001.

[Dave D]

so everyone earns the same, great how do you incentivise staff?

Why put in extra effort if some twat is kicking about doing half the work for the same money?

Really, people go to work to earn a living, some enjoy their work, some hate it, but at the end of the day you want a wage, you wouldn't go for an apple and an orange at the end of the week...

I go to work and do my job, do I go over and above, no, not any more, I once did over and above my role and did additional work to assist the company.
We had a performance related pay scheme, I was awarded an "outstanding" score, my colleagues gained "met all", two scores lower...

I ended up with £200 extra for the entire year.

My time as a keen eager employee were over.

I now go to work, do my job , no more no less, I was recently asked about another role within the company getting an extra £10k a year, I turned it down because it would have likely increased my hours by a third, so I would have just ben doing extra hours for pretty much the same pay.

So in your case incentives were low and and $10k raise wasn’t worth the extra work. So incentives didn’t work.

So you’re saying it’s a no win situation?

[IroNat]

Trump works for free.  No salary.