Millionaire boss who began paying his employees $70,000 minimum wage is thriving

[Professor Emeritus]

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.

Dan Price was hiking with his friend Valerie in the Cascade mountains that loom majestically over Seattle, when he had an uncomfortable revelation.

As they walked, she told him that her life was in chaos, that her landlord had put her monthly rent up by $200 and she was struggling to pay her bills.

It made Price angry. Valerie, who he had once dated, had served for 11 years in the military, doing two tours in Iraq, and was now working 50 hours a week in two jobs to make ends meet.

"She is somebody for whom service, honour and hard work just defines who she is as a person," he says.

Even though she was earning around $40,000 a year, in Seattle that wasn't enough to afford a decent home. He was angry that the world had become such an unequal place. And suddenly it struck him that he was part of the problem.

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!?"

There's a lot more in the BBC story as well as an older Inc. story. This shyt was posted on the Coli a bunch of times back in 2015 when he announced it, pretty even mix of folk repping him and folk talking shyt and saying it wouldn't work (just like they did for Seattle's $15 minimum wage).

I think we know who came out right.

I'll just quote a few more highlights.

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).

Even as the nation's productivity has improved 22 percent since 2000, median wages have risen only 1.8 percent, adjusted for inflation. Wages have actually fallen by 3 percent since the recession. Meanwhile, productivity gains are going to CEOs who earn, on average, about 300 times more than typical workers, compared with 71.2 times in 1990, according to the Economic Policy Institute. (Price's $1.1 million salary was about 23 times the $48,000 average at Gravity.) Such trends have driven the push for a $15 minimum wage in some cities, including Seattle.

Crazy shyt that inequality has increased that quickly, and that the USA is so much higher than even the UK (which itself is more unequal than most European economies).

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.

Since that April made-for-TV moment, Price says he's had no second thoughts --mostly because he's been learning how his employees had been struggling. Garret Nelson, 31, a salesman in Boise, Idaho, got a $5,000 raise, to $55,000 [now $70,000], allowing him to pay for teaching supplies and music lessons for his five homeschooled kids. "People back in Idaho said he was nuts," says Nelson, who went to middle school with Price. "But it really energized the employees."

People making a living wage are able to live better lives.

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.

fukking insane though - he's calling a profitable company voluntarily choosing to pay its workers a living wage "socialism" and wants them to fail.

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?'"

Is there a magic number that keeps workers focused while still generating a profit?

Price calculated a figure but never imagined the publicity he's gotten would boost new customer inquiries from 30 per month to 2,000 within two weeks. Customer acquisition costs are typically high, so in that sense, the strategy has paid off. And in this business, customer retention is key. Gravity's 91 percent retention rate over the past three years -- far above the industry average of about 68 percent -- has been crucial to its success.

Maria Harley, Gravity's vice president of operations, looks at a different set of numbers. While the company had to hire 10 more people than anticipated to handle the new business, most nonlabor costs -- rent, technology, etc. -- have remained the same, thus improving operating ratios. "We don't need our sales to double," she says. "We only need them to increase marginally -- by about 25 to 30 percent. When I started being more logical than emotional about this, I said, 'This is totally possible.'"

Satisfied employees who don't have to worry about making ends meet do better work.

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."

Acting like a good person and making sure the people around you are happy makes your life better.

 

[Oldschooler]

The key here is paying someone a 'living' wage. There's a huge difference in being informed on what a living wage is and a minimum wage.

Raising the minimum wage does not do anything because costs rise everywhere to offset that. In fact a lot would argue that it benefits huge companies like Walmart and Amazon because they can afford to raise the minimum wage. But small businesses can't and are forced to shut down or be owner operated basically. Raising minimum wages drastically also makes everyone else making more than minimum wage (middle class) poorer because now cost of living has gone up across the board and your company hasn't increased your wages by the same difference. This happened to my extended family in Canada when they decided to drastically increase minimum wage from something like $10/hr to $15/hr in a span of a year.

Obviously it works for the posted example because only a few companies paying their employees more does not alter costs of living. However, big industries, such as tech congregating and setting up shop on a small geographical location does change the cost of living so much so that you have educated tech workers sleeping in vans.

Edit: forgot to comment on the inequities between ceo pay and average worker.

Basically you can carve out CEO pay by taxing the shyt out of people that make $10+ million a year. This still leaves the autonomy to private companies to do whatever they want. But in the end it benefits society as a whole by taking that large taxed income and redestributing it to provide a social safety net for the other side of the spectrum.

 

[LurkMoar]

Amazon and Walmart fight for higher minimum wage, ask yourself why. Salute to this boss tho

 

[GnauzBookOfRhymes]

"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."

That is crazy but not surprising.

 

[Professor Emeritus]

TLDR: @Oldschooler, your entire argument ignores that minimum wage and wages in general are LOW right now while productivity, CEO compensation, and profits are HIGH. You're talking like no one can raise wages when wages have been higher relative to inflation in very recent history, and you completely ignore that the rich are getting far richer off the backs of their low pay - when you talk about what will happen due to the minimum wage increases, you completely ignore high-level pay and shareholder profits as if those aren't even relevant to the business outcome.

Which makes sense, because right-wing sources always hide those factors, pretending that only poor people's wages translate directly to product cost and completely ignoring high-level salaries and profits in the model altogether.

The key here is paying someone a 'living' wage. There's a huge difference in being informed on what a living wage is and a minimum wage.

Raising the minimum wage does not do anything because costs rise everywhere to offset that.

That's false, because labor costs are only a percentage of total costs and the % of labor costs composed of minimum wage employees is an even smaller percentage of that. It's literally impossible for costs to offset the rise because the rise is only in a small portion of product costs.

Not to mention that claiming that labor costs will be 100% passed down is to suddenly pretend that the supply-demand curve doesn't exist anymore and market rates are irrelevant. If the market is not going to pay that much more for the product, then they would be stupid to raise costs. Instead the minimum wage gain is just eaten by the biggest bosses and shareholders, who (as demonstrated in the OP) have been able to vastly increase their own compensation and inequality by keeping wages low.

In fact a lot would argue that it benefits huge companies like Walmart and Amazon because they can afford to raise the minimum wage. But small businesses can't and are forced to shut down or be owner operated basically.

That's absolutely false, we've been over this is threads before and there's a reason that small business owners support an increase in the minimum wage. Outlets like Walmart depend on faceless, replaceable workers making absolutely minimum money because their business model is based on volume. By paying masses of low-wage workers in volume, they charge the lowest prices and thereby undercut the small businesses.

Small businesses can't possibly beat big business on saving costs via volume, so their only advantages are superior workmanship, greater personalization, superior service, and long-term relationships and trust built over time. All that shyt requires more competent, longer-tenured employees and so it benefits the small business model much more than the big business model to pay their employees more.

Some links, all on shyt that's already been discussed:

Seattle passed a $15 minimum wage law in 2014. Here's how it's turned out so far

National Poll: Small Business Owners Favor Raising Federal Minimum Wage | Business For a Fair Minimum Wage

https://www.asbcouncil.org/sites/ma..._bfmw_poll_report_final_140709.pdf?1546455424

Most Small Businesses Support Minimum Wage Hikes, Survey Says

Raising minimum wages drastically also makes everyone else making more than minimum wage (middle class) poorer because now cost of living has gone up across the board and your company hasn't increased your wages by the same difference.

The tendency (as the Seattle article shows) is for minimum wage increases to trickle up and cause other low-paid employees to see increases in their wages as well to match. That leads to labor costs become a higher % of product costs (but as they are still well under 100%, the accompanying product cost raise is not as high as the wage raise), which is compensated in part by increased productivity, in part by reducing the completely ridiculous top-level compensation, in part by lower profits, and only in part by higher product costs.

 

[Dre Space Age]

How much an hour are you making if you're getting $70,000 a year?

 

[Pressure]

So 19.23/hr isn't a living wage in Seattle.

I'm not sure this story really makes a statement that paying people 15/hr meets that standard.

It does show two things:

Lowering executive pay provides a vehicle for increasing employee pay.

The need for more mid level jobs.

 

[Professor Emeritus]

Amazon and Walmart fight for higher minimum wage, ask yourself why. Salute to this boss tho

They just now started lobbying for higher wages after people like Bernie were shytting on them like crazy and leading to tons of bad press.

On top of that it's a super-tight labor market and they were starting to have issues attracting employees at their bottom-barrel wages with shytty working conditions.

Amazon raises minimum wage to $15, urges rivals to follow

Amazon.com Inc said on Tuesday it would raise its minimum wage to $15 per hour for U.S. employees from next month, giving in to critics of poor pay and working conditions at the world’s second most valuable company.

Amazon’s move comes when U.S. unemployment is at a near two-decade low as retailers and shippers compete for hundreds of thousands of workers for the all-important holiday shopping season.

Several companies, including United Parcel Service and Macy’s, have announced hiring to staff stores and handle holiday sales and delivery.

“We listened to our critics, thought hard about what we wanted to do, and decided we want to lead,” founder and Chief Executive Jeff Bezos said in a statement

“You’ve got a company that can’t attract and keep labor because their wage rates are at the bottom of the pay scale, generally speaking,” said Marc Wulfraat, president of logistics consultancy MWPVL International, which closely tracks Amazon’s fulfillment operation.

“This is Amazon waking up and smelling the coffee.”

Why Amazon Really Raised Its Minimum Wage to $15

After months of increased public criticism about its grueling labor practices, Amazon announced Tuesday that it would begin paying all US employees, including part-time, seasonal, and temporary workers, at least $15 an hour and all UK employees at least £9.50 (with higher wages in London) beginning November 1.

Amazon has also sustained months-long attacks from politicians like Bernie Sanders, who introduced a bill last month literally called the Stop BEZOS Act. The legislation is designed to force large employers to raise wages by taxing them when their workers need to rely on public benefits like food stamps.

Amazon is likely betting, however, that increasing pay will do more than just alleviate pressure from lawmakers and activists who want the retail giant to improve its working conditions. In the coming months, the company will need to attract 100,000 seasonal employees in the US and once again try to dominate the holiday shopping season. It has to accomplish those tasks in an extremely tight US labor market—the unemployment rate recently dipped below 4 percent—where few people are looking for jobs. Wage hikes like Amazon’s have historically occurred in similar economies.

"This isn't really anything new," says Sylvia A. Allegretto, a labor economist and the co-chair of the Center on Wage and Employment Dynamics at the University of California, Berkeley. "It typically happens around tight labor markets. Don't forget that Amazon needs a lot of workers coming in for the holiday season."

Making hiring matters worse for Amazon is the fact that it has faced a steady onslaught of bad press in recent months about its labor practices both in the US and beyond. One report published in April documented how some Amazon workers were forced to pee in water bottles to meet workplace demands, and another from July found some employees have suffered from workplace accidents that left them homeless.

Taken together, those negative reports could make it more difficult to convince the already-small pool of job seekers to choose Amazon, especially when other retailers are also hiring for the holiday season. At first, the company tried to solve that problem by fighting back with its own counter-messaging, including via a new fleet of Twitter accounts tasked with spreading positive testimonies of working at the retail giant. Now it’s simply paying more, a move that could also help to reduce other labor costs in the long term.

"They have really high turnover rates—that's very costly when you have to be constantly spending money on recruiting and training workers," says Allegretto. "Paying a higher wage will help you retain those workers."

Increasing wages also means that many more people—Amazon is one of the largest employers in the US—will have extra funds to spend on goods from places like, well, Amazon. Although the pay hike will cost the retail giant, it can potentially make up the loss via increased sales. "A lot of [Bezos’] customers are low-wage workers. There is a lot of demand that is unleashed when you start paying workers more money," says Allegretto.

Walmart CEO calls on Congress to raise the minimum wage - CNN

In a hotel ballroom near Walmart's corporate headquarters in Bentonville, Sanders pressed the world's largest retailer to increase its wages and called out McMillon for his nearly $24 million in total pay last year. Sanders also introduced a shareholder resolution that would put hourly workers on Walmart's board of directors. The resolution was voted down on Wednesday.

"Walmart pays many of its employees starvation wages," Sanders said Wednesday. "Walmart can afford to pay its employees a living wage of at least $15 an hour."

Sanders noted that Walmart's big competitors, such as Amazon (AMZN) and Costco (COST), have moved to a $15 an hour minimum wage.

McMillon's call may also ease pressure on Walmart. Senator and presidential candidate Bernie Sanders, along with workers' rights groups, have called on Walmart to raise its wages above the company's current $11-an-hour minimum.

Corporate America has been changing its stance on the minimum wage in recent months. McDonald's, for example, announced in March that it would no longer lobby against minimum wage hikes. And in addition to raising its minimum wage, Amazon has challenged its top retail competitors to match its move to $15 an hour.

Sanders and organizations like Fight for $15 have successfully lobbied some companies to raise their minimum wage. Amazon's hike to $15, for example, came after the company took heat from critics, including Sanders.

People like us have finally put enough pressure on these bullshyt companies to start changing and you use that as an argument against our pressure campaign and hope for change.

 

[Copy Ninja]

How much an hour are you making if you're getting $70,000 a year?

Roughly $35/hour in an typical 40hr/week schedule.

 

[Professor Emeritus]

How much an hour are you making if you're getting $70,000 a year?

Around $35/hour if it's a full-time job.

He gives them really nice paid leave too apparently. Don't know how many hours people are working though.

 

[Dre Space Age]

Got damn

 

[R. Money]

This is impossible!

 

[hayesc0]

You mean if you pay people a good wage and treat them like humans everyone prospers?

 

[Kenny West]

@DEAD7

 

[Strapped]

Greed is a human condition that needs eradication