CEO Dan Price Cuts His Million Dollar Salary by 93%, Raises Minimum Wage to $70,000
Daniel Drew, 4/19/2015
Greed is definitely not good at Gravity Payments.
In a stunning move, CEO Dan Price announced that he will cut his million dollar salary to $70,000, and he will raise the lowest salary at the firm to $70,000 over the next 3 years. His actions would create a relatively flat compensation structure and function as a criticism of the mind-boggling wage inequality chasm in the United States, where the average CEO makes 200-300 times as much as the average worker. Famous financier J. Pierpont Morgan recommended the ratio should be no higher than 20-to-1.
The idea for a $70,000 minimum wage came to Price after he read a Princeton study by economist Angus Deaton and psychologist Daniel Kahneman that showed $75,000 is the point where money creates maximum happiness.
Price said, "The market rate for me as a C.E.O. compared to a regular person is ridiculous, it's absurd. I want to be a part of the solution to inequality in this country...It's not about pay, it's about an opportunity and developing people and giving them a chance to like thrive and show what they can do."To pull off this stunt, Price had to cut his own salary dramatically, and profits of $2.2 million will be cut by 80%. However, he believes in the long run, it will boost morale, productivity, and profits. When he announced the new changes at the company's quarterly meeting, his employees stared at him in shock before giving him a standing ovation. Three days after the announcement, Gravity Payments gained several new clients, and 3,500 people applied to work at the company, hoping to secure a $70,000 job they can't find anywhere else.
Paul Tudor Jones said wealth inequality will lead to revolution, taxes, or war. Bill Gross said economic inequality threatens capitalism itself. Elizabeth Warren noted that if the minimum wage kept pace with the increase of worker productivity, it would be $22 per hour.
Dan Price is similar to Henry Ford because Ford doubled his workers' pay to $5 per day. Even more radically, he did this at a time when the minimum wage did not exist. Ford's competitors thought he was a fool. The high wage attracted the best employees, and his employee turnover rate dropped tremendously. His workers then used their high wages to buy the cars they made, boosting sales. Despite the Ford example, we still have to listen to hacks like Patrick Rogers, associate professor of strategic management at the School of Business and Economics at North Carolina A&T; State University, who said,
"The sad thing is that Mr. Price probably thinks happy workers are productive workers. However, there's just no evidence that this is true. So he'll improve happiness, only in the short term, and will not improve productivity. Which doesn't bode well for his long-term viability as a firm."Critics mention the "market rate" as if it were some kind of impersonal force of nature, like gravity. It's just the way the world works, according to them. This is far from the truth. Unlike gravity, which is the same in every country, the "market rate" is not a natural fact that we must subject ourselves to. It is a human creation that reflects not just the economic realities of a country, but the values of a nation as well. In short, they confuse "social science" with "natural science." Dan Price understands the difference.