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Earlier this year, Seattle-based Gravity Payments CEO Dan Price announced he was setting the minimum wage for his workers at $70k. About 70 of the company's 120 employees would be receiving the raises over a 3 year period and Price cut his salary from $1m to $70k to make the change happen. His reasoning: He read an article that more money for people who make less than $70k leads to increased happiness.
His plan may have backfired:
What few outsiders realised, however, was how much turmoil all the hoopla was causing at the company itself. To begin with, Gravity was simply unprepared for the onslaught of emails, Facebook posts and phone calls. The attention was thrilling, but it was also exhausting and distracting. And with so many eyes focused on the firm, some hoping to witness failure, the pressure has been intense.
More troubling, a few customers, dismayed by what they viewed as a political statement, withdrew their business. Others, anticipating a fee increase - despite repeated assurances to the contrary - also left. While dozens of new clients, inspired by Price's announcement, were signing up, those accounts will not start paying off for at least another year. To handle the flood, he has had to hire a dozen additional employees - now at a significantly higher cost - and is struggling to figure out whether more are needed without knowing for certain how long the bonanza will last.
Two of Price's most valued employees quit, spurred in part by their view that it was unfair to double the pay of some new hires while the longest-serving staff members got small or no raises. Some friends and associates in Seattle's close-knit entrepreneurial network were also piqued that Price's action made them look stingy in front of their own employees.
To make matters worse, Price's brother and company co-founder Lucas filed a lawsuit less than 2 weeks after the raise increase announcement, accusing his brother of violating his rights as a minority shareholder.
(Score: 3, Insightful) by SecurityGuy on Tuesday August 04 2015, @04:17PM
Yeah, that's just stupid. Their incentive to hustle is not wanting to lose a job that pays 3x more than they can make anywhere else. They're wearing golden handcuffs.
These things are basic supply and demand, and well understood. Lots of people are capable of doing mail room work. Market equilibrium establishes a floor price. The upper bound is the hourly cost of the people who would otherwise have to not do their jobs to manage their own mail. You hire the mailroom people to avoid that expense, so you'd never pay more than that.
Sure. It's a function of how much it costs to hire a new person to open mail, what it costs to train them, and lost productivity while they're coming up to speed. Assuming, of course, that someone who has been there for 3 years is more likely to stick around than someone who has just been hired.