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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, Interesting) by tibman on Tuesday August 04 2015, @05:46PM
I never understood that pay part. Someone else getting a raise doesn't cheapen your pay. Maybe they didn't even earn theirs and it was a mistake on a form. Either way, good for them. It still doesn't change how much you make. The only way this could make sense is that them getting a raise means that you do not. But i do not think that is the case. Some employees simply aren't worth any more money then they are getting paid. Give them inflation bumps and that is it until their abilities and knowledge grow more.
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(Score: 1, Insightful) by Anonymous Coward on Tuesday August 04 2015, @06:49PM
> Someone else getting a raise doesn't cheapen your pay.
Conservatives lurve themselves the hierarchy.¹ One of the most popular ways for conservatives to measure their position in the hierarchy is with dollars. It isn't just the spending value of the dollars, it is the status indicated by the dollars. So, to a person who values their position in the hierarchy, this move does cheapen them. Even if they can't articulate it this way, their gut tells them that if the janitor is making nearly the same amount of money that they are, then they've been demoted to the status of janitor.
ยน Look at the people defending this attitude towards the company's minimum wage hike - Gugnir and Bradley13, both posters with a history of heavily conservative positions.
(Score: 2) by GungnirSniper on Tuesday August 04 2015, @07:54PM
Management types do tend to be more conservative, for whatever reason.
You're right that staff do consider compensation when comparing themselves to others, especially since that's how management looks at them. Each employee is a cost, and have to bring according value for that cost, or they won't be there long.
I had a situation where some second line engineers found out one of the senior customer service reps was making more than they were, and they were rightfully pissed. That rep came in years earlier when we had different starting salaries, thanks to knowing our then-director from working together at a different company. Wouldn't you be upset too if you found out someone with an A+ and maybe Network+ is getting paid the same as you and your CCIE? Wouldn't a doctor be upset if they found out the nurses made the same? I don't think this is a political point so much as a human nature point.
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(Score: 0) by Anonymous Coward on Tuesday August 04 2015, @08:40PM
> I don't think this is a political point so much as a human nature point.
We are all limited by our experiences. It seems like a human nature point to you because that is your nature. You will find it very difficult to understand that not everyone perceives the world the way you do.
(Score: 2) by Phoenix666 on Tuesday August 04 2015, @07:31PM
Humans are monkeys, on a basic level. We crave hierarchy to know where we stand. That's why so many want to be on the winning side of a zero-sum game. There are of course other philosophies and people who escape the primate calculus through them, but most people remain in that limbic fog. Why else would sports and war remain so popular?
Washington DC delenda est.
(Score: 2) by githaron on Tuesday August 04 2015, @08:59PM
What is hard to understand? If you spent years cultivating your skills and have a lot of responsibilities in order to make your current wage and the new low-skill guy with significantly less responsibilities comes in and immediately starts making the same or almost the same as you, you aren't going to be frustrated? It implies your additional skill and responsibility level are of little value to your company. Without some non-monetary motivator, it discourages people from taking on new responsibilities and building new skills.
If the new "minimum wage" became the norm across the industry, you can bet that the high-skill laborers are going to demand higher wages.
(Score: 3, Interesting) by tibman on Wednesday August 05 2015, @02:40PM
No, i wouldn't be frustrated. I would train the new guy up. If he wasn't fit for the job then i'd request for him to be fired. I don't use pay to compare myself to others. Pay is something i experience outside of work. While at work i use job performance to compare myself to others. I am probably a-typical though. I use to be in the army and you knew someone's pay just by looking at their collar (now center mass). Pay is no secret. Pay also does not equal responsibility or ability. Plenty of experts at the bottom and worthless idiots at the top. When your life depends on the person next to you, you will prefer someone who actually knows what they are doing over someone who is getting paid the most. If you care for your excellent co-workers instead of seeing them as competition then i am certain you will arrive at something similar.
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(Score: 1) by nitehawk214 on Tuesday August 04 2015, @09:28PM
It does if the company has a fixed poll of dollars for raises. I was flat-out told by two former bosses at two companies that they would love to give me a higher raise, but they wanted to give at least x dollars to the entire time, and corporate only gave y thousand dollars for raises for the entire team. (Don't recall what x was, but my raise ended up being pretty terrible.)
I told him "No problem, boss. If I am unhappy with my pay, I will let you know. With a 2 weeks notice." I followed right the hell through with that about a year later. At a huge giant evil company it does you no good to tell them early that you are looking to leave, and it gives them the excuse to fire you or make your job an even more unreasonable hell than it already is.
At 100 employees I don't know if Gravity Payments is into the "huge evil company" and the articles do a nice job of dancing around whether or not raises were from a fixed pool, but it is kind of a necessity for a small company. There are only so many dollars to go around. Why stick around if you know you won't be getting a decent raise ever again?
"Don't you ever miss the days when you used to be nostalgic?" -Loiosh
(Score: 1) by nitehawk214 on Tuesday August 04 2015, @09:28PM
That is "fixed pool"
The funny thing is I originally typoed it as "fixed pull", then manage to correct it wrong.
"Don't you ever miss the days when you used to be nostalgic?" -Loiosh
(Score: 0) by Anonymous Coward on Tuesday August 04 2015, @10:13PM
> Why stick around if you know you won't be getting a decent raise ever again?
You seem to be commingling two independent concepts:
(1) The ability to find a higher paying job somewhere else
(2) The company's compensation policies
With respect to (1) - people have been leaving their job for greener pastures since the invention of employment, the fact that someone can find a better paying job just means they were previously underpaid, nothing more.
With respect to (2) - compensation is rarely so linear - would you leave if the CEO got a $10M bonus? Regardless of specifics, the only real limit on total employee compensation is revenue. If this high minimum policy produces a disproportionately large increase in revenue, would that still make you feel justified in quitting?