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posted by takyon on Friday April 17 2015, @03:30AM   Printer-friendly
from the minimum-wage-maximum-happiness dept.

"Is anyone else freaking out right now? I'm kind of freaking out." said Dan Price, the CEO of Seattle-based Gravity Payments, as he announced that the new minimum salary for current employees will be raised to $70,000 a year. Price is taking a pay cut from $1 million to $70,000 and spending an appreciable amount of the company's profit to raise annual salaries from the current average of $48,000.

From the article:

The United States has one of the world's largest pay gaps, with chief executives earning nearly 300 times what the average worker makes, according to some economists' estimates. That is much higher than the 20-to-1 ratio recommended by Gilded Age magnates like J. Pierpont Morgan and the 20th century management visionary Peter Drucker.

[...] Under a financial overhaul passed by Congress in 2010, the Securities and Exchange Commission was supposed to require all publicly held companies to disclose the ratio of C.E.O. pay to the median pay of all other employees, but it has so far failed to put it in effect. Corporate executives have vigorously opposed the idea, complaining it would be cumbersome and costly to implement.

[...] The happiness research behind Mr. Price's announcement on Monday came from Angus Deaton and Daniel Kahneman, a Nobel Prize-winning psychologist. They found that what they called emotional well-being — defined as "the emotional quality of an individual's everyday experience, the frequency and intensity of experiences of joy, stress, sadness, anger, and affection that make one's life pleasant or unpleasant" — rises with income, but only to a point. And that point turns out to be about $75,000 a year.

Related Stories

Update: $70k Salaries Didn't "Backfire"; Gravity Payments' Profits Have Doubled 34 comments

The Center for American Progress reports

In April, Dan Price, CEO of the credit card payment processor Gravity Payments, announced that he will eventually raise minimum pay for all employees to at least $70,000 a year.

[...]Six months later, the financial results are starting to come in: Price told Inc. Magazine that revenue is now growing at double the rate before the raises began and profits have also doubled since then.

On top of that, while it lost a few customers in the kerfuffle, the company's customer retention rate rose from 91 to 95 percent, and only two employees quit. Two weeks after he made the initial announcement, the company was flooded with 4,500 resumes and new customer inquiries jumped from 30 a month to 2,000 a month.

Previous: Gravity Payments: CEO Takes Cut and Makes $70k/year New Minimum Salary
All Staff Pay Raise Backfires on Credit Card Processing Firm


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  • (Score: 0) by Anonymous Coward on Friday April 17 2015, @04:03AM

    by Anonymous Coward on Friday April 17 2015, @04:03AM (#171876)

    I think it is one of the best ideas for shareholders I've heard of in a long while. Nothing puts short term gains in the head of a ceo than golden parachutes

    • (Score: 1, Informative) by Anonymous Coward on Friday April 17 2015, @04:10AM

      by Anonymous Coward on Friday April 17 2015, @04:10AM (#171878)

      He owns the company with his brother and has done so since he was 19.

  • (Score: 1) by slinches on Friday April 17 2015, @04:10AM

    by slinches (5049) on Friday April 17 2015, @04:10AM (#171879)

    A CEO of a publicly traded company doing such a thing would be meaningful, but Gravity Payments is a private company. It doesn't really matter what the owners "pay themselves" as a salary, all of the profit is still theirs.

    • (Score: 5, Insightful) by tathra on Friday April 17 2015, @04:51AM

      by tathra (3367) on Friday April 17 2015, @04:51AM (#171885)

      the $70k/year is what everyone who works for his company will now make at minimum. that is the newsworthy part.

      meanwhile, the ceo of mcdonalds just got a 69% raise [wsj.com] up to $1.1-fucking-million/year and its former ceo is raking in $3-fucking-million/year in "consulting fees", while the workers have to get welfare just to be able to survive.

      • (Score: 1) by Pherenikos on Friday April 17 2015, @06:03AM

        by Pherenikos (1113) on Friday April 17 2015, @06:03AM (#171907)

        Considering McDonalds has >1 million employees, if the CEO can improve their productivity by >1 dollar a year they will have earned their salary and then some. For the Gravity Payments, even with the new salary, considering their ~200 employees this corresponds to a value improvement of $350 per employee year.

        • (Score: 3, Insightful) by sjames on Friday April 17 2015, @06:28AM

          by sjames (2882) on Friday April 17 2015, @06:28AM (#171913) Journal

          So what happens when he destroys their productivity?

          • (Score: 5, Insightful) by Anonymous Coward on Friday April 17 2015, @06:35AM

            by Anonymous Coward on Friday April 17 2015, @06:35AM (#171915)

            He gets a raise of course, just like the last CEO.

        • (Score: 0) by Anonymous Coward on Friday April 17 2015, @08:59AM

          by Anonymous Coward on Friday April 17 2015, @08:59AM (#171945)

          Maybe, but if you take the poorest lowest payed Mcdonalds staff and put him in place of the CEO, what would the difference be for that productivity raise?
          If you pay someone much more than normal salaries, they should be able to perform much better than others. Just because the function in the company means you have more influence over how much money it makes, doesn't necessarily mean you are any good at it.

        • (Score: 0) by Anonymous Coward on Friday April 17 2015, @12:29PM

          by Anonymous Coward on Friday April 17 2015, @12:29PM (#171985)

          Not quite. There's a floor of 0 dollars in the CEO's salary. An instrument like that is worth more than one without such floor.

      • (Score: 5, Funny) by Anonymous Coward on Friday April 17 2015, @06:38AM

        by Anonymous Coward on Friday April 17 2015, @06:38AM (#171916)

        Oddly enough minimum-wage earners are also paid in units of fucking-dollars. Just not the good kind.

      • (Score: 1, Insightful) by Anonymous Coward on Friday April 17 2015, @01:58PM

        by Anonymous Coward on Friday April 17 2015, @01:58PM (#172028)

        while the workers have to get welfare just to be able to survive

        Mcdonalds is not MEANT to be a job for life. Well maybe if you become a manager. It is a stepping stone job.

        It is 'the starter job' where you learn things you need for other jobs
        1) be polite even when everyone else is a dick and yelling they can buy and sell you
        2) show up on time
        3) dont be smelly
        4) clean your work area
        5) fast food is a rat shithole to work for, you do not want to come back here

        If you consider a job slinging burgers the rest of your life as a career you have bigger problems. As that job is about 10-15 years from full automation.

        It must have changed from when I was younger. There were always that one or two guys who hung on for years. But mostly it was teenagers saving up to buy a car or have some spending for gas for the bought car.

        • (Score: 3, Informative) by tathra on Friday April 17 2015, @04:47PM

          by tathra (3367) on Friday April 17 2015, @04:47PM (#172103)

          Mcdonalds is not MEANT to be a job for life. Well maybe if you become a manager. It is a stepping stone job.

          it sounds good in theory, but in practice there's often not a "next step" job available, especially when you're making slave wages and can't afford a car which means your work prospects are limited to anything within walking or bicycling distance. there's also the fact that the minimum wage is supposed to be a living wage, and you're basically saying that its their own damn fault that there's no better jobs available and that they're starving and living in poverty. only sociopaths blame the victim.

          • (Score: 0) by Anonymous Coward on Friday April 17 2015, @05:57PM

            by Anonymous Coward on Friday April 17 2015, @05:57PM (#172125)

            there's also the fact that the minimum wage is supposed to be a living wage

            Now, now. Sarah Palin said if the minimum wage was lowered to $2 per hour it would end unemployment in this country. Seriously, she said that.

            • (Score: 3, Informative) by tathra on Friday April 17 2015, @07:04PM

              by tathra (3367) on Friday April 17 2015, @07:04PM (#172149)

              supply-side economics doesn't work. [americanprogress.org] the only way to spur the economy is to increase demand, which requires people having disposable income. reducing people's spending power, through inflation (wage stagnation) or pay cuts (reducing or abolishing minimum wage), reduces demand, to which the supply side must respond with a reduction in production, ie layoffs, to prevent from hemorrhaging money. increasing the minimum wage back to a living wage, where it used to be, would spur the economy [bloomberg.com] by increasing demand and would also help reduce the ridiculous amount the US subsidizes companies that refuse to pay a living wage despite making billions in profit ever year.

    • (Score: 3, Informative) by frojack on Friday April 17 2015, @06:35AM

      by frojack (1554) on Friday April 17 2015, @06:35AM (#171914) Journal

      all of the profit is still theirs.

      The Story said:

      spending an appreciable amount of the company's profit to raise annual salaries from the current average of $48,000...
      surprised his 120-person staff by announcing that he planned over the next three years to raise the salary of even the lowest-paid clerk, customer service representative and salesman to a minimum of $70,000.

      So to move the average employee from 48000 to 70000 times 120 people takes 2,640,000

      The story also says

      cutting his own salary from nearly $1 million to $70,000 and using 75 to 80 percent of the company’s anticipated $2.2 million in profit this year.

      Whats not clear if his former million dollar salary was part of that 2.2 million profit.

      If it was, his company profit will be reduced to around 440 thousand, and even if he pocketed ALL of that, he will still have cut his salary by about half. (That assumes he leaves nothing in the bank for a rainy day.)

      --
      No, you are mistaken. I've always had this sig.
      • (Score: 5, Insightful) by TheRaven on Friday April 17 2015, @09:24AM

        by TheRaven (270) on Friday April 17 2015, @09:24AM (#171954) Journal

        In the short term, that's no doubt true. The story also said that he's had 1500 applicants for jobs since making the announcement, so I wouldn't be surprised if he's able to grow the company quite quickly. Note that he said he'd raise the salaries to $70K over three years, so there's the potential to spend a big chunk of that $2M on new employees' salaries.

        And, honestly, I hope this is what happens. Seeing CEOs who pay their employees well and promote a positive working environment get rich by increasing the value of their companies significantly would send a good message to investors...

        --
        sudo mod me up
  • (Score: 0) by Anonymous Coward on Friday April 17 2015, @05:56AM

    by Anonymous Coward on Friday April 17 2015, @05:56AM (#171905)

    "the emotional quality of an individual's everyday experience, the frequency and intensity of experiences of joy, stress, sadness, anger, and affection that make one's life pleasant or unpleasant" — rises with income, but only to a point. And that point turns out to be about $75,000 a year.

    Maybe adding more and more money won't make someone more and more happy, but it might keep someone happy for a longer period of time. Being financially independent (i.e. capable of retiring and not having to rely on employers to pay you so you can maintain your standard of living) is very comforting.

  • (Score: 2) by MichaelDavidCrawford on Friday April 17 2015, @08:16AM

    by MichaelDavidCrawford (2339) Subscriber Badge <mdcrawford@gmail.com> on Friday April 17 2015, @08:16AM (#171936) Homepage Journal

    a few lines of SQL and a light sprinkling of Perl or Python?

    Or are they saying it would be "costly" due to the well-informed demands to cut executive pay?

    --
    Yes I Have No Bananas. [gofundme.com]
    • (Score: 0) by Anonymous Coward on Friday April 17 2015, @08:36AM

      by Anonymous Coward on Friday April 17 2015, @08:36AM (#171938)

      Learn the language. Cumbersome and costly are magical words in the realm of business legal responsibility. If they can convince others that at least the first and possibly the second applies, then any requirements placed upon them suddenly have far better chances to be voided.

  • (Score: 0) by Anonymous Coward on Friday April 17 2015, @09:31AM

    by Anonymous Coward on Friday April 17 2015, @09:31AM (#171956)

    Sounds Potentially Energic!

    • (Score: 2) by maxwell demon on Friday April 17 2015, @05:21PM

      by maxwell demon (1608) on Friday April 17 2015, @05:21PM (#172112) Journal

      That's heavy. But their salary payments certainly are attractive.

      --
      The Tao of math: The numbers you can count are not the real numbers.
      • (Score: 2) by Fluffeh on Saturday April 18 2015, @06:47AM

        by Fluffeh (954) Subscriber Badge on Saturday April 18 2015, @06:47AM (#172320) Journal

        certainly are attractive

        Gravity can be seen as an attractive "pull" but the other way to look at it as once described by a very interesting professor was that rather than looking at a large body as exerting a "pull" it is more intuitive to look at that large body as blocking all the repelling force in the universe that is pushing everything apart. The more mass the object has, the greater the ability to block this omni-directional push exerted by the universe.

        • (Score: 3, Interesting) by maxwell demon on Saturday April 18 2015, @07:26AM

          by maxwell demon (1608) on Saturday April 18 2015, @07:26AM (#172324) Journal

          Of course, according to Einstein it is neither; all objects are just following a straight path in the curved spacetime (unless forced away from that path by another force, like the force the floor exerts on you). The large body just bends the spacetime so the straight path in spacetime doesn't result in a straight path in space.

          --
          The Tao of math: The numbers you can count are not the real numbers.