SoylentNews is people
SoylentNews
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: 4, Interesting) by bradley13 on Tuesday August 04 2015, @04:01PM
All the comments criticizing the employees who felt demotivated by this are off-base. Sorry, folks, this is basic human nature.
If you work for this company as - let's say - a network tech. You've recently finished school, and don't have a lot of experience, so $70k is a fine enough salary. Then the company needs to hire a new janitor, and hires someone with zilch education who barely even speaks the language. Because of this company policy, the janitor gets the same salary you do. Can you honestly say that wouldn't irritate the hell out of you?
There have been enough studies to prove this. I don't recall the exact numbers, but one famous study went something like this: People were given the choice of making $150k in a neighborhood where everyone, including all their friends, earned $200k. Or they could earn $75k, with everyone around them earning $50k. Almost everyone picked the second option. People would rather be the big fish in the small pond.
Put more politely, we want to feel valued for our knowledge and skills, and salary is the most obvious and objective way that companies show us that we are valued. Give everyone the same salary, and we are basically trying a weird form of communism (to each according to his needs). If there's no incentive, people aren't going to be motivated. Which is why human nature dooms real communism to failure.
Everyone is somebody else's weirdo.
(Score: 1, Informative) by Anonymous Coward on Tuesday August 04 2015, @04:05PM
> Because of this company policy, the janitor gets the same salary you do.
If they were really two of the company's "most valued employees" they were already making way more than $70K.
(Score: 2) by Thexalon on Tuesday August 04 2015, @04:13PM
There are incentives other than money. For example, he could have his people competing for first dibs on conference rooms, bigger or nicer offices, parking spaces, first in line at the lunch buffet, bonus vacation time, or even simply title and prestige. That sort of competition happens all the time in civil service systems where wages basically are entirely determined by seniority and department.
But I think the point that he missed was that if you set the minimum at $70K, that isn't also the maximum. If he really wanted to do this, and he might have reasonably done so, he'd have done better to bump the people who were at $70K before the raises to $100K or so.
What I find particularly interesting is the customers who jumped ship because they didn't want to do business with a company that would make this kind of move. If the rates didn't change (and they didn't), and the service didn't change (and it didn't), why the heck did the customers care about internal salary decisions?
"Think of how stupid the average person is. Then realize half of 'em are stupider than that." - George Carlin
(Score: 2) by skullz on Tuesday August 04 2015, @04:34PM
Interestingly enough it looked like they were able to talk most of their customers into signing back up again. As one guy said, let Price run his business, I'll run mine. The pizza guy passed his monthly savings by using Gravity onto his employees so he won out by building loyalty at no real cost to his business.
Then you get the folks who get upset over cocktails who worry that they will look stingy...
(Score: 0) by Anonymous Coward on Tuesday August 04 2015, @06:22PM
I can understand believing rates would raise, and therefore they want to look now rather than when the higher rates hit. I mean, they announced rates wouldn't go up because of this, but absent any legal constraint, it's hard to take such words at face value.
(Score: 2) by githaron on Tuesday August 04 2015, @09:30PM
The companies might of canceled their contracts because they believed the cost of changeover now would be smaller than the cost of changeover later when/if something changed for the worse. Also predictability has value. When someone/something someone depends on becomes unpredictable, they tend to get worried.
(Score: 2) by Refugee from beyond on Tuesday August 04 2015, @06:23PM
He might afford some education with that money, maybe. It's not like janitors are useless people nobody needs. Or you (not necessary exactly you here) might, I dunno, work as a janitor yourself and “get the same for less.” Would you?
Instantly better soylentnews: replace background on article and comment titles with #973131.
(Score: 0) by Anonymous Coward on Tuesday August 04 2015, @06:36PM
Why the hell would he go to school if he ends up making the same amount after he gets out? He just spent $$$$$ on literately nothing. I very much doubt he values education already, so yes it is worthless to him. With that money he could get two cars and a boat probably, if that is what he values more.
(Score: 2) by Refugee from beyond on Tuesday August 04 2015, @07:52PM
Why does it bother you what he is spending his money on? Unless that's something illegal.
Instantly better soylentnews: replace background on article and comment titles with #973131.
(Score: 0) by Anonymous Coward on Wednesday August 05 2015, @05:25PM
If "getting a better job" is literally the only reason you can think of to go to learn anything, I pity you.
(Score: 0) by Anonymous Coward on Thursday August 06 2015, @05:18PM
That is not what I said at all. I see value in education, but I was pointing out that a janitor, who is uneducated to begin with, might not. Giving him money in hopes of him pursuing more lofty ideals will certainly backfire. It's like giving a homeless person a million dollars to get them of the streets.
(Score: 0) by Anonymous Coward on Tuesday August 04 2015, @06:45PM
Because of this company policy, the janitor gets the same salary you do. Can you honestly say that wouldn't irritate the hell out of you?
No, coz the janitor doesn't facebook and use soylentnews all day like I do ;).
Seriously though, I actually do work but I wouldn't want to work as a janitor for the same salary. And I think given a choice very many of you for the same pay would rather have your own jobs than work as a janitor: https://libcom.org/library/it-takes-janitor-tell-tale [libcom.org]
I'm sure some janitor jobs aren't as bad but still...
(Score: 2) by Phoenix666 on Tuesday August 04 2015, @07:36PM
I concur that that phenomenon is well-documented. The Chicago School of Economics where I was trained cited it clearly. But then they waved their hands, Jedi-like, and moved on, never considering the implications of that zero-sum mentality. They never seriously considered the ramifications of a different consumer/actor preference set.
Washington DC delenda est.
(Score: 3, Insightful) by K_benzoate on Tuesday August 04 2015, @10:18PM
Can you honestly say that wouldn't irritate the hell out of you?
Yes, I can. Or to be more verbose, my logical, deliberately thought faculties can overrule the primitive and irrational emotional response which might cause me to feel wrongfully aggrieved. The capacity to do this is, to me, synonymous with mental adulthood--a state of being that many people, even of advanced age, do not ever achieve.
You're making the case, a strong one, that people make irrational, petty, spiteful, emotional decisions that do not accurately reflect their reality or stated goals. Sounds like an argument against full capitalism to me. An important premise often leaned on by apologists for unrestricted capitalism is that humans can be counted on to basically act rationally in pursuing their own self-interests. That seems to not be the case. It looks like people actively sabotage their own well-being by acting like spoiled, petulant, children. Thankfully it is the saving grace and primary strength of humanity that we can externalize mental faculties like self-control and enculturate ourselves to any number of "unnatural" ways of thinking and acting.
I have no doubt that people can be trained to not view salaries as a zero-sum game. I'm an existence proof that such a mindset is neither inevitable nor universal. And I don't think I'm a paragon of virtue and altruism.
Climate change is real and primarily caused by human activity.
(Score: 2) by Grishnakh on Wednesday August 05 2015, @12:39AM
Oh please.
First, if you'd rather be a janitor than an office drone getting to sit at a desk all day and spend a good portion of it goofing off on the internet, then go ahead and make the career leap.
Second, the network tech job has a higher salary cap; that janitor will never make more than the minimum.
Third, if you don't like the pay you're getting at this place, go work somewhere else. It's not like this place can stop being competitive with the higher-pay positions like IT. If you're getting the same or better pay at this place than at competing employers, then what does it matter what the janitor is getting paid?
(Score: 0) by Anonymous Coward on Wednesday August 05 2015, @02:17AM
Can you honestly say that wouldn't irritate the hell out of you?
Who am I to judge that the janitor's efforts are easier than mine? Just because I had the privilege of getting an "education" in a field doesn't mean he deserves less than me. This "crab mentality" is dragging us humans down.