The example of Ms. Goodall is priceless for its level of tone deafness. She was 23 years old making a meager $42k per year. Poor girl! How can one survive at that age on a mere $42k per year? The sacrifices she had to make must have been unbearable for her, not the least of which is the inability to afford round trip airfare. Oh, the humanity! Thank God that Gravity saved her from the poor house! Here's a thought: Ms. Goodall could have chose to live in a more affordable city where her income would provide more buying power. How about moving closer to her family in Arkansas so she could drive to see them? Don't want to do that? Fine, but don't expect sympathy from me because your life style choices force you to make sacrifices here and there.
13
I'm glad the employees are doing well... and I use plastic (and get cash back, miles, gift cards -- all the time!!) -- which I would not get if I paid CASH.. (I tip in cash. which might not be a good thing.)
OTOH -- I detest the middle man economy (aka why medical care and meds are so expensive in the USA -- OK and there's Congress)... so robbing Peter, paying Paul -- is this really a healthy economy? What value is added? IMO, no and none.
Maybe business should allow cash paying customers a 3% discount?? (If AmEX blue pays me cash back 6% on grocery purchases -- what is the merchant paying?? or does AMEX invest really well -- and maybe it should become an investment company.)
2
Give folks more money and their life gets better. Like duh.
10
Although this is a step in the right direction we must not forget that unregulated American style capitalism is strip-mining Earth to death. The value of money as it now stands is without meaning when you never pay for what you take out of the biosphere.
10
So Rush believes that a private company paying its employees a living, fair wage is socialism. Obviously he doesn't even know what socialism is. Why does anyone listen to this man?
25
In and Out Burger enjoys a cult like allegiance and following because of its reputation for quality and service. It is not a coincidence that in and out has been paying a minimum wage of $16 since before I was in high school in the early 2000s. Higher wages attract higher skilled and more motivated workers which in turn produce a better product which the. generates more then enough revenue to cover the added costs and still be profitable.
24
Yes Yes Yes!
For capitalism to really work everyone needs to participate. Wall St used to be a place where investors bought stocks in companies that were going to build things. This allowed our society to grow and we all had a stake. And there were jobs.
Now the system seems to be all about skimming a little bit off the top while others pass money back and forth to increase its value.
That is not capitalism. That is cannibalism.
19
I'm always hearing "create more jobs!" but never "raise wages!"from Washington. I remember there was an article in the N.Y. Times about the Danish raising their fast food workers salary to $20.00 or $25.00? an hour and most of the Danish that were asked about the eventual higher food cost to them, said they didn't mind if it helped these workers. Of course the Danish are also all the way round better off then we are so maybe that's why they didn't mind.
11
Readers who were buoyed/inspired by this article's message -- that businesses can "thrive while treating even the lowest-level workers with dignity" -- will enjoy reading the book "Money and Morals in America," by Patricia O'Toole. I especially like the chapter about Bill Norris, CEO of Control Data Corporation, de-facto co-founder of the "Information Age," and visionary social conscience.
3
Seattle: Surprise, surprise. Real progress on this issue will be evident when companies in some place like Texas start doing this.
4
The 1960 minimum wage of $1/hr was in a $620B economy. Our population was rought 180 million. Today, our economy is nearing $21T. To demand an equivalent portion of goods and services, minimum wage would need to be $32.32. Multiply that by 2,000 work hours in a year and you get $64,645. Close enough to $70K for government work.
The problem is a) how we've left the bulk of our economic growth result in income growth for an ever shrinking segment of our economy - a rising tides apparently doesn't lift all boats by the same amount! and 2) how we let our corporate interests grow at the exclusion of fair growth for our middle tier earners.
15
.... well a PC or a MacBook Pro decimated the secretarial pool - among others - for one.
2
This kind of article doesn't explain the whole scenario. When wages go up, so does the cost of everything. In Seattle, due to higher wages, housing costs have gone through the roof. Rental housing owners pay more for services. Some contractors get $100 an hour here. That has to be passed on to tenants. The cries for affordable housing are nonstop. We have record homelessness. Poorer people can't afford to live in most places in Seattle.
My own daughter was making $20 an hour here for nannying. She was a college student, and we were still supporting her, she was just making spending money. She didn't need a living wage. The idea that every worker needs a living wage misses the point that not every worker needs a living wage. How many minimum wage workers are there that need a living wage? No one seems to have those figures.
$70,000 isn't much in Seattle any more. If we want to solve the living wage for families who need it, we have to stop using blanket approaches.
15
@Cyclopsina Tells it like it is.
3
I kinda is a question of values and perspectives. Like how many perspectives can we hold? Is the drive for maximum profit and self interest the only value? Or is the health of employees also a value or is harmony in the entire system a value too.
Just like the natural world with its self balancing and self harmonizing forces so too can an economic system tweak itself to foster a balance of maximizing building wealth and health of owners, employees and the system.
1
Wow! So inspirational- Price is so different rhan the corporate culture we see around. While a low lverl worker is paid $25,000 a year, the CEO makes millions in bonus. The greed never ends. If the CEO makes $20 million bonus this year- he will strive for $30 million next year. The ever growing greed also results in labor reduction to the max meaning an employee needs to work equivalent to three. Even in not for profit health system, the President of one system makes $20 million bonus a year. The same system downsized and got rid of over 10,000 employees during the same time. Keep in mind they are not for profit and hospitals don’t pay any tax. They survive on tax payer subsidies. Capitalism when it is practiced in true sense does lot to the society. It creates innovation and excellence which benefits us greatly. But over the last three decades, we have cartels practicing capitalism. Anti-trust rules are not in existence. Cartels get rid of competition so that the CEOs can gouge the people and at the end make millions at our cost. The corript practice started with blessing from Reagan and it continues till today despite different administrations in power.
4
Talk about a teachable moment. This could be on a Lit syllabus. A businessman named Price (name as destiny, kids), after struggling with a Cartesian model of good (the teachings of Christ) versus evil (Limbaugh), chooses the way of the heart and upends the way humans are bound to their jobs. In a company called Gravity that, in an ironic flourish, elevates workers and sends their hopes and dreams soaring. An allegory for the 21st century.
14
A McDonald's employee in Denmark starts at around $22/hour.
It's not $70K per year, but it doesn't need to be because the whole structure of Denmark, a capitalist society, is arranged to provide health care, retirement, free or heavily subsidized education, vacations, retraining, unemployment insurance, etc., etc.
How do they do it? Taxes, graduated taxes, that control income and wealth inequality.
If you wonder why the cheap and good college education you got 50 years ago disappeared you can start with Reagan. The marginal tax rate, 70%, started at about $700K in today's dollars when he entered office. He immediately cut taxes severely and, just to stick it to you further, tripled the national debt in just 8 years.
No one pays 70% today - not the Kochs or the Waltons,nor Bill Gates, or Jeff Bezos. As Warren Buffet asked, "why should I pay taxes at a lower rate than my secretary pays?"
That's where your children's good neighborhood schools and affordable college education went.
Thank you Republican Party!
21
Jesus Christ of Nazareth was a left -wing socialist community organizer.
Donald Trump won the New York City white real estate baron father genetic lottery.
Rush Limbaugh is a white high school graduate entertainer from Missouri.
6
Fast food chains say they can not make a profit with higher wages. They should look at a locally owned Hamburger chain in Seattle call Dicks. It is Bill Gates favorite fast food joint.
From The Seattle Times: "Flipping burgers and making shakes pays $10 an hour to start? Merit raises? Employer-paid insurance? Up to $8,000 for child care or college tuition? A 401(k) retirement program with employer match? Paid time for volunteer service? Up to three weeks paid vacation?
Yes, it’s true. Minimum requirements must be met, but every one of those benefits is available to the 180 employees who work for Dick’s Drive-In. Since the first restaurant opened in January 1954, tens of thousands of workers have started their careers in one of the chain’s six Seattle-area locations.
As local fast-food workers join a nationwide movement for a $15 minimum wage, Dick’s approach is a much more realistic, time-tested model for local businesses to emulate. "
61
@Maxman
Yes. Part time fast food jobs should pay a living wage. That way, no one has to become a full time doctor, home builder, or farmer to pay their bills.
6
One need only look to the Federal civil service for a paradigm of make work that pays stupendous wages and benefits. Most if not all of what Reagan termed "gummint" does is superfluous. We who work in law enforcement at a Federal level know that what we do mainly supports state and local interdiction. But many of our coworkers, especially those who have no experience in the private world, could readily be dispensed with, as their highly-paid efforts are marginal at best. Yet they expect a parade weekly at taxpayer expense to celebrate diversity and their own accomplishments...
3
I don't mind the story so much as the business the Times picked to hold up to us. That business, a business who charges people money for spending money is in the end a business that basically rips everyone off. I wish the Times or any paper would do a story on just how much going cashless costs everyone.
6
Great idea & now can we may raise the minimum of Social Security to 70 thou a year, so we old folks can pay for the 10 dollar daily New York Times
6
What does Limbaugh have to say about this now?
@walkman
Who cares what Limbaugh has to say about anything.
3
The question is: Should you be paid for what you need or want to live on - or should you be paid for what you produce?
6
jody hall-good thing but not for her. She would make less money.
1
It’s amazing watching the right-wingers react to this article as though Kristof’d written about the joys of vivisecting puppies. I mean, the only mention of socialism is a quote from that idiot Limbaugh, the article’s filled with details about the problems and iffinesses of such a move, the main intellectual inspiration seems to be Christianity, the company’s doing well, and they’re acting like the guy’d set up a labor-and-indoctrination Kamp under a Walmart in Texas.
Completely nuts.
Nice article, Mr. Kristof. Thanks.
4
This isn’t socialism. This is a private sector business freely adjusting compensation to be more competitive at the low end of pay scale, which simultaneously attracts certain types of talent and certain types of clients. Free movement of capital and free movement of labor. THAT is capitalism.
12
Fox news and its cohorts do not want you to understand that paying the same salary to everyone will NOT tank a company. This is because they are water carriers for the 1%. It is not Socialism if you pay everyone the same salary. It is still Capitalism because the company makes profits. Deciding NOT to increase everyone's salary and instead pump up the share price by doing buybacks is basically socialism for the very rich who own lots of shares. The share price increases by the same amount for everyone, no? Capitalism is about innovation and not about how the profits are used, be it to increase the salaries of employees or conduct stock buybacks or give the CEO a golden parachute. We have had almost zero innovation in the USA for the last 3 decades. Huawei can catch up with Qualcomm and pass it idly by in 5G technology because Qualcomm has been sitting on its gluteus maximus and doing stock buybacks, outsourcing labor cost, suing other companies for patent infringement, shaking down handset companies for illegal kickbacks etc. All the MBA Professors in Harvard, Yale, Wharton and Kellogg are watching this bastardization of 'capitalism' and sagely nod their heads in approval. A notable paper written by Michael Porter of Harvard recommends using Government lobbying and favorable legislation to make a company a monopoly in the market. This is where we have come to in the great 'Capitalist Mecca' of the USA. Business exists merely to make the 1% richer. Nothing else.
85
@Paul Art
This article wasn't about everyone making the same salary. I've been in a situation where everyone was on the same pay scale and it wasn't great for productivity (although it had other advantages).
What this company did is raise the bottom tier so entry-level workers made a livable wage. In this case, the owner took a pay cut to bring his salary more in line with his people. This is a good thing, but you need a tiered pay structure so there's a reason to work hard. Why bother to do more than the minimum if you're not going to make more money?
8
0 innovation? Really?
3
Rampant hypocrisy on the owner's part. His "pay cut" is an illusion, because he owns the company, owns all the profits, all the perks of being an owner. Since his company obviously has pricing power---which many companies do not--he can set his prices as high as necessary to pay his wage costs and make money. Unfortunately, most businesses must be more competitive than his and there is simply no revenue to use for that purpose. Truly an outlier.
6
Thank you for this valuable follow up. I was wondering what the results of Price’s revolutionary move were. What great news. Mahalo!
1
You can give a name to every pieced of Leftist writing, the name of some kind of fallacy, formal or informal. In this case, it is the informal fallacy of "equivocation".
Equivocation is changing the meaning of a word, mid-argument. Or, calling two different things by the same name. The jokey definition I learned, years ago, goes like this:
Some cats have fleas;
My cat has flees;
My cat is some cat.
Get it? Get it? This is exactly what Nicholas Kristof does.
Earlier in the article, Kristof writes,
"Entry-level employees benefited hugely from Price’s decision to raise the minimum wage."
Later, he writes,
"Indeed, she worries that Seattle’s increase in the minimum wage to $15 will hurt small businesses like hers and may cost some jobs."
As if the decision of a private company on what they pay their employees is the same thing as a city mandating what all companies must pay their employees.
Kristof calls them both "minimum wage", but they are not even remotely the same thing. I wonder why the Harvard graduate, Nicholas Kristof, who must know better, is doing this.
3
Best story ever!
1
Good going, Dan!
Not so good for you, Jody. Minimum wage will cost jobs? See, that isn’t the point. I don’t go to your local coffee place anymore because of your business over people decisions.
Nicholas- nice article, late, but what’s Is a good liberal? Perhaps If someone doesn’t believe in a living wage, “liberal” shouldn’t even apply...then again, in Seattle, a liberal is someone who recycles when it is convenient.
Whatever Dan is, he sounds ethical. And that is what counts.
"Sounds good. Doesnt work"-Donald Trump
The correct minimum wage is, and always has been, zero.
See https://www.nytimes.com/1987/01/14/opinion/the-right-minimum-wage-0.00.html
1
I would love to see this thinking applied to public education.
I, I, I, me, me, ME.
That’s what I hear in my head as I read many of the comments here. Or at least the ones from people off-handedly dismissing this phenomenal experiment.
No one is “worth” any particular salary on their own. I can’t think of a single job or career in which you can make money without SOMEONE else contributing with their labor.
Can’t we all just appreciate this guy’s ability to value the people who make his business run? Couldn’t we learn to just appreciate each other?
Sheesh!!! I am so tired of me me me!
117
@Kristen B Without going into a really esoteric world, try artist, finish carpenter, mason, blacksmith. Medicine has its own pecularities because of the system.
1
"Why would anyone worth $70,000.01 in the open market work at a place that only pays you $70,000.00 - all other things being equal?"
As others have pointed out, it is clear your motivation, "all other things being equal". That last part is the "x" factor in the equation. I grew up in my home town, went to UCSB, and worked here my entire career. There is not one person with whom I was friends in high school or college who still resides in my home town. They all had opportunities to take higher-paying jobs in locations with lower costs of living. I had the same opportunities, with chances to relocate to LA, Cleveland, Fort Wayne Indiana, or to stay in town and work for a larger entity. I chose to stay where my parents raised me, where my other siblings live, and where my adult children and grandchildren live. There are other personal issues that factor into "all things being equal" that have kept me here, not the least of which is quality of life.
I calculate that over the 30 final years of my 40 year adult working career I likely could have doubled my lifetime earnings, perhaps by earning $2 - $5 million more doing the same jobs for larger corporations. I earned enough to live a comfortable life, own a home and several cars, take vacations, have a 401K retirement plan. This would be where your head explodes. "Who in their right mind would give up perhaps more than they would earn in their entire lifetime for a reason that was not financial?"
I, for one.
7
Life is full of decisions. Money isn’t everything - not by a long shot. Congrats on your satisfying life! If you could do your same job in the same city with the same conditions (401K, perks, comp time - whatever..) and make say 50% more at a business down the road, which would you chose? If you were the business owner picking people like yourself for key positions so your business could be successful and maybe grow (employing more people - which pay more taxes and support their families btw) what are the odds he could get that $125,000 valued employee on the cheap - say for $70,000 because the individual was all so altruistic? Good luck with that.
There’s a few principles missing from comments.
1. The move to a $70k minimum salary was accompanied by a slash to CEO pay. The most glaring problem with our current capitalism is that employees are not rewarded proportionally. (Think about those public companies whose CEO and three other C levels receive a $10M bonus and no one else gets much). That’s a flaw in public companies who distribute earnings to shareholders and those with the most power.
2. While a $70k minimum wage might not work in all industries, the principle of narrowing the salary gap between the highest and lowest paid still applies.
3. Why would a business owner do this? Because increased income inequality threatens our democracy. This may not be the answer, but people better start coming up with some.
5
Maybe Jody Hall the "good liberal" should walk the walk. Pay her employees the $15 per hour, institute profit sharing if appropriate and advertise heavily about her policies. I am sure others in small businesses such as credit card processing would say this model won't work in their industry, but evidently it does. Why should restaurant business be any different?
1
In the early to mid seventies, I, as a college student, was making in today's dollars $24 per hour, part time during the school year and full time in the summer. I was able to pay all of my tuition and living expenses. The reason that I was paid so well is that I was a member of the Teamsters union. My job was parking cars and managing lots. It was not a job that required technical skills, just hard work. The lots and garages filled up every day. The owners were making money while paying employees a living wage. If today's business owners won't pay a living wage, unions must make a comeback bigtime.
11
...meanwhile - while you were overpaid for parking cars - the US auto business was devastated by cheaper imports and global competition making better, cheaper, more reliable cars and many, MANY more people than a handful a parking attendants were fired or never got the job to start with. Thanks UAW! Unions work in a vacuum but not in global competition unless tariffs are instituted to level the playing field.
2
I consider myself an economic realist and as a small business owner I try to pay my employees as much as I can, not as little as I can. It just makes sense. I want them to keep working for me and to be reasonably happy and productive at work. It’s rather telling that such a fuss is raised when a company shifts its policy to do that in America today.
8
Thanks for following up on this, Nick. A question (I welcome reader responses if I missed something). You say the former Yahoo exec took an 80 percent pay cut to go to work at Gravity. If if she work making $1 million plus as you report, wouldn't she have taken a far larger cut than 80 percent when she took a job for $70,000. Or do some execs at Gravity make more than $70,000?
1
As soon as I heard about Gravity, my small business jumped on board to use their services. I want to support other businesses that care about employees, as well as those who care about the environment. Our small business has always done so, scaled to our location and circumstances. It means we have higher costs, fewer profits, and make less personal income, but it is worth it. I feel privileged to live the lifestyle of a small business owner, with the opportunity to manage my own time. I don’t need a high income, a fancy car, or multiple homes to lead a good life. I sleep better at night knowing that the people who work alongside me are financially stable.
7
Not sure I get the point of this piece. Mildly interesting, as confined to one particular company and the decision made by its CEO. As the author admits, there are serious doubts about how well this would work in other situations.
4
In the early 1980s I remember how working for a living was both more stable and more humane. Unfortunately politics started to unravel it's own social contracts. Reagan told us we were no longer a labor society, we'd be an investment society. The fact that 99% have to earn a wage (and/or rely on wage earners as customers and clients.) seemed to not count.
One day new MBA schooled "bean counters" told us in a conference room we needed to understand the future. The monopoly that acquired our company "thru new hostile takeover means" didn't care if we designed the greatest widget, cured people, or kept our shelves stocked and floor clean. We needed employees to become nameless and replaceable people. Our jobs reduced to something quantifiably less then before. Profits have to go up every year, so compensation has to go down EVERY year. The hollowed out company sank to new product lows. Unfortunately our product was News and public information made in the pubic's interest.
I laugh at taking Fox TV and Limbaugh seriously. We all know they broadcast a script w/ one convenient message that is akin to economic feudalism.
The history of voluntary "humane capitalism" is grim. It's like asking modern medicine to go back to "voluntarily" testing drugs and treatment. The Price model shows everything old is new again. It's a collective Dah! Shocking labor has had NO representation in government for decades, either party, Yet we spend so much of our lives at work.
6
Prices are higher in Swiss and NZ restaurants because servers are paid much more. But, tips are not expected (and may even be handed back in NZ).
I think the idea that meal prices should be held as low as possible; but, diners should be expected to tip well is perverse.
Personally, I am more comfortable with a higher wage and a "non tip" economy.
9
Many restaurants in heavily foreign tourist areas in the US (like Miami) have simply started adding 18% “service fees” to restaurant bills. I wonder - perhaps some restaurant owners can tell us - if the service fees are given to each employee per bill or does the restaurant keep it all, pay $15/hr plus medical (or whatever). I did notice that service was not a responsive as normal - as one might expect.
1
We tried this years ago in an unique industrial business and were successful due to the favorability of the work schedule and the premium paid for the location and job related risk. I don't see how this can work in a competitive environment which is not dealt with in this report.
2
Anecdotes are not data...and this small company without a manufacturing or heavy infrastructure base is just not an example of something that can be expanded across all sectors of the economy. (I realize such was given a single statement about such)
5
While the $70,000 might not work everywhere for everyone, the increase of minimum wage to a livable wage everywhere for everyone is something we must do.
5
This sounds like a great idea. But we also need to be building more housing to support these income levels. Since 2011, the Bay area created 531,400 new jobs but only permitted 123,801 new housing units.
We need to revamp or zoning processes, which are held hostage by NIMBYs and excessive levels of bureaucracy.
3
It's interesting to hear right wingers like Limbaugh call this "socialism" and hope the company fails. Isn't Henry Ford once considered one of the all-time great capitalists? And wasn't Ford the one who decided his workers needed a living wage so they could buy products like the ones his company made? I think that ended up working out pretty well for his company.
What's so great about owners of companies all making $1 million while workers scrape by on $30,000? That's not going to advance the economy or help the cause of capitalism that the right wing pays lip service to valuing.
13
Yep. And while the boss’ income in a civilized country such as the Netherlands aren’t eual to that of their employees, they do seem to have tight hold of the idea that it’s unethical to make millions more than anybody else, and then flaunt your wealth.
They have this notion, I believe, because that is in fact unethical.
3
The company more than double it net profit. The good PR help bring in thousands of new customers. Since Payment processing is almost totally automated, Most of the new revenue
dropped to the bottom line.
1
In the Bay Area, people talk about affordable housing as if it's a social problem. It's not. It's a labor problem.
Pay a living wage and people will be able to afford to live where they work. And the financial stimulus will be good for the whole economy.
Capitalism works best when we are all invested.
2
It’s neither a social problem nor a labor problem. It’s a supply problem.
Even if we agree workers are underpaid, that doesn’t explain housing being unaffordable (measured as a function of income).
In a free market, supply adjusts to meet demand. If housing is too expensive, why does not the supply of housing adjust? Why aren’t there more places to live?
You will find the answer in zoning laws. A large house cannot be subdivided into apartments. It cannot be razed and replaced with a tower. In town after town, the single-family house on the 1/4 acre lot is maintained not by the market, but by law.
The California legislature recently recognized that; it considered a bill to override local zoning near transit routes to allow denser housing. I don’t remember why, but it was stopped. Not passed, vetoed, stayed, something. And not unique: rare is the town — or city — that adapts its zoning to allow for greater density.
6
@James K. Lowden
Zoning laws maintain the character of neighborhoods. Not every block needs an apartment building and an oil refinery on the corner. This isn't Houston.
2
The skeptics are those who correctly point out that this does not work everywhere, for every business. Ok, but I would not have guessed that this would have worked ANYWHERE at all! The skeptics who point out that if you can make MORE elsewhere, why work there don't get it. Money isn't the whole story. Why? When we were in tribes, everyone had to pull their own weight. The reward was that the tribe supported your existence. Money only came along after the Agricultural Revolution, about 10,000 years ago. Money is required in order to ensure that trading is equitable. It is clear to anyone who is not a mercenary that more money does not equal more happiness. It is so much more complicated. Working at a place like this, which VALUES its employees is so much better than working at a place which does not. Most people would take a job that pays less over a job that makes them feel continuously compromised and undervalued. In the future, if you believe Star Trek, money will be gone, as everyone's basic needs are filled by automation and we compete on value added to the society. This company is just one step ahead of the rest in the transition to a post capitalist society.
4
You lost me at the word “tribes”. How is paying your say, VP of Sales at $70,000 when he could make $250,000 down the street “valuing your employees”? This is a huckster like Jim Jones selling a false dream. $70,000 is deal for a $40,000 employee but not for a $150,000 employee - nor your shareholders or lending institutions.
2
Everybody getting the same salary is the ultimate adjustment of inequlity and I laud it. I am willing to settle for a ratio of 10:1 for the highest paid to the lowest paid. Let us go.
3
Would like it to work.
However, if higher wages, result in higher prices, what will happen to people on a fixed income? Will Social Security and other retirement pensions be adjusted upward to meet the new reality?
Fixes sound easy until they are implemented.
5
You are perhaps unaware social security is adjusted annually for inflation.
The exact way that adjustment is calculated is a matter of some controversy, but the policy goes back decades.
2
Any owner of a private company should be allowed to pay his/her employees any salary deemed appropriate. If that number is $70000 minimum with the knowledge that it would generate a massive amount of free publicity adding to the customer base and the bottom line, why not. This is called free enterprise.
The problem of course is when we try to make the inference that now the government should have the right to set wages for private companies. That's the path to Socialism.
6
So instead, we let companies collude to set labor prices through the is of so-called salary surveys of various labor positions. Isn't that"socialism" in reverse (where the capitalists decide what to pay the peasants, but not one dollar more)?
2
Please show me where this article so much as hints at having government impose this. Cripes, dogs, bells and salivation ain’t in it.
1
This reeks of pity to me, rather than the owner valuing his junior employees so much. The senior employees who left because they didn't receive an equal raise - were they not valued?
@Andrew- most likely they did not feel it was fair that they were to be "valued" as much their secretaries. Which was stupid and childish, considering the 20% growth the company has enjoyed since then.
And if that's pity, I'll take mine all the way to the bank! SMILING!
2
As somebody who’s actually heard senior workers who’d just gotten a 14% raise, the most anybody got, complain about how now, people with less seniority were now making almost only ten grand less than them, my general thought is don’t let the screen door hitcha, boys.
2
You "buy" an employee's loyalty and commitment with salary and compensation. You also attract the best workers, who will work hard to keep a good paying job. Nobody wants to work at a job that pays nothing.
And don't tell me a support staff person isn't "worth" that. That value is completely arbitrary considering the last time they saved a contract from becoming invalid that you missed, or found you a hotel out of town at midnight when the meeting went sideways, or prepared your multi-media presentation for you while you did something else. Considering how A and B level exec's sometimes notoriously act, it has become highly suspect.
This company is making money, with good margins suitable for the industry. That is a success no matter how you count it out. Staff might make almost as much as the CEO, but his net worth is enormous compared to theirs with his stock holdings. They'll never have that. And then there's the "good will" this bought with staff and the public that is almost priceless.
How is this socialism? Again, please?
6
Pretty sure this won't go over well at the NYT where the writers want to live like the rich and famous.
Also a big problem for Hollywood where the actresses want to spend 500k to get their kids into USC.
But for an up and running company with systems and procedures in place, and a CEO who is up for it ... sounds good. When they have to innovate or put together something like AWS they might not make it.
HEY NICK!
Take a year off and try to run a business. No - really do it! You and your kind looking from the outside in and think you know the answers. I did. It isn't the minimum wage. Workman's comp, family leave, disability, and everyone's silent partner, power companies, taxes to fund all of the above make it nearly impossible for it to work for the true little man.
Capitalism by itself is a great thing. Your adding socialism to the mix...sorry.
All business is small business. This guy doesn't count. And until you get out from your world tour junkets and politicians like Bernie give up a couple of their homes and private jet airplane rides and KNOWS not FEELS the pain of small business you'll never get it.
So I challenge you Nick, skip the junket to India or Africa next year, pick up and ice cream scoop, run a bodega and find out what its like. More importantly, find out what it costs.
Chris Connolly
6
@Chris Connolly IMO, if you can't pay your employees a living wage AND make a profit, you shouldn't be in business.
Maybe you provide a good service and product but the local or online market won't support it. Or maybe you don't run your business very well and customers are voting with their feet.
Gravity has decided $70,000 is the appropriate minimum wage level in Seattle. NYC would not blink at $70K as a minimum either. In most locations, however, $70K would be an absurd minimum.
The point and model are still valid, however. If a business can't pay an employee enough for them to live a decent life in their community, it should cease to exist. If a company needs to pay a worker poorly in order to survive, governments (read taxpayers) end up subsidizing corporate incompetence with food stamps and other programs to those same workers. I think the government subsidy (read socialism) of Corporate America is slowly coming to an end.
6
All business isn’t small business. According to sba.gov, 46% of the gdp is due to small businesses.
The reason you’re having a tough time of it isn’t socialism; it’s the lack of it. Three decades of Republican tax cuts have increased the relative size of large corporations in the economy. Lax antitrust enforcement had led to greater market concentration (especially in media). An out of control healthcare sector raises per-employee costs, but not productivity.
A healthcare system that didn’t burden employers unduly, a tax code that didn’t encourage million-dollar salaries and stock-buybacks, a more progressive tax code that put more money in the hands of your customers: these would improve your business prospects, and the lives of your friends and neighbors.
That’s the socialism you’re opposing, and the boot of capitalism on your neck.
3
Since when did EVERY wage need to be a living wage? Many people just want to learn how to work for someone after school or to make a few buck to be able to put gas in their car and buy a movie ticket for them and their date.
1
FOX Business has surely run a follow-up story by now correcting their error and apologizing, right?
Nahhhhh..!
2
I wonder how much the men and women who clean the office space and the toilets at this company make.
1
@Erik- since they are vendors and not employees, that's up to their own company.
Good for companies that can replicate Gravity Payments generosity. As for its scalability in other industries - well, I don't have a degree in Economics but I suspect if every full-time employee at my local McDonalds was paid 70K a year it would probably be out of business in a month.
3
I used to pay my workers 70K/yr but they had to work 15 hours/day six days a week. This was Florida.
In NYC if you make 70K/yr, your practically a vagrant !
1
..."that's probably not scalable..."
It's the only sentence that was relevant - the article is make believe and not even close to the real world. Nice isn't always incorporated into profits .
...and it shouldn't be.
3
@JMS- actually, that's just the writer's opinion. In fact, the compensation scheme is scalable commensurate to the profit margins in each industry sector. If you keep within those bounds, it will work anywhere provided the company is a going concern and profitable, which this was.
3
Gasp! Communism! Just kidding. How wonderful, and I hope other companies try similar experiments, especially where the CEO's willingly rebalance their bloated salaries downward to benefit the lower rungs.
2
Dan Price is a great man.
2
There used to be companies like this. My father worked 40 years for Eastman Kodak, back when it owned all the patents to pretty much every step in film processing. It was the Silicon Valley corporation of its day, and until it invented the means of its own technological obsolescence (digital photography), it followed the philosophy set by its childless founder, George Eastman, to whom the company was his child. High pay, yearly bonuses, incredible benefits, coupled with consistently high profits. Half of the west side of the map of Rochester was softball fields for employee recreation. The pay was so good (including for summer workers like myself, who made triple minimum wage) that no one could unionize the company. It is criminal to see the disgusting greed of billionaires like Bezos who could similarly make livable instead of unbearable lives for employees.
10
....this was before EK went bankrupt, right?
Lunatics is too mild a word for these folks.
I assume they also hand out beads, dyed shirts, and sandals as well.
A well oiled hippy facade behind a good business. Where are the profits going, and to whom. I bet I know.
1
@Bob- 20% growth and commensurate profit margins over the short intervening time period can't be argued with.
2
This example is a bit extreme but it illustrates that the “trickle down effect” can actually work and do lots of good..IF...the money actually trickles down in significant amounts to employees and others. The problem in American business is...the money never seems to trickle down. Instead, it always goes to very upper tier management and it goes to stick buy backs. Sure it goes also to investment in the company, but that comes if there’s any left over from all the rest. And occasionally they’ll throw a bone to employees to keep everyone quiet in and out of the company.
I’m reminded of the movie “Key Largo” when Humphrey Bogart “clarifies” what greedy crook Edward G. Robinson can’t put into words about what he wants. Bogart says, “He wants MORE!” Robinson agrees. Bogart says, “Will you ever get enough?” Robinson answers, “Never have!”
3
Noted with interest, the reaction of FOX Business and Limbaugh. Pathetically predictable.
2
Is it just me, or did Limbaugh and Fox News accuse Dan Price accused of being a socialist for choosing to spend his OWN money on his workers rather than himself? Did a bunch of "free market conservatives" dare to lecture a businessman about how he spends the money HE makes?
What about economic freedom? What happened to that?
Shame on all of you FMCINOs! (Free Market Conservatives in Name Only)
7
A good book to read would be "Sacred Economics" by Charles Eisenstein. The "brilliant" CEOs and COOs can apply their great skills and creative abilities to keep the company thriving and be compensated for it by the joy they derive from nurturing the business (rather than by egregious "compensation packages") and also by the happiness they can see in the faces of their employees (which should be a great reward in itself)!
Did anyone hear that "Money alone cannot buy happiness?" or am I making that up?
3
Seems to me that shareholders and pension managers have a role in this. Across the board, we are waaaaay overpaying for executive talent, at the expense of our own retirement nest eggs and the quality of life in our cities and towns (got empty storefronts?).
Paul Krugman had a piece in the Times a few years ago in which he pointed out the absurdity of an $80 million salary -- as though no one decent would possibly work for a measly $8 million a year.
This beggar-thy-neighbor concentration of money and power in far too few hands is the chief reason for all the animosity and ugliness in our politics today.
7
What if we stopped using language like, "even the lowest-level worker?" Stopped thinking of levels of people and started thinking about a company as an integration of people getting work done, everyone important and necessary to the processes, systems and structure? The words we use underlie our beliefs and set the mind's direction. Change the words, change behavior.
8
It's good that there is finally serious attention being given to income inequality in America and around the world. There is a lot of new research and insight into this reality now than a few years ago. There is one central concept that I don't believe receives anywhere near enough attention.
That concept, that reality, is that the gross value of an economy is increased by the speed of the circulation of currency within it. The more that money is being spent, the most sustained and significant the economic growth of any economy. Wealth in a bank doesn't do much good. Money being spent is what pays wages and generates profits.
So for the greatest good of everyone in any economy, you want wages to be as high as possible. Ideally you identify a level at which people have the option of saving money while enjoying what society believes is an acceptable minimum living standard and that is the minimum wage. You want people spending freely to live a decent life but also save at least something every week. That's ideal for everyone.
The reality is that the wealthy would accumulate even greater wealth if there was a higher rate of circulation of currency generated by higher wages. The reason that the working class is deliberately kept in relative poverty is just about the rich being nasty and vindictive - they define the real value of their wealth by the degree of poverty they can inflict. It is a worldwide economic catastrophe.
Tax and spend and give people a life with dignity.
3
This is such a nice story. But you have to agree that the thriving economy we are in has helped a lot. If we were in a recession or in a very poor economy, this would not work. Also, do people get raises or is it forever $70,000 for everyone? A family of 4 in Seattle cannot live on $70,000 a year, so everything depends. This is only good for the ones that don't want any stuff, any nice trips, any splurges. It is really socialism at its best, people working for other people, some work hard, others don't and everyone makes the same amount. Not good in my book.
3
@Charlie- Rebalancing a compensation scheme, in a highly successful and profitable company, in a highly profitable industry, where the CEO keeps all the stock, is pure capitalism and especially at 20% growth. It is not socialism and never will be.
And if you look, you'll see that credit card servicing companies have done very well for themselves in good times and bad. So the assertion that this would not work in a recession if false.
1
What pleasant nonsense. First, the economics of every small business are significantly different. The idea that an outlier like this can, or should, apply globally is a non-starter. Second, the idea that an economic system must have a magical “heart” is irrelevant outside The Wizard of Oz. Third, I run a business with (lowly) average salaries of approximately 65k. I do it because it makes competitive sense, not because I’m battling the excesses of Evil Capitalism. Employment is a win-win. If you don’t like your job, go elsewhere. It’s a free country.
37
@John D
Kristof himself writes that it may not be scalable, obviously most businesses would not be able to accommodate this level of salary increase. However I'd argue we need more entrepreneur/employers like Price. Your last couple of sentences in your comment indicates to me that you yourself could use a heart.
44
@John D When the rich don't like they taxes they buy politicians, they don't move.
13
@John D No, it's a very expensive country to live in. Nothing is free except the natural resources that have already been claimed by the elite. Grow a heart!
11
I’m astounded how many commenters somehow find a way to demonize or dismiss paying workers an honest-to-goodness living wage. Why isn’t that worker worth that much? We Americans have drunk the kool aid fed to us by the wealthiest, the most powerful. Somehow we believe that ceos and execs are worth so much more and corporation’s shouldn’t pay taxes but my 18 year old part time hostess daughter should. Man. How did we get here and where does it lead.
10
If the starting salary for teachers were $70,000 a year, there would be no teaching shortage. None. In fact, teaching would rapidly become a more respected and competitive job. Schools across the country would be able to attract AND retain the best
teachers.
Hedge fund managers, all of Wall Street, corporate lawyers, this White House: try teaching for six months. Or even one month. You'll see what hard work, constant demands on your attention, and high stress REALLY is. Not only are you over-paid to the nth degree, but your jobs are far easier - and I'm not saying you have an easy job. You will also see and feel what it is to work in one of the most meaningful and important jobs in the world. The one that Don, Jr. calls "loser teachers."
14
Enjoyed your opinion piece on $70,000 a year minimum wage. Did you know there is a huge truck driver shortage? Many large companies will pay you to train, about 19 days, and then you start driving at $45,000 to $50,000 right out of the gate. With 3 years experience, Walmart will pay you $92,000 a year. Why aren't millennials doing this? The other part of this equation is we the consumer. Starbucks can have a heart and pay it's employees $70,000 a year if we the consumer are willing to pay $20 for a cup of coffee. Extending this, $20 for a BigMac, $100 for our restaurant meal, $2000 for an iPhone. Get the picture? It is not only evil corporations but evil consumers who want everything for free or cheap. Without profits, there are no iPhones, blue jeans, automobiles, Facebook, Google, Apple, Instagram, etc. etc. You can be part of the solution if you will support a business who comes out with a $20 cup of coffee and passes the excess profit on to its employees. That's not a business gamble I'm going to take.
4
@bk
"Without profits , there are no IPhones....."
I think the issue here is not profits disappearing, but the distribution of the profits. It's safe to say that everyone likes profits.
1
@bk- the problem with your argument is that "free" and "cheap" still make a lot of money. Corporate profits and executive compensation are at all time highs, so it's not about there not being enough money. Any successful company could do what Gravity has done, a re-balancing of their compensation plan, commensurate with margins within their industry. It's pure capitalism.
2
@bk
The "truck driver shortage" is a lot of bunk -- just marketing by the trucking majors who rely on a constant stream of new drivers, whom they can trap in a form of indentured servitude in exchange for getting them their CDLs.
1
This article was inspiring. Some argue the excuse that executives need high salaries for motivation. This is a rationalization. Mothers and fathers have really important jobs raising the next generation and they work endlessly for free. In fact, to be parents, you end up with a lot of out of pocket expenses.
1
Why would anyone worth $70,000.01 in the open market work at a place that only pays you $70,000.00 - all other things being equal? If one does, then the other benefits and intangibles must make the difference. Why wouldn’t someone who is really worth a lot more than $70,000 go work where they make a competitive salary and donate everything in excess of $70,000 in compensation to their charity of choice if they truly believe in “equal compensation and ‘equality‘”? Making $70,000 is a great deal if you are really worth $40,000 in every other job you can find but if you’re worth $150,000 at a business across town, $70,000 is a slap in the face. If that happens you know the company’s management is far more interested in something else vs paying a fair wage for talent. This experiment is a flash-in-the-pan and will ultimately end when the company closes or gets purchased. This company will attract 100% of the people that are worth less than $70,000 but my guess it attracts less than 5% of the people that are worth more than $70,000. Who wants to work for a company, and how successful will it ultimately be, when it’s personnel is made up of “walk-ons” and lesser and having to compete against better skilled competitors. It works for awhile to amuse NYT writers, readers and those supporting their same socialist agenda but when the clock strikes “reality” the gig is up.
35
@Bert
In my experience, not everyone is motivated by the same things. It sounds here as if money is a big motivator for you. I can think of an example in my college writing class: not all students care about getting an "A" grade. Some are happy to get a "C" or "B", while others are happy with a pass/no pass.
I see it quite often. Many people are driven by motivators other than money. It is merely a tool they use and there sense of self worth is found in other areas.
32
@Bert
You kind of missed the point. There actually still are people in this country who get it that money isn't what makes you happy, as the person in the story said.
Feel free to chase the gold, but no need to trash those who differ from your perspective.
43
@Bert These are exactly the arguments that were presented when this CEO did this four years ago. You have just read an article about how the company has been very successful. But instead of paying attention to the facts presented and accumulated over four years of this policy being in place, you have repeated the predictions from four years ago.
You also ignored the very important aspect that the $70k was set at a minimum. The company can and does pay some employees more.
59
Decades ago Einstein said that the three greatest problems of humanity were greed, stupidity and ignorance.
Gravity payments is a fine example of voluntary justice, but very, very few capitalists will do this. But consider Ben and Jerry's. It was ran with the highest paid getting no more than five times the lowest. Then Unilever bought it: end of story. People must be compelled by government to be fair.
That's why we must have a structure that allows capitalism to flourish, but regulates what it will not: see above. Capitalism has provided great wealth and innovation (ah, though the latter is complicated by the fact of many innovations coming from state sponsored research. The web, anyone?), but is prey to the holy trinity of greed, stupidity and ignorance.
That's where Democratic Socialism comes in. We make an agreed upon structure, and make it more fair and just. Works in Scandinavia! No, it will not be utopia. Just Better.
3
@Slipping Glimpser- ... or you could just not work for Ben & Jerry's any more.
American culture will never accept that kind of government control of our work or private lives, so dream on but it'll never happen here
1
"There is now a broad recognition that American capitalism is flawed — see Steven Pearlstein’s superb book “Can American Capitalism Survive?” — and our next step is to figure out how to move beyond blind rapacity. Price seems part of that national rethink."
Perhaps a bit of 8th grade history might help.
1
Capitalism per se isn't the problem. The problem is the no regulation, zero tax, anti consumer, anti worker, anti environment, pro rich, corrupt, rapacious version of capitalism promoted by the Trump McConnell Republicans that is the problem. The Democrats should demonstrate intelligence and nuance on this issue. They are against this new robber baron mentality. Many European countries are both very capitalistic and very much the opposite of the Republican capitalism.
106
....and have been in the economic doldrums and inconsequential inventive posture for 20 years if not longer....
2
@Robert
Bravo! We had though the heartless Robber Barons we’re gone for good.
Apparently not so. Clearly more regulation of our current Cowboy Caputalusm is needed.
5
@Out of Stater
Sorry for typos. Typed in “were” and got “we’re”. Sigh, Auto-correct. And of course, Capitalism.
1
Dan Price plumbed the depths of his Christian faith, Judeo-Christian, if you will, weighed it against the odious rantings of Rush Limbaugh & instituted his plan.
Shareholders of publicly held companies adhering to the austere living standards of Warren Buffett are gritting their teeth as they open cans of hash for dinner & tremble at the thought of this heresy spreading throughout the business world. What will happen to their portfolios?
1
I have 28 years of business ownership under my belt. So far, I’ve never missed a payroll. Neither I, nor any of my business owner friends, think of our employees as serfs. Nick’s comment is a dangerous kind of bigotry that harms our nation. It’s tiresome and it needs to be called out.
34
@Dave Smith- I own a business too, these last 30 years. And Nick's comment can be applied to many businesses, most of them larger than yours and mine. I don't feel personally threatened or criticized by it at all.
I'm very glad that you too have treated your staff fairly, as have I. You don't need to include yourself in those who do not.
26
@Dave Smith
Your point is well taken and makes me think that the scalable thing Mr. Kristof should have written about is the broad notion of looking for ways to do good for others, not even necessarily in business and not at all by emulating this exact pay model. Actually the piece can be read that way but the inclusion of that statement by Mr. Price undercuts that interpretation and invites your response.
2
@Dave Smith Companies that force unskilled or lightly skilled workers to sign non-compete clauses treat their staff like serfs. Non Compete clauses were designed to prevent highly skilled workers from transferring technical know how obtained in one position to a competitor. Fast food restaurants think burger flipping is high tech.
9
Kudos, Dan Price. Kudos.
2
Ricardo Semler has written two books about developing his own humane leadership style, where workers decide their own wages and work hours at his company, Semco, — and it has worked! The titles are “The Seven Day Weekend” and “Maverick”. Both are inspiring to read.
If capitalism is only about feeding owners and leaders who act like greedy children, capitalism will fail just as surely among adults as selfishness fails children at playtime. The selfish children find no one wants to play with them, and the adults will find no one wants to work with them.
25
"Price enjoyed publicity and new customers by being the first to go to $70,000; those benefits will not accrue to followers."
You can say the same thing about housing. Price's employees enjoyed the advantage of getting there first; if enough people got similar raises, the cost of housing would follow the wages up and landlords would capture the difference.
There is no substitute for enough housing. When demand goes up and the supply does not, price increases are inevitable.
To create an economy that is reasonable for everyday people, you have to increase the supply of housing. California is struggling with this, and is considering SB50, a bill to compel local communities to zone more low-end housing.
2
This is reminiscent of the 1990s when there was a push in many, not all that many, but to have employees to have a "stake" in the company. Also, asking for ideas through "quality circles" to improve by by involving employees in the proceedures used.
I like this idea better. I think it mostly works because Mr. Price is not greedy and wishes to improve the lives of his employees as well as his business. People perform well and thrive when they know it counts!
Will it be embraced by the main stream "captains" of corporations, I doubt it. Too bad.
1
An inspiring piece. Not the newest idea ever, but another wonderful example of a concept partly demonstrated by the Hawthorne Effect in organizational psychology. Happy employees often equal higher productivity. A capitalist idea worth looking into by CEOs for no other reason but to boost their own long-term company's productivity.
Mr Price seems like a good and decent man, which is why he’s running a charity out of his business. Another more cunning line of thinking is that he’s seized on the media’s naivety to the tune of millions in free ads. Assuming the former, that’s his prerogative, since he owns 100% of the business.
The question isn’t “what should other CEOs do?”, but rather “are individual investors and funds willing to see lower returns on businesses owned in distributed ways?”.
The answer is “no”, and it should be “no” - even if these investors want to be charitable, it should be at their discretion, not the discretion of a CEO who may or may not share values. In this example, the sole investor is the CEO, so it’s aligned, but not broadly applicable to big American industries.
6
@Tim Mosk Is it a charity when minimum wage hasn’t kept up with inflation or the cost of living? One of his employees said that she was making $42K. I made $50K over 15 years as a starting salary. Something’s wrong.
3
@Tim Mosk
I think those investors and fund managers would take their money elsewhere if they didn't want to buy in to a company sacrificing shareholder profit for employee benefit. Others would direct their money to a place like that, so it could be a wash. You already see options to invest in these "charitable" companies at some wealth-management firms: "socially responsible investments." My point is that there is room for companies to consider their own employees over shareholders and still win investors, but I'm not sanguine that many companies will choose this route.
1
@Tim Mosk- It's very hard to read comments like this and not laugh because it's clear the poster doesn't understand what has happened here.
1- The company is making money hand over fist. That's how capitalism works and succeeds. Oh, and apparently there are still profits here, good ones. That's also how capitalism works. What the CEO does with that money is no one's concern since the company is privately held.
2- Paying everyone pretty much the same is not a misrepresentation to shareholders or the public, or some scam, quite the opposite.
3- Paying everyone that much money just bought their loyalty and commitment to the company and its success, in a way nothing else will. That is what compensation is supposed to do. No one will ever leave, and they will all work hard to assure its success. He has bought their goodwill and the public's, which are both highly valuable assets since this is a service business.
4- As much as critics try to paint this as charity, it's anything but. Rather, it is merely a rebalancing of compensation, which has not diluted the corporation's worth at all since the founder still owns all the stock. If we ask a real accountant, we will find the company's valuation is much greater than its liabilities which is a success in any book.
I'm not interested in dividends in my stock holdings. I'm interested in appreciation. So yes, I'd be very happy to buy some shares here! You'd be a fool not to.
If this company has margins that are so high they can afford to pay employees $70,000 when they are truly worth $40,000 perhaps someone needs to regulate (a favorite of the socialist and liberal set) the credit card processing business sector. That way a lot more than 200 people (employees) would benefit.
5
@Bert further to your thought, unless this firm has managed to raise its employees productivity to $70k, there is an opportunity for another firm to pay, say, $69k and render this firm irrelevant. That new entrant might be someone looking to help Seattle's homeless work -- and might even be delivering great social justice -- but in a more efficient manner.
This is an interested experiment. And it was voluntary. Let's not be so arrogant as to think we can mandate innovation and experimentation to our own ends.
3
@Bert- the credit card companies, like most of the financial industry, have comparatively high margins all the way around. You should already know that, and yes your idea of some regulation here is worth considering.
Also, the idea that a particular job position and the person who fill sit are "worth" a certain amount is laughably arbitrary. No one can even explain how we came to these decisions historically. Considering how most CEOs actually behave, and the ludicrous decisions they often notoriously make, it is high time their support staff get paid more because they are often the ones who are saving the day. Not their fearless leader.
1
@Bert, Signal: The company did have those margins, but as in most companies, the benefit was going to the C-suite. What he did was to transfer that balance from the C-suite to the employees.
When will investors decide that the C-suite is taking up too much of their precious investment dollars, paying themselves Croesus-like salaries?
3
This wouldn't work for any company that sells on balance to customers making less than $70,000/year, nor would it work in any company where margins are tighter and competetition fierce. Individual efforts like this are nice, but this was not an experiement that says anything about raising wages nationally. If minimum wages rise nationally, and even better, internationally, then it does work. The only things dampening the top end of the scale macroeconomically (globally) are inadequate technology for producing raw materials and the reduced incentive for workers to strive for higher paying jobs. Nobody knows the limits of these factors, and even if they know them today, because these are dynamic variables rather than static variables, they would change as wages went up.
2
@DudeNumber42- not really. As wages increase, currency inflation will offset most gains in real time. So the one will tend to cancel out the other over time.
And you are mistaken about paying a decent salary will disincent workers from striving for better paying jobs. Salaries buy loyalty and commitment, contrary to popular management theories. having a good job, and keeping it, will actually make people work harder than underpaying them and keeping them hungry. Paying them nothing will assure that you always attract the worst job candidates who will never perform for you, and won't stay long.
@laguna greg
I think we're talking about 2 differerent modes of thinking. First, "As wages increase, currency inflation will offset most gains in real time." No, not at all. first, inflation leads wages in existing data, and second, I'm talking about low-end wages and you appear to be talking about ALL wages.
Second, "Salaries buy loyalty and commitment". I'm talking about a massive uplift at the bottom, which will to some degree disincent striving for better-paying jobs that require more education and/or effort, and that exists in the data also.
This is one of the main differences between micro and macro modes of thinking in economics. Most people only think in terms of micro because that's all they encounter unless they're in government.
1
@DudeNumber42- we're not talking about different things. You just left a few qualifiers out of your argument until now.
1- If you go back and read the article again, you'll find that not everyone is paid the same. Some employees are paid more. Yes, two employees left at first because they were probably insulted at being paid as much as the secretaries. That was just childish and short-sighted because 20% growth can't be argued with.
2- Who works harder? Or is better educated these days? The admin, or their boss? Be careful what you say, and then be prepared to duck. Your valuing of these things is highly subjective, and like everybody else you couldn't explain how you came to them. Don't even offer the MBA as an example of "added value." It is no longer, and can be had these days by idiots taking online courses for a price. These fools somehow deserve more than anybody else, why exactly? Don't also suggest "talent," because most CEOs don't have any. Even stupid people can run a business, and many do.
3- "Micro" versus "macro?" When wages are static, inflation will eventually eat up any gains in income even if they don't cause the inflation itself. Read John Kenneth Galbraith.
Most people could not do better than a job with this company, even many B and C level managers. Anybody who thinks they can is of course free to leave.
Beautiful move by this company. People don't just need a salary, they need a living wage. Rent, food, travel, clothes, all these things should be covered by the income of only one job. A $15.00 minimum wage in NYC is a non-livable wage unless you live at home rent free with your parents. NYC employers should consider the $70,000 minimum. It's the only way a person can actually live in this city. Kudos to Mr. Price.
9
One thing to understand in this commendable story is that the company was very profitable. To the credit of the owner, he decided to share the profits. Without the success, there would not have been the ability to implement the model. Just look at the author’s shrinking newspaper industry to see how important it is to make money.
7
What if every business was reorganized as a Class B Corp? Life would be better for everyone. Instead of just being concerned with shareholders interests, class B corps consider shareholders, stakeholders, employees, the town they operate in and the environment they impact. They operate on the common good principle that spreads the wealth while doing the least harm. Peace.
5
I still don't understand how people who call themselves Christian can have problems with valuing everyone's work and everyone's life to the point of making it a livable one for them. It seems Price's upbringing of listening to Limbaugh (I feel sick just writing that name) and reading hours a day of scripture, didn't deter him from the true message of the Divine which is to love the least of those among you as you love the greatest. To love all of life, which includes the plants, the animals, Earth and the cosmos. Capitalism without the heart is the opposite of being a Christian.
10
@RCJCHC...people make decisions in life and “reality” dictates that as a result of these decisions, they “live in the bed they make”. If one wants to squander free educational opportunities through high school and often thru college and be a “surfer”all the while smoking and boozing it up, who am I to judge? I won’t judge but at the same time I’m not willing to pay for “his” folly. Why should someone who gets a PhD in Electrical Engineering at a top university who applied themselves from grammar school on to achieve such - often forgoing many activities and Friday and Saturday nights - now have to support their pot smoking un-ambitious classmate? “Can’t do it” and “won’t do it” are not synonymous and our society has enough “won’t do its”.
“A person can chose to ignore reality but they can’t ignore the consequences of ignoring reality.”
1
Give it employees? How would my boss purchase those extravagant box seats to professional games to publicly declare his wealth? Or pay for his private retinue of help? Or have oodles left over to donate millions to endow buildings with his name on them? Naw, the system works just fine....
6
The bottom-line is that consumers must pay more than they are now for many goods and services. Prices are generally too low to make a "living wage" possible. Yes,this will hurt, but some sort of solidarity will have to be shown in order to pull those in low-paying jobs to middle-class level. By insisting on rock-bottom prices consumers (we!) are enablers of the current low-wage situation. It's up to all of us.
5
The other enablers are the CEO’s, boards, and investors who, beyond of the sight of employees, decide how much goes to workers and how much to execs and ownership.
This is an interesting, hugely generous, and extreme experiment. But it can be replicated in less extreme but meaningful degrees by other profitable companies- e.g., $15/hr min wage.
2
@TJ- it's not the generous. the CEO still owns all the stock, and with its good margins the valuation would be quite high. He's still making out like a bandit.
It only makes sense and when more business owners like Mr Price understand their workers need a living wage our nation will actually move forward. As indicated by the increase in business a workforce which is valued and respected is clearly more effective.
He and his employees have all benefitted, not because he has made a radical adjustment rather a reasonable one.
And there is plenty of batter to make more cake.
3
When I first started practice in state court my colleague gave me some great advice. He told me to always be polite and helpful to the clerks and administrative staff. They were often overworked, but could help you if you were respectful, and help you serve your client.
As a retired labor lawyer I often wonder at the country's devaluation of manual and low level work. Those jobs are crucial to the success of an enterprise, a worker who does a good job and is careful is invaluable. Their importance and value should never be underestimated, they should be rewarded and paid enough to support their families. The demise of unions has made it easier for management to ignore this fact. And by the way, many of the people who are really excellent workers in thankless jobs happen to be immigrants.
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@Melvin Cowznofski I could not agree with you more. Because I grew up in a working class background, I have always talked to/shown respect to employees at all levels. We are all human beings. Once I reached the management ranks, I realized what an asset this "common decency" was...staff of all levels will literally do anything to help me, and they always say, "You're a nice person, and you thank me and show appreciation for my work and treat me with respect. Happy to help you out anytime." The other thing I have learned is that people working at the "lower level" jobs for many years are EXPERTS at what they do...no business/program can survive without their knowledge, care and expertise. If you don't get this and/or are incapable of showing gratitude and dignity to these hard working individuals, you shouldn't be in a position of authority. Bravo to this company for showing the rest of us how it can be done.
7
A friend did something similar, 40 years ago. I noticed he spent large portions of time traveling and I wondered how the company managed without him at the helm. He said he paid his employees more than they were worth, meaning they could not find a similar job that paid as much. The employees had a vested interest in making sure the company ran smoothly and profitably. They sorted out the decision making and only contacted him if needed, which was seldom.
5
It's a feel good story and I'm extremely happy for Gravity's employees. I'm a 73-year-old ex (but not voluntarily) IT worker. Long and (I think) good/great work history and qualifications. But now I have to work in retail sales. And not IT sales. 73, manual labor, managers who treat you like dirt, 19-year-old co-workers paid what I'm paid (and I'm happy for them of course), a tiny tiny bit above minimum wage in NYC. I am not alone. The Times published a story about an IT engineer who committed suicide in his car where he was living. And I know of a few others, 60+, who cannot get work. I think, with my skills, if I were a recently released felon in his early 30s, there'd be a race to hire me. My situation is partly due to 2008-10 when the economy ruptured and partly mine. I've worked in IT since the mid-1980s and I guess just couldn't believe there'd be more jobs. I was always sought after. Weird and crazy. Thank god for Social Security. Without that, I'd be sitting on the sidewalk with a sign "Homeless. Please help. Will write code for food."
4
When I invested in and risked starting my business, there were many years I made less than some of my employees as I tried to grow the company. I struggled a lot as I tried to make payroll every week. I paid my people basically what my competitors were paying, maybe more in some cases for better talent. But in the end, I had to be cost competitive or I couldn't sell my products.
Most business owners don't make 500 times what their employees do. Those few executives that do are from a small minority of very large companies.
The public is getting a distorted view of business from people who never owned or ran one.
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@Alan Klein- possibly, but this is not a large company either and started out just like yours and mine.
Saying this works in Seattle is like saying that nuclear fusion will work in your home because it works on the sun.
4
I know employees at one company all making a sort of decent salary, radical. Not a great salary in Seattle though.
Kristof clearly doesn't know anyone who has worked in a restaurant (non-tipped) if he thinks it legitimate for the owner to complain about $15 per hour, that's $30,000 per year.
And what the supervisors, who left, weren’t already making more than $70,000?
This is further evidence of Kristof not knowing why Trump won.
5
Actually, paying restaurant workers, including servers, a living wage is not all that uncommon in other countries, particularly in Europe. This is true even in some large expensive cities such as Paris and Rekjavik, where tipping is symbolic or even resented. I know of a few (but only a few) places in the US that do this as well. None pay $70,000 and year, of course, and I'm sure there are exceptions, but all the ones I have patronized appear to be prospering.
To the followers of Gordon Gekko, he was wrong even as a fictitious. "Greed is good" is not a viable capitalist motto. Entrepreneurial spirit does not rely on greed but on risk-taking and risk management. Good for Dan Price to see this. Kudos!
4
I love a feel good story, and this is one. But, I think most readers know that this is not transferable across society. We all understand the reasons.
To be blunt, the fact that it isn't transferable is why we have taxes. That's the price of democracy, and it is a price I willingly pay. That word, "taxes," shouldn't be the evil word that it has become.
The work of bringing more fairness into our tax code and by extension into our society is difficult and complex. One example is in the back of my mind. I think years ago, perhaps in the Clinton Administration, the tax code was revised to prohibit corporations from expensing anything beyond the first million in cash compensation to corporate executives. Now, the vast majority of executive pay is in stock and stock options, which of course leads to twisted schemes to avoid taxes. Maybe an enterprising "Times" reader or columnist could enlighten us on that subject.
Thanks for a well written story.
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At the heart of the US Govt's dysfunction is profit over all else. Our elected employees are more worried about keeping their jobs then they are doing a good, dare I better job, then those they replaced. Its about their personal profits over the citizenry's benefits. So they refuse to work across the aisle, and the GOP whole heartedly refuses to censor the president. To hold him accountable. Much like goes on in the business world when Executive staff misbehaves, those who should be speaking up are silent.
While its true the Gravity model in its strictest form, would not work elsewhere - some forms of it most assuredly would. Which is what's important. Using Gravity as a model, as a template for other businesses to take from and fix their inherent wage issues.
Retail being one such place. Big box chains could certainly look at the Gravity model, and figure out how to mold it to suit the needs of their employees. Especially long term employees. (+8 years) Instead they figure ways to shed their higher earners, and do more with less. Or roll-back incentive plans, make earning more neigh impossible, or generally devalue experienced, tenured employees by capping their wages.
US businesses must stop paying homage to the old cliched Business maxims.They must seek ways of better compensating staff, along with newer ways to add value to the jobs, and the self-worth of the employee.
The old ways are simply not sustainable going forward.
4
"...with a new Tesla that they had all chipped in to buy, replacing his ratty old car.
That’s probably not scalable, either. "
There is a retired 767 in a hanger at Delta headquarters in Atlanta. It was purchase during the 1980's by Delta employees to help the company over a rough patch right after deregulation. Since then the company has endured other rough patches, including pay cuts, layoffs, and bankruptcy. But for those of us who stuck it out, the company returned to form, and our pay and benefits packages are at the top of the industry. Every employee got a profit sharing check last month equal to 14.2% of their 2018 pay. And this is the only major airline without a union (other than the pilots). Of course, a cynic would argue it's precisely because the company wants to keep unions out that our pay is as good as it is. And I'm sure there's a certain amount of truth to that. Plus, I believe our senior management actually giggles when they read about labor strife at our rivals, especially when their unions are demanding they match what Delta employees get.
But I was speaking with a retiree last week who worked for the company for 40 years. He told me that back when he was a baggage handler, he once helped the founding CEO load a plane.
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What would have been the effect of profit sharing on wages?
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@Patricia J.
Good point. And also productivity. Of course in the end, most businesses cannot afford to pay these wages.
@Alan Klein- they can afford to pay the equivalent relative to the margins in their respective industry, if they are successful and ongoing. This isn't a gift, it's merely a re-balancing of compensation. The CEO here still owns all the stock, with a nice hefty valuation. The employees will never have that.
As a conservative, I want to say Rush Limbaugh and Fox Business News do not speak for conservative leaders. This element of the article only serves division by caricaturing conservative business practices as relying on exploitation of the work force. Regardless of politics, both liberal and conservative leaders are familiar with the cost of hiring, training, and retaining quality workers. I read this story with great interest as the NYT informed me of Mr. Price’s experience in my home state. Regardless of Mr. Price’s politics, I would like to meet him and hear more about his experience. This opinion would have been more effective without stoking division.
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@Hayden- Sorry, but since these critics have been so loudly outspoken about their insistence that this is "communism" and "doomed to fail," it has become newsworthy and inescapable. Nor are Fox and Limbaugh the only conservatives offering rather nasty criticism in every news venue.
Are you sure you want to be a part of this group?
That's great news for the people that are getting the $70,000/year. If everyone were to make $70,000/year prices would rise. And where would that leave the elderly, the handicapped who would be making no where near the $70,000/year that it would require people to make if they were to survive.
Similarly two income families make a lot more than a person who for whatever reason is not married and not bringing in a two income salary. That would be $140,000/year. Think about the elderly senior single person making considerably less.
@esp That is absolutely not a valid argument for keeping wages down for workers. If higher wages trigger higher inflation, elderly folks can easily be made whole with aggressive Social Security & MedicAid COLAs.
1
Having an economics degree from a very good school, I was always amazed at the generalizations made with economics. At a point these generalizations become the rule, and you have the type of dogma that is contributing to the failures of capitalism.
I have watched last 40 years as people that are beholden to those rules exclaim that only business school gives a worthy education. Of course, business school teaches a person to plan for their mother’s death at the age of life expectancy, and to show up in the delivery room For their wife’s third pregnancy with a chainsaw because everybody has 2 1/2 children on average.
Many of the social sciences have been elevated to “science.” We are seeing the failures of this not only in economics, but in political science. While rational Americans can’t sleep at night because of the Trump presidency, it is obvious that politicians in Washington are simply calculating how to stay in power.
The profit motive is not the answer to everything. Worse yet, it has been a motivation for some very bad realities.
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@K. Corbin do business schools really fail to teach about variance from the mean? Any expectation that your outcome will be precisely average is doomed to failure. You have to expect that you could well experience at least two or three standard deviations from the mean in either direction, and have plans for how to deal with it.
Free-Market essentialists believe that the best way to order a society is to have minimal government intrusion into capitalism and then let the goodness of people's heart generate benevolences to support those left behind in a dynamic economy. While this program's decentralized nature and emphasis on personal responsibility has a strong element of appeal, in practice, it proves unworkable.
The reason it doesn't work is because in the economic climate in which we find ourselves, a whole class of quite intelligent trans-generational elites arise who hire analysts to look at this system of buying and selling entire companies -- as well as the absolute necessities of life like internet service, healthcare, personal care items -- in order to determine how to extract the bulk of the profit from societies' productivity. Profits gush to the top to this economic pyramid and very little gets done in the way of personal benevolences. We end up with Billionaires at the top and 30% of our children growing up in poverty.
The only reason we need progressive taxation is to offset the greed of the super-rich and the lesser greed of the upper 5%.
Dan Price "succeeded" the moment he implemented his $70,000 per employee plan. If everyone in his position behaved as he did, poverty and suffering would disappear overnight.
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@Kip Leitner....”If everyone in his position behaved as he did, poverty and suffering would disappear overnight.” The only thing that would disappear overnight is private enterprise in this country. If you want that life go live in Venezuela - they have it down pat to a science.
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I'm not sure what to make of this. If we remove the incentive for capital formation then there would be fewer employers and business creation. That being said, our society has got to find a way for workers to survive, and also reap the rewards of a free market. At the very least business schools at Harvard and Wharton had better start looking at this...
Demanding affordable health care is the tip of the iceberg here.
Decent housing and child care are not far behind.
You won't get to keep your yacht and your little jet if things get even worse for the majority of US citizens.
7
@Ultramayan...we can start by disallowing certain useless degrees from colleges and universities (like “gender studies” and “theater design” and even sociology when the the class size is ”ginormous”) with borrowed money - especially backed by the US government (taxpayers). If you want one of those degrees - fine. Pay for it yourself out of you own money. There is no need to inflate college costs and tuition by turning the faucet wide open with “free money” (ha) to indebt students for a long time for a useless degree. That’s akin to giving a crack user money to go buy groceries but not monitoring the purchase. If a qualified person needs college funds, they should major in needed degrees like STEM etc... Those degree can pay back the loans. Otherwise you end up with a society of poor, indebted, young morons wanting the government to bail them out of their poor decisions.
As I have grown older, doing good work for a good company, being valued, and having employment longevity (which I am very lucky to have achieved) has become vastly more rewarding than dirty, old money.
But maybe that's the wisdom of age.
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@Bartleby S Ah yes, the wisdom of age and I’ll bet the fact that most of your debt is paid. Student loans and mortgages keep many of us beholden to higher paying jobs. Student loan payments take about 30% of my salary! And that is because of the interest!
If you're worth $70K per year, why would you work for a company that pays you less than that? When the management consulting firm I was working for decided to move everyone into a cube farm, cut total compensation by 5%, and take away a week of vacation from those with the most seniority, I got off the fence and retired early at age 58. Thanks, former employer, for letting me know you didn't really value my contributions. Thanks also for giving me the nudge that forced me to recognize I was ready to move into the next phase of my life, the one where I value experiences with people I love and enjoy spending time with more than I love accumulating an ever bigger pile of shiny toys. So take the salary you're being offered as a very important signal of how much your employer loves you. If the answer is they're just not that into you, then look for somewhere else that is. If you don't stick up for yourself and demand to be paid what you're worth, why should you expect to be treated otherwise?
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@Earl W. This is an excellent argument for unions, particularly in places where there are few employers and monopsony conditions prevail.
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A real, livable income would be a dream come true for most people (except the 1% at the top). But what about just not taxing income until a worker reaches that income level? Everybody, top 1% included, pay no tax up to ? $40K,?$50K? Then tax at what ever level -?40%?, 60%? is needed to fund the government. I'll bet when the bottom half of the population has more money to spend the economy picks up. The top half may not get back all of what they paid in tax, but they'll get a good bit and no one will be chasing them with pitchforks.
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@mzmecz
Taxes do not fund the Government. This is a lie that has been created by the 1% since time immemorial to keep the proletariat dreams and hopes in check. It is the lie that enables the 1% and Fat Cats to tell everyone that we cannot afford anything that would help the middle class but we can afford tax cuts for the wealthy and $800 billion a year for Defense spending. The USA is a sovereign nation that prints its own currency and pays for all expenses in this currency. The 'national debt' is a book keeping number. It is not an actual debt that 'our children will have to pay off'. It is utter nonsense to say this. Printing money by itself does not cause inflation but a lack of resources does. If we able to produce enough for everyone - and we have been able to do that for some time now - then we do not need to be frightened by this boogey man nonsense of the debt. The other thing is, the Government debt is the Private sector profit. When we pay $800 billion annually for Defense, we are paying millions of Defense Contracting companies (Boeing, Northrop Grumman etc). If we stop spending this money then where do you think the jobs in these companies will go? You should read a little bit of Modern Monetary Theory to understand how we are all hoodwinked in our Econ 101 classes by Professors who carry water for the 1% and spout Austrian Economics all the time.
4
@mzmecz Americans making less than about $45k already pay no federal income tax.
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@mzmecz
Done. That is already the case.
1
Most businesses simply don't have and can't get the revenue to do this.
Look at the masses of low-paid workers - hotel maids, health-care aides, retail workers, restaurant workers. The customers of these places simply don't have the money to pay much more. The customers would change their behavior if prices went up - carry a sandwich in a brown paper bag, shop at Amazon, stay with friends, live with their relatives when they get old.
The reason why there are so many jobs in the US is that pay is low. There were even more jobs fifty years ago, when pay was even lower. If you raise pay artificially, the number of jobs will steadily shrink and the number of unemployed will increase.
5
Rush Limbaugh declared, “I hope this company is a case study in M.B.A. programs on how socialism does not work, because it’s going to fail.”
The redefining of "socialism" as any policy that benefits workers is a perfect example of Hegelian dialectics. Hegel posited that ideas move forward through three phases: thesis, antithesis, and finally synthesis. Originally, socialism, which meant government ownership of industry and centralized planning, was seen by workers as a solution to the extremes of wealth and poverty. But socialist failures in communist countries (among other factors) created the antithesis. Socialism became a frightening concept. But now, with the GOP embracing the term as a cudgel to fight anything they oppose, they are actually creating the synthesis. Socialism, now redefined as capitalism with a more egalitarian distribution of resources , is becoming acceptable to more and more people.
34
The flaw in the argument is the same flaw that Pullman had years ago. When the company, say Google, is a juggernaut and growing rapidly, it is easy, but what about GE, Sears, and the coffee shop that has thin margins? GDP/capita is about $60k, so paying $70k is more than the average and likely unsustainable when the business stops growing. Then what? all the salaries fall? The average wage is $44k, so where is the other $16k (60-44)? distortion in upper income pay? Then the best that could be done is un-distort the income distribution and the mean salary would go up 30% (with other costs to GDP, maybe 25%?). Distortions in the upper end salaries is likely the problem and is perpetuated by upper income political power (new tax law favoring upper incomes) and thus represents a violation of the social contract, whatever that is. We know that increased GDP has not lead to significant increase in Middle Class income for several decades, (by some statistics) while upper incomes soar. But the question is: do the people feel like they are being cheated? (aka the social contract). Heartwarming as this story is, it can't solve the problem.
1
@William Trainor,
I'll tell you where the money could come from: make stock buy-back illegal. Companies would then use giant windfalls to pay workers fairly and invest in innovation. Maybe $70,000 is not the right number all over the country, but the goal of a living wage is something that anyone with half a brain should support enthusiastically.
9
@Alex
No the math doesn't work, the best we can get in today's conditions would be a median salary that matched GDP/Capital. Other places in the world do fine, thank you very much, on lower wages, it isn't true that more money makes us happy, but there is some living wage t likely much less than even that, that keeps us from being unhappy, but being cheated makes us mad and unhappy. Concentrate on happiness and the terms social contract aka fairness and trust.
@William Trainor There is a valid argument to be made that had a company like Sears properly invested in talent and its customer-facing work force it would have been much more able to compete in a changing retail environment. Instead the people who customers actually interact with in their stores are paid minimum wage and it shows. Shopping at Sears is a horrible experience. The people make the business when you are selling the same department store junk as everyone else.
Look, let’s get something straight right now — the problem is NOT whether it’s a living wage, the problem is whether the wage is justified by the required training and quality of work. If all you do is raise wages, then manufacturers will simply raise their prices for thsoe same goods and service and we’ll simply end up with a variant of inflation all over again which will very quickly neutralize whatever advantage was thought to be gained by raising minimum wage.
In fact, it’s well within technology’s reach to completely automate a Burger King to require ZERO humans to run the show 24/7, just as the ATM has remove the human element from deposits and withdrawls.
And we need to stop fooling ourselves that we can raise Walmark workers’ wage from $10/hr to $15/hr and still sell mens’ shirts for $19.95.
What we REALLY need to do is EDUCATE our populous to learn valuable skills that are actually WORTH a higher wage in a free enterprise, “what the market will bear”, capitalist economy. Only then will we see America rise to the global economic challenge.
But simply raising minimum wage only serves to change the set point of the price of goods and services and after 5 or 10 years we will only find ourselves back in the same predicament after the price of those same burgers and shirts will go up accordingly to absorb that increase in minimum wage.
So let’s not fool ourselves into thinking that raising minimum wage per se is going to solve any problems in our economy.
5
@Tony
This is a high schools student's take on things. Who will care for the elderly, tech workers? Who will fix and clean and maintain things, phd engineers? There are huge numbers of essential low wage jobs in which the workers have no leverage other than the absurd theoretical options that simplistic free-marketers promote. On the other end of the wealth spectrum there are countless distortions of market forces that have created a bloated finance industry and a huge bubble of wealth among a very small cohort. If you think "the market" makes everything fair and efficient you aren't paying attention. This is not a matter of picking one philosophy and rigidly sticking to it. It's a matter of looking at the issues and crafting policies that promote a fair and sustainable economy.
9
As someone who ran a small construction business, I think the next place we have to go is reasonable executive pay, living wages for all workers, profit sharing for all workers; and, a business culture that embraces 24/7 learning.
The cost of this will inevitable reduce executive pay and investor profits.
15
This is about a living wage paid employees vs avarice in the form of outrageous leadership pay.
9
Capitalism was more palatable when it was part of a culture where people were seen as a creation of a divinity, and respect, reciprocity in relationships and a concern with morality were salient values. People have moved to human resources, not personnel. Our system objectifies people and implicitly views them as a consumable, as worthy of exploitation, i.e., we rationalize however we can to keep as much for ourselves without regard to others, we have thrown out the baby but kept the bath water.
The argument about wages and values are the visible edges in which the devaluation of human beings manifest. So is the conflict over health and social welfare. The preamble to the constitution speaks of providing for a common defense, domestic tranquility and promotion of the general welfare and to secure the blessings of liberty. That's not how it has worked. We have been good at the war thing but have made only baby steps in providing liberty and equal rights to all.
There is a lack of reciprocity and respect intrinsic in a system that has evolved so that about half pay no income tax due to absent or low wages and are supported by entitlement programs. The only reciprocity that remains is the resentment between those that receive entitlements and those who pay towards them. What we need is a system that engages more of us in meaningful and respectful ways.
6
I know employees at one company all making a sort of decent salary, it's not great though.
Kristof clearly doesn't know anyone who has worked in a restaurant (non-tipped) if he thinks it legitimate for the owner to complain about $15 per hour, that's $30,000 per year.
And what the supervisors, who left, we're already making more than $70,000?
This is further evidence of Kristof not knowing why Trump won.
This is all well and good if a company can do this AND stay competitive! To explain:
1. Can a company make the product and sell it at a price that customers will still buy it. Or will the customer go to the company whose product sells for less?
2. Can the company’s quarterly numbers meet the dreaded quarterly estimates of Wall St analysts!!! Woe to the CEO who not only misses the estimate, but also misses the “whisper number!”
3. I’ve known small companies who tried to compete while paying decent wages but were put out of business by customers going to goods made in China that could be bought for less.
And lastly, what about us, the customers. How many of us actually ask or know what workers are being paid when we buy products? How many gravitate to the least expensive ( understandably) even though the more expensive pays the living wage. We ALL have a stake in this. You want fair wages...then support the companies that pay them!
7
Great for them, but their minimum wage is the same as what I eventually earned being an accomplished professional. Surely those working there are not all as accomplished as I am. Now sharing the wealth is fine, calling it a minimum wage is just not reality.
3
I am stunned by the degree of skepticism I've read below.
Highlights how base our culture has become.
How can Washington clean out the swamps when so many citizens appear to live in it themselves.
Where is "The Soul of America: The Battle for Our Better Angels" these days?
3
Paying fair wages creates an environment where businesses sustainably prosper because employees can meaningfully participate, buying goods and services and even starting new businesses.
This environment tends to grow the pie for everyone and makes our social ties tighter and country stronger.
My bet is that 21st century GDP growth would be higher with more equal wages.
3
@TomD You use two words "fair" and "more equal". Fair is best determined by the market, and more equal is a choice of management.
The correlation between the company's success and teh pay is unfounded. The company might be more profitable if the pay was left alone. Typical not arguing the counter factual.
1
@JoeGiul You missed the point. One can pay a decent wage and still remain profitable. The object is not to make as much as possible for the company on the backs of the employees.
2
Kudos to Mr. Price but his employees have to rely on his benficiance and his temperament. When I read that the employees are all non union I wondered if the comment was meant to say trust your employer he’ll do right by you! As we all know Mr. Price may be a Prince but his brother apparently wasn’t and there is no guarantee Mr. Price will continue to be or that he won’t sell to someone whose style is more cut throat.
I’d rather be protected by a union, a good solid working union, that rely on the kindness of one human being no matter how nice and generous.
2
@Justice Holmes As is your right, I would never want a union telling me that I could not work and earn my pay. And I would never want a corrupt union manipulating politics, so a union run my be is fine, by others not.
My company employs nearly 1000 people and neither I nor the dozens of business owners I know treat, pay, or consider our employees to be surfs. That is a typical trope used to smear business owners made by people who’ve never owned a business, never had to make a consistent payroll, and never had to fire an employee who had a family but who’s work quality was such that they jeopardized the jobs of many others who also had families. Every one of us considers our employees as people who are valued and appreciated. Every one of us also recognizes that our most important role as an employer is to ensure we manage our businesses to assure our associates that we can meet the payroll of everyone who works for us every payday. None of us take that responsibility lightly.
No one argues for unfettered capitalism yet plenty of those cheering Mr. Kristof’s column and Gravity’s business model advocate for forcing his model on every business despite the fact that such unfettered government has failed in far more places than capitalism ever has.
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@Airman
No one forced you to be a business owner or employer; one could assume that your self-adopted profession appeals to and intrinsically rewards you.
Corrupt capitalism has destroyed many lives, a significant fact that has persisted throughout history and continues today. At its most pernicious capitalism controls government, a situation we are experiencing now. Your anti-government trope is inaccurate and overly simplistic.
Businesses only exist to facilitate the exchange of goods and services between people. Society does not "owe" business an existence nor does it owe business a government that coddles and favors it to the detriment of the common good.
If people cannot, or are not willing to, afford the cost of paying a living wage for the goods and services they obtain that is obviously not a workable situation. That many working families can only get by with taxpayer funded subsidies indicates something is out of kilter with our current practice of capitalism.
No matter how it is sliced and diced, when the business community, its many tentacles, their paid-for politicians, and hired mercenaries (aka private security) fight against a living wage, healthcare, and an intact, functional environment they are leveraging the power and protections of government to obtain an unnatural and unsustainable result for their own gains.
@Airman You might not feel like you treat or pay them like serfs, but that is not the question. The question is do THEY feel like they are treated or paid like serfs, and if your company is a typical American business, the answer is probably yes.
It's obvious that Rush Limbaugh doesn’t understand Socialism. This company and its decisions is pure Capitalism. The government had zero to do with it. Some companies may like and, can use this model and others not.
Why anyone would get upset over someone giving people a large raise is beyond me. I guess we’ve become too used to keeping people on the bottom with slave wages.
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@wolf201 I think a lot of people get upset because they might have to follow suit, to some degree, in order to keep workers doing the work that brings in the money. Peer pressure works sometimes.
Reality Check maybe we should concider payng our kids to spend more time studying. All begins an ends with our children so rewarding them for good attendance an grades would solve alot socail problems for every one. Alot can be improved on tools we give kids to go to school . Like for one health rewarding kids to take better care of health by making health care free for children under age of 18. Somethings in life are priceless one which is health . Im we begin today maybe in 15 years an our children become adults we see results .
@jerry lee Or perhaps as in the past you don't need to pay them, after all you feed, house, and take care of them. Performing at your capability should be the minimum and does not require a bribe.
A person who uses their own money and effort to start and run a business shouldn't be paid on the same level as the data entry clerk who clocked in, clocked out and went home. That person has no skin in the game and can just go down the street and clock in at another business, leaving it all behind. The thought process that the two are equal is simply baffling to me. I do think corporate pay is too high. But what is the answer? I think any given company should not pay any employee or owner more than seven to ten times that of the average employee pay. You want to increase your income? Give your employees a comparable raise then. That way the profit motive isn't extinguished from being paid the same as the laziest worker there. I'm no economist but there has to be something between that and socialism without CEO pay 1000 times that of the employee.
59
@Keith
Close reading of this and other articles written about Gravity Payments does not indicate to me that it has a flat pay structure. The owner dropped his pay from $1.1 million down towards $70k, while raising the lowest earners’ pay (most articles indicated that the raise took a while to raise everyone’s pay to at least $70k). I also did not see anything about other employees whose pay was greater than the $70k base rate having their pay cut.
While his brother and a few others objected to the new policy, the effect on his company was a big increase in productivity and commitment by his employees, resulting in a steady increase (about 20% a year, according to one article) in customer base, that more than offset the increase in the company’s labor costs. I did not see anything in the later articles about Dan Price’s current pay rate. But a couple of the articles did say that his employees chipped in to buy him a new Tesla to replace his old car. One also indicated that the number of workers who decided to have children went up from one or two a year, to around 20 per year.
I would call this a very good example of a win-win scenario for capitalism.
50
@AS Pruyn That's because capitalism, true capitalism, DOES have to have a heart in order for the head part of it to work. Just like us.
5
@Keith
Time to stop using the word, "socialism" as a bad word. Do some reading on the
Scandinavian countries; solid economies, healthy and happy lifestyle citizens enjoy.
Invite you to Google and broaden your view:
"Sweden: Lessons for America? A Personal Exploration by Johan Norberg"
4
There is hope in the world. It doesn't have to be all fight all the time.
8
This is the kind of bold move the country is screaming for from CEO’s. When someone does it, everyone freaks out and thinks it’s a bad idea? Whatever. This is awesome. $70K isn’t that much in Seattle. Raise wages everywhere. Minimum wage should be closer to $20/hour.
6
@Kirk Bentley Not from a CEO but from the owners. Now I have stock in a variety of companies, I depend on their dividends to pay my bills. I don't want a minimum wage like this, I expect management to pay within the laws and the market.
1
@vulcanalex If higher wages ultimately leads to higher productivity and higher profits, it is stupid not to go this route. Demanding maximum profit as opposed to a healthy and sustainable profit is the reason so many companies ultimately fail. The point of higher pay is talent retention. Replacing quality talent is ridiculously expensive, much more so than simply paying productive employees what is needed for them to stay.
Thank-you for this, Nick.
We need to hear more because this is how we fix our devolving country.
7
Henry Ford didn't go broke when he raised his employees wages above and beyond what his competitors were paying. Indeed, he sold more cars because his employess could better afford to buy them.
Such a simple, simple economic principle!
Let's call it Demand-Side Economics!
Hip, hip, hooray!
7
@Ralph Averill Do you understand why he increased the wage? It was become turnover was costing him a lot of money, it was not to allow them to buy his product. It might have had that effect, but the reason was business. And he interfered in the private lives of his employees as well, which we would not tolerate.
@vulcanalex Actually, it was both, and the creation of a market for the product was more important to him. https://www.saturdayeveningpost.com/2014/01/ford-doubles-minimum-wage/
Reading a few of the selfish comments that people wrote it iimmediately burst my bubble that there was some good in capitalism.
A corporation putting employees before shareholders is such a novel idea. A great profile of a management group that’ understand the corporate success depends on great people working with them. People deserve to make a decent wage where they are not constantly stressed or being degraded by their job. Have benefits be treated like a human being.
Many of the comments were pathetic and very Trump like.
We have become a soulless greedy capitalistic society that can not see goodness without a negative innuendo .
4
Nothing -
can change living like taking real estate away from people. Gravity is a good company in the midst of real estate vultures.
What are we to take from this story—that all small businesses can or should do this? I can tell you as a small business owner with 20 wonderful employees, this company’s policies are fantasy-land for most small firms.
I own a specialty contracting company in The People's Republic of Vermont—one of the most hostile places in the nation for small business. Pick up any of the national financial publications—Forbes, Money, Kiplinger—they all publish annual surveys of the worst states for business. Vermont is always near the top of these lists.
Between all of taxes (corporate income taxes property taxes, sales taxes, paid sick time, etc), the other fees, some of the highest workers’ compensation rates, and environmental policies inspired by zealots, only the stubborn and dedicated can survive here.
But aside from the burdens imposed by the Socialist junta in Montpelier, there are other pressures on my business—namely competition from similar firms in New Hampshire—whose state legislature imposes much lower burdens on business.
Liberals cannot be made to understand, not all businesses are monopolies with unlimited pricing power, and no small businesses have the limitless budgets of government. We have to live within our means, while competing in the marketplace.
My CPA just finished my 2018 books . Calculating my bottom line for paying my employees a $70,000 minimum wage, I would be $363,000 in the red. Heart has nothing to do with it. Reality rules the day.
14
This is philanthropy, not a buiness policy.
Kristof should encourage and write about philanthropy, not business practices.
5
@Midway it might actually be a business policy, keeping good employees and avoiding turnover is a policy.
3
Have you ever thought that Mr. Price may have calculated the benefit of liberal sentiment and the ensuing publicity from raising salaries but not shares in a now multi-billion business? Aren’t you promoting a business, as you did the Jordanian government on your article that excluded human trafficking, prematurely?
4
“The majority of Americans support private enterprise, not as a God-given right but as the best practical means of conducting business in a free society,” pulp and paper executive J. D. Zellerbach told the magazine. “They regard business management as a stewardship, and they expect it to operate the economy as a public trust for the benefit of all the people.”
- from Harvard Business Review article on corporate stewardship
Hard to choose the sweetest part of this story:
- that Mr. Price's instinct seems to have been correct, and he's operating a successful business with a happy staff (I'd bet his turnover is far below average)?
- that they showed their gratitude by buying him a Tesla?
- that Rush Limbaugh was proven wrong?
6
The warm and fuzzy’s I’m feeling right now are really creeping me out.
2
Thanks for the follow-up. Interesting!
3
When good deeds are a rarity in your society, you are a morally failed society. And if you think moral integrity is the only metric that really matters, as do I, then you can only conclude that we are a failed society. The USA has become nothing more than a bunch of people focusing on scraping to survive, distrusting of everyone and seeing them as competition for scarce resources. It's a fake scarcity created by greedy people who deserve to be punished for the good of society. Americans are exhausted and depressed and spending time worrying about debt and healthcare and education rather than enjoying each others' company during our incredibly short existence. I have not moved my family to Europe, out of cowardice. Maybe I could, but that wouldn't solve the problem of the largest truly heterogeneous country on Earth being in a moral freefall.
5
Capitalism: A billionaire builds a boat and thinks he invented water.
3
“Money doesn’t make you happy, doesn’t make you a better person.” I wish this was taught in the trump household where their money is used to make the rest of us miserable.
3
@Mike Sure just money does not make you happy, but without it you are hungry, cold and not happy.
This story is just a nice, feel-good advertisement-for one company. It reminds me of the Carrier air-conditioning factory in that Trump "saved" before the election.
This article is only a single solution for one single business, and it is meaningless to apply the "lessons" of this specific example to the rest of America.
The service this company provides is unique--it feeds off the ridiculously high fees that credit card companies demand from all of us. (There's a reason why very small businesses refuse to take credit cards for sales under $20. )
No other industry can copy this business model.
Kristof's readers in the NY Times bubble may feel smug and progressive for a few minutes; But wake up and get real, please.
7
So, truth be told, good ethics IS good business!
(But it’s telling, isn’t it, that low-information Rush Limbaugh and Fox News derided and bet against a magnanimous, ethical act being good business?)
3
This is exactly the direction that Capitalism needs to take if it hopes to survive. The present model of greedy, unbridaled Capitalism and overwhelming income inequality is simply not sustainable, pushing the old pendulum swing toward (Oh no, That dirty word!) SOCIALISM
2
Oh, capitalism doesn't need to be reborn. It needs to be regulated, demonopolized, and unionized.
2
This makes me uncomfortable. An oligarch soothes his conscience and finds satisfaction by giving lots of money to his line employees. He says money doesn’t make him happy so he gives money to his employees to make them happy. And we all know that if the company flounders, the experiment will end. This seems pretty patronizing to me.
4
“However, on Fox Business he was labeled the “lunatic of all lunatics,” and Rush Limbaugh declared, “I hope this company is a case study in M.B.A. programs on how socialism does not work, because it’s going to fail.”
Since then FOX and Rush, seeing deficits soar after the tax cuts for our wealthy, and Progressive policies work, such as those practiced by Gravity and minimum wage cities like Seattle, have retracted their obviously vacuous statements and admitted they were wrong.
Right? Ya, when a woman is made Pope, maybe.
Worse, the sheep that are current Conservatives don’t care that they’re wrong, only that they faithfully pronounce daily ideological cliches without deviation from what amounts to a Republican Little Red Book.
3
So many things to say....
—With the next wave of IPOs set to make a new generation of tech millionaires in San Francisco, it’s safe to say this won’t happen there.
—Price did not hone his values in a big, tech-fueled West Coast city, but in rural Idaho.
—If Tim Cook did this, he’d make most of his employees homeless.
Price’s story is a good one, but it’s not one that the tech-enamored Left probably want to dig too deeply into. It works because that’s who he is, where he is, and the size of Gravity.
Admirable man.
3
Sometimes we forget what that definition of capitalism is as follows:an economic and political system in which a country's trade and industry are controlled by private owners for profit, rather than by the state. That definition doesn't preclude business owners from running their businesses on a moral basis. Most people don't realize that about half of all Americans either directly or indirectly own stocks , either through individual stocks or mutual funds. see https://www.politifact.com/california/statements/2018/sep/18/ro-khanna/what-percentage-americans-own-stocks/
All these shareholders aren't super wealthy and they depend on these stocks for their savings. And ironically, most pension plans for government employees depend on profits from the stock market to pay government workers their monthly pensions. So, before we totally embrace socialism as a cure all , we should look at socialist nations in which the top one percent control the economy and have destroyed democracy.
China is an good example
America's problems
3
This just in...a new heartwarming story out of Seattle. Dan Price is going to the barber.
Wonderful to revisit this story since corporate news is pretty much always about boundless greed that gets worse all the time (Boeing).
It has no chance of becoming a model enterprise as pushing corporate pigs from the trough is a hopeless Sisyphean task, but nice to know it exists somewhere.
2
thanks for a followup to this inspiring story. and it proves to no elaborate schemes to get his employees to a reasonable wage were necessary; only that really good things happen to large numbers of people the disease of greed is checked.
if we had a govt run not run by a totally inept excuse for a successful businessman and criminal, he could act on a real national emergency; wage inequality of truly obscene proportions. I forgot exact numbers but it was something like in 1960's, a CEO made 150x the lowest paid employee whereas now its some number that would prob break my calculator. they ALSO paid their fair share of taxes on top of that.
if again, we had a non-criminal non-thug making decisions, an executive order would go out that the govt would refuse to buy anything from companies whose high/low ration was over some number, say 250x.
while that may not be possible esp when purchasing items in markets esp where the products are non-differentiated, commodity-types, there's nothing that would prevent the govt from giving credit to the bidders on a sliding scale based on how low the company's ratio is. ie, a company with a ratio of 250x gets a 15% credit whereas a company with a 2500x ratio gets penalized by 15%......
nah that makes too much sense if youre unstated goal is to continue to worship at the alter of unnecessary, unfettered greed........
37
@sam
Trump has only been president for 2 years, although it sometimes seems longer. Obama issued a lot of executive orders but none of them that I know of restricted government purchasing based on executive pay differentials. It's highly doubtful that Clinton would have done so either.
1
@sam Thankfully you aren't running the country, Sam. You'll be rid of Trump in 2025. Then one of your Socialist Favorites can take us down the slide to mediocrity once again. Following Venezuela's model, I've already staked out my garbage truck in DC. Because all the "public servants" will be eating just fine. That will be the place to find the best food scraps.
And here, in one great example, it is: part of the model of where capitalism can and needs to go. And while Gravity Payments owns this particular "minimum wage" move, there are other examples of companies taking non-business-as-usual, jaw-dropping moves in other social and environmental areas. For example, Patagonia says they are "in business to save the earth." Companies have fought leaving the Paris Agreement and for gay rights. The ethical perspective, foresight, and actions of such companies, either explicitly or implicitly "Purpose"-driven, can be replicated. Beyond that, there is the opportunity to encourage this as part of local, state, national economic development policy and strategy, with explicit direction, incentives, and idea-sharing. It would help if shoppers favor such companies, students learn about them, and journalists follow these developments. It is also an easily-fixed missing part of the Green New Deal, which would then show the ridiculous of kneejerk "socialist" charges the latter is receiving. Companies voluntarily doing these things, and customers buying from them, are hardly an example of "over-reaching" government. There is no shortage of problems with which we can use assists from companies with "heart." We could also use some surprise good news these days. We just have to re-think our conventional categories about what "business" is or does, something I've surprisingly found is very hard for people to do. But, as shown here, look at the rewards!
1
Right, for all those who don't have it, it's time to lift them up. So, since many are retired and are being swept away, why don't we have a push for $60,000 minimum annual social security benefits. People don't realize that an industry is alive out there, $50 trillion, and it all centers on how can we swindle the savings from our retired folks. Their pensions, 401K, real estate valuations, investment accounts, overseas slush buckets, it goes on and on.....and it is there for the taking. And don't forget the false social security monthly checks that go out total about $195 million, EACH MONTH. Oh well, someone needs to speak out for us besides AARP.
Like liberalism, ideas based governing, and general good will these models work best when 80% or more subscribe to a similar type of long term business model. Capitalism has morphed from its truest forms where quarterly profits supersede everything including long term viability, which includes poisoning the environment and creating a poverty class that cannot afford to consume.
Because we've allowed capitalism to invade our governing, it needs to be checked; an economic model is not, cannot, and should never be a model for governance.
1
Look, this is an anecdotal gimmick. Lots of businesses fail every year because their payroll put them under. Ultimately, we want more people to have more of what they need. That means more people working, fewer people spending productive years pursuing worthless degrees, and fewer people living on welfare. It's all about production vs. consumption and the progressives are always pushing us in the wrong direction.
6
"Seattle housing is expensive, so many residents had been unable to buy homes or start families."
Same in NYC. Housing is expensive. The so-called housing crisis here is actually a stagnant-wage crisis which has been going on for four decades. It was morphed into a phony housing crisis to benefit developers, no one else.
From Forbes: "In the 1950s, a typical CEO made 20 times the salary of his or her average worker. Last year, CEO pay at an S&P 500 Index firm soared to an average of 361 times more than the average rank-and-file worker." This is the crisis. This is the source of much unrest in this country.
7
@Trilby Housing is expensive because property taxes are high and because of lack of infrastructure. Way too many property tax exemptions with those not exempt trying to support cadillac govt retiree wages and bennies. As a result,we have some families doubled and tripled up, trying to hang on until they can retire at 67 1/2, and others who fold up the tent at 55 retiring to lower tax states on their caddy pension and bennies. Even if all wages were doubled, the nongovernmental employees can't make the living wage in their area and support those who have the golden retirement. Adding more people in the area who work above the table would help spread the tax load, but many areas don't have the infrastructure to support the dense housing...can't truck in that much water, don't have the bucks for the necessary sewer plant and transportation corridor expansions.
1
So the "good liberal" who owns a cafe thinks it's great but not for the business she owns. Just for other business owners. And she is even worried about the $15 wage.
Indeed, a good liberal.
4
@Dakota T Quinoa and kale and strong labor unions are not the same thing.
1
When capitalists own the conversation...I only see things like this in the MOST liberal of places throughout America. And those places being islands without support...really struggle. It is part of the plan of the capitalists to advertise to Americans that the "corpocracy" has made their lives so much better - they have the Internet! Americans only have a tiny bit better shelter than, say, south america. Maybe. Other than that, money lets you buy more things. What has capitalism wrought other than better shelters, consumerism and militarism?
3
I've been thinking about the value that an employee brings to a business vs the value that they bring to me. Is the grunt in whatever news organization who relieves the higher paid writers of 8 hours of grunt work worth the same as the writers because he took 8 hours of work from them that they would have to do if he wasn't there? Or is he worth less because we believe is is more easily replaceable? Insert smart alec remark about some writers' worth here. I used a newspaper example for obvious reasons, but this goes for any organization.
Do I tip the guys at the car wash to equal the amount of time it would have taken me when I was younger to detail a car in my own salary or a buck because it is optional?
I will note regarding the article that this decision was embraced by two people in the article AFTER they had achieved financial independence. Human nature.
What is Value?
4
I hate to inform Mr. Limbaugh, but this isn't about capitalism vs socialism. It is about respect versus mistreatment. In Mr. Limbaugh's world, the capitalist altar he preaches at, the way to make money is to look at workers like a commodity. Get the most for the cheapest amount. There was a time in this country where unions said enough of that and demanded fair treatment for their members. Then unions were portrayed as evil, employers were viewed as saints, grossly maligned by unions, and employers started taking back all the gains workers had achieved. And , more importantly, getting workers to reject unions as 100% bad for them. Well now we are back to employers treating their employees like widgets to be manipulated for the profit of the company. And employers convincing themselves they are 100% good for the worker. I say, No....workers now ARE widgets. They have no allegiance to the company. It doesn't take long for workers to recognize that they are viewed as a liability to the company, like the cost of utilities. Missing here is the notion workers might enjoy being treated with dignity, respect, and be given a piece of the pie they help to create. Limbaugh thinks workers should kneel down in front of their bosses, grateful to be employed. Price simply shows it doesn't have to be that way. That perhaps making $1 million a year isn't necessary to prove you are a success.
9
@Walking Man I agree that unions can be helpful (teacher's union for one), but I've been in a few unions (restaurant, hotel, in N.Y.) when I was younger, where I felt I needed a union to protect me from the union!
Workers have been going backwards since 1980. I’ve feared that nothing would change in my lifetime, but the last few years have brought some rumblings. The multiple, state teacher strikes, Bernie Sanders in 2016, the new Congress, and the current Democratic, Presidential hopefuls—all give me hope for the kids who are currently entering the job market.
7
Congratulations, Nicholas. You stumbled upon a rare personification of Supply-Side philosophy. Too bad the anomaly is a case-study in its rarity. In 4 decades, I can count on one hand the times I've taken in such pathetically unique anecdotes, ones that were---and continue to be---sold as the pending norm. Just to reiterate...it's been FOUR DECADES. Just when should we expect Trickle-Down's ubiquity? At what point does business ownership/management incorporate this supposedly omnipresent altruism of the human heart?
That's stated, of course, with tongue not only in, but popping through cheek. Just like the "American" theocrats they're aligned with, unbridled capitalists have an uncanny knack for persuading some to hop the ride, as long as they're not riding with them. Decades of this white-washing, and a good many still are unable and/or unwilling to get off the ride, turn around, and look at what they've been riding.
Idealism ALWAYS falls to pragmatism, because of its obtuse, all-too-generous assumptions re: human nature. Should we expect that, in light of political, social/cultural regression, that the human heart will prevail? Or is he merely presenting a diamond in the rough? Whatever Nicholas's intention was here, there couldn't be a better case for democratic socialism.
4
@kstew
A better comparison is an evaluation of employee outcomes of companies that have an ESOP plan versus those that don't.
https://en.wikipedia.org/wiki/Employee_stock_ownership_plan
I assume that offshoring is not much of an issue with these employees.
How does the company compete for talent? I’d be shocked if they were pulling from top tier computer science or mba schools. High achievers want to be rewarded.
8
@Randall Tinfow They ARE rewarded. There are other rewards besides money.
A business owner is free to pay his employees whatever amount he chooses to. In this example, and according to Kristof, this strategy appears to have worked well for the business owner for this particular company in this particular city.
The problem lies when a third party (i.e. Government) mandates what you should pay to your employees. Third parties, including government, should stay away from your volunteer work agreements between the employees and employee.
In a free market society, if this is truly a success story, other companies would voluntarily mimic this strategy. As a business owner why wouldn't I copy what I see is working for my competitor? I don't need the Government to mandate and regulate the way I conduct my business as long as other people's liberties are not infringed upon.
10
@Eli VÁZQUEZ Perhaps the prevailing economic system is set up to discourage such enlightened actions. Just like corruption is interwoven into the economic system of Mexico, making it very difficult for business people to succeed without corruption. Does that help you understand?
I don’t see my comment as an enlightened action at all. It’s simple competition. As a business owner if my competitor tests an strategy that turns out successful than I will most likely do the same or improve on it, if not I’ll be out of business. I don’t need a third party to force me to do that.
I've often wondered....how does one make millions and millions of dollars owning a business without shortchanging the employees and/or overpricing the product and thus shortchanging the consumer?
9
@Frank Roseavelt
You make millions of dollars if you offer a product or service that people and/companies will voluntarily pay for, and you can attract employees with the salary, benefits, and work environment you provide. If you price your product or service for more than people are willing to pay, they will find alternatives. If your employees have better employment opportunities, they will quit. And, if the price that willing consumers will pay for your product or service isn’t more than your cost, you will lose money and go out of business.
Making millions of dollars means that you are competing successfully, which allows you to grow the business, hire more people, and serve more customers.
In a competitive environment, your customers and employees have options, which means that you have to attract them to your business. Private business is not like the DMV, where the consumer has no choice but to use the service.
11
Unions are not prefect but there irrelevance in the last thirty years has not been good for the average private sector employee.They are the reason there is a middle class in this country. Health benefits, paid vacation, paid sick leave,retirement benefits are all the result of the Union movement.Over the decades the rights of workers and unions have declined and as a result there is greater income inequality. History repeating itself.
17
This is less about capitalism than it is about a man who decided that his own personal ethical standard demanded something different than trying to make and keep every last buck for himself. Kudos for following his own moral compass and staying the course!
33
Inspiring business model. Even if the model can not be scaled up, there is another business model that may be sustainable and scaleable - employee owned business co-operatives. Wish we had more information on such ventures, and their critical success factors.
14
The rest of us cannot have nice things anymore because a few at the top want to keep it all. Trump gave corporations a gigantic tax cut and the corporations used it to buy back stock which will be used for management pay and pay larger dividend. And....the layoffs continue....deeper and more brazen than ever.
18
"It has grown to 200 employees, all nonunion."
For decades business consultants have advised clients facing workforces considering whether to organize that the best way to tamp down the fervor was to treat employees with respect and make it financially unrewarding to unionize. I would not envy the task of a union organizer approaching this company's employees.
8
P. Liddle. As someone who has organized employees you are correct. Organizing this group would be nearly impossible. Unfortunately for workers compassionate and fair employers are in the minority. The end result is the income inequality that exists in this country. Look no further than the elimination of employer paid health insurance and the elimination of pensions replaced with 401 k plans all blessed by the politicians bought and paid for by the political class
6
Capitalism should not need to have a heart, if markets really work. Its the distortion of markets that create the situation where where labor needs to beg capital to have a heart. Its not largesse that is needed but a level playing field for both labor and capital.
2
Minimum wages are great for people who already have a job. They are terrible for unskilled people who have never had a job. A first job is the first step to learning how to work with others, learning skills, gaining self-sufficiency, and contributing to society. Sure, if you have some skills and experience and live in a prosperous area, a wage of $15, $20, or even $30 an hour isn’t too much of a stretch. But if you’re an unskilled young person in an economically depressed or rural area, who is going to give you a job at $15 or $20 an hour, plus all the burdens (taxes and fees) that go on top of that? With a minimum wage of $15 an hour, it’s literally illegal to hire someone who needs work and would be happy with a first job at $10 or $12 an hour. You might say that we could just gives these folks money from the government, but without a first job they will never contribute and will never realize their potential.
6
@RY
Executive or entry level, people are not hired as an act of charity. Nobody"gives" anyone a job. (Relatives excepted.)
No business owner thinks, "How can I fulfill this contract with the most people possible?"
If an employer has no need for entry level, unskilled, (or better; not yet skilled,) labor, they won't hire anyone at any wage.
People are hired because there is a need for them. If a business owner wants honest, smart, reliable people who show up every day and grow with the job, those people need a reason for doing so.
In the end, it's about mutual respect.
15
What struck me most was Mr Price had earned 1.1 million dollars a year as a boss employing 120 persons before. That would most likely be a pay for a boss employing 100 times more people. (I'm old-fashioned, say I am talking about the Japan of 40 years ago. But anyway if this is normal we've got to do something about it.) But I admit he becomes very generous from very greedy.
4
Price is a rare example of a self-proclaimed Christian who actually walks the walk, unlike so many other so-called “Christians.” The problem, of course, is that anecdotal cases of fairness, charity, and “purpose over profits” business ethics won’t solve the problem with the vast majority of business “leaders” who will continue to undervalue their employees. The only viable strategy, nationally, is to make them do it. No, not $70k/year, but how about we start with $15/hr for a national minimum wage? Frankly, I’m tired of subsidizing the Walton family’s multi-billion-dollar business because they won’t pay their workers a living wage.
36
Great to read the story again. I remember reading and commenting about this company few years back. It’s based on simple formula i.e keep employees happy, they in turn make you grow. A win win situation for the employee and employer as well.
20
Henry Ford understood this when he paid his employees double the local wages ($5 a day in 1914, a little over $125 a day now.) In Ford’s case it reduced turnover and improved productivity, both of which boosted the bottom line. Would this work for everyone? Probably not, but paying a locally-based living wage would, while greatly reducing the need for government (taxpayer paid) services.
11
@Anne Tomlin It didn't help Ford in the end when they voted for a union despite his benevolent patriarchy.
As per Schumacher's book SMALL IS BEAUTIFUL. Hurray!
2
How often does a 120 employee small business enterprise based in Seattle get a 1250 word article in the New York Times let alone a laudatory one? (April 13, 2015)
For a little perspective --
It seems clear that in 2015 the owner wasn't concerned with current earnings -- consider the "ratty old car" he drove. He seems to have been working to build the business which required him to get ahead of competitors and prevent entry of new competitors into the industry. That means marketing --getting the company's name out there. So he caught the hot minimum wage story and ran with it. Kudos to him!
It is also the case that with the pick up of jobs after 2015 he would have had to give substantial raises to retain his employees or waste his time acting as the company's HR department (I suspect it doesn't have one) interviewing replacements. Good (lucky) timing.
Seems like it's a one off.
10
Here is a way to use the news to grow the economy. It's another valuable example of #ourtopstory told by Nicholas Kristof. It is much appreciated by those of us who think it is important to our well-being that the best new media focus on the best in people.
7
I've called it "capitalism with a conscience", but it's really just returning to how American capitalism worked before Reaganomics - a.k.a. "trickle down" - was adopted. Up until then America had the largest middle class in history, and most families could live on one income, have a decent home, take vacation, and send their kids to college. All of this was the result of fair labor standards and protection of unions and collective bargaining.
But unions got greedy and corrupted and lost public support. Then when Reagan launched his war on the Air Traffic Controller's Union it was the first salvo in a an assault on working people ever since. Greed was deemed good, and the bottom line became sacrosanct with the belief that if money were allowed to flow to the top, the "excess" would trickle down to the masses and everyone would benefit. The strange thing was that no one stopped to challenge that belief, or to point out that with the way things had been working, everyone already was benefiting - the only "problem" was that the 1% and Corporate America felt they weren't benefiting enough.
Before Reagan CEOs earned an average of 42 times their lowest paid employees. In 2017 that gap was 361 times! Have CEOs gotten that much smarter or more valuable? Of course not! It's simple greed, fueled by a system rigged to promote it. What we have to do isn't necessarily follow Gravity's formula, although it has merit. But we should at least return to a system that was proven to work.
64
@Kingfish52
So the unions forced RayGun to do what the GOP has always liked doing, keeping workers from making too much money. Is that your position? How about this - along with welfare queens and other outright lies, the Right also bought the lie that unions were evil.
There was a time when corporations competed for workers, in part to keep them from organizing. Now, it's no longer necessary, since the owners need only cry "socialism" to keep people voting against their own interests.
4
@uwteacher No one forced Reagan to do what he did, he was simply following the conservative line as all Republicans do: make the rich richer.
But the unions hurt their own cause with widespread malpractice and even criminal behavior. Unions can be greedy too.
Unions are a critical piece of restoring what we once had, but they need to get a new reputation. And they need to get protection from those who would eliminate them, both outside, and from within their ranks. The government needs to help them return to the counterweight they once were, because right now they're more like a featherweight.
1
He cares about his own employees and puts his own sacrifices? That's leadership. Would that there would be some kind of cap on ratio between workers' salaries and CEOs.
26
Thanks for the follow up. I like this. It is VERY reasonable for there to be an acceptable and realistic controlled gap between the highest and lowest salaries in a privately held company. Not every small business will have straight equal pay between the CEO and the customer service rep. But something that DOES strengthen the sense of self-worth and empowerment at the salary and benefit level makes complete sense to me.
American capitalism is in no way "perfect" , but may not need draconian governmental measures to improve. This is based on the hope of avoiding excessive capitalism by many leaders by choice, and true high net worth individuals engaging in philanthropic endeavors such as the Melinda and Bill Gates foundation.
Well compensated leadership and very high net- worth folks should take note and consider choosing wisely now, if current types of choices are to remain an option in our future environment.
Good article!
4
"including some who yearned to join a company with values."
"It has grown to 200 employees, all nonunion."
Are not unions a positive labor and work value? Is nonunion, even at a decent salary a good thing?
13
@Joshua Schwartz In the American setting (where I have worked in union and non-union jobs), unions have proven to be even more corruptible than management itself, so in my experience the union stewards sit around doing nothing or worse, being drunk on the job for good pay, while the average worker continues to work. It turns out nothing works better for fairness than good values and accountability throughout an organization. If you can attain both without a union, everyone is better off in my experience.
In this follow up, I believe Kristof's reporting, but would believe it more if audit reports or looking at the books directly confirmed what Gravity is saying. I would like to see more articles focused on improving capitalism, but with greater scrutiny. What about benefit corporations, social benefit corporations, how are they doing? Has Gravity invited Rush Limbaugh to see how they are doing? Let's report on Rush's response to the invitation.
2
@szyzygy
Union stewards are not the union. The contract is where the union is. That's where the gains are. Pointing at a lazy shop steward is a deflection. Of course, non-union workers benefit from the gains made by unions, so there's that.
2
Thank you Dan for answering the age old question "How much is enough?" When enough is not enough, then it's not your wallet that needs attention, it's your soul. No amount of money can fill that need.
17
Thank you everyone for your comments. I read through them and enjoyed hearing everyone's perspectives.
138
@Frank
Please, go ahead and make me unhappy. Give me that higher than average salary -- the much higher than average salary. I will work harder and long hours for it.
.
I can take the pain. I can suffer with it. I'll take that" large sum of money".
4
"... profits are higher than ever."
That's meaningless without specific numbers. Show us a financial statement.
"Gravity last year processed $10.2 billion in payments, more than double the $3.8 billion in 2014, before the announcement."
That is meaningless without knowing what percentage the company gets.
"... Steven Pearlstein’s superb book ..."
The linked blurb is wrong when it refers to "free market capitalism". There is no such thing -- all businesses are regulated and taxed.
5
For those who label Gravity' s compensation approach 'socialism' - I say it's entirely capitalist, in the most goodhearted way, for companies to put more disposable income into the hands of people who will spend it and drive quality economic growth instead of in the hands of the very rich who stow it in offshore or illiquid accounts. There's also the capitalist benefit of not having to support people in the future with welfare when we pay them a true living wage now. Last, people with good health insurance mean less disease on the streets and in public places - and that benefits the common good too.
Look and learn before you protest - you may just realize that you like what you see.
43
"For those who label Gravity' s compensation approach 'socialism' - ..."
According to Kristof, that was Limbaugh, who doesn't know what he is talking about. Governments implement socialism, not private companies.
However, Limbaugh goes on to predict that "it’s going to fail." Without a detailed financial statement for the company that prediction is unfounded, but in a growth market, even incompetent businesses can succeed.
3
@PGB - you would be right if Limbaugh were in a vacuum. Those who would label it socialism include many of Limbaugh's believers - the lost people who believe it's great for him to "earn" an 85 million dollar salary (that's more than 1200 times 70,000 dollars) simply for spewing his lies and hatred, while he continues to pad his 590 million dollar net worth - while all too many of his followers live in poverty or close to it.
Maybe... let’s view this issue another way:
Let’s pretend it’s 1973. You’re 22-years-old. Just outta college. You get a pretty good job at IBM in a big city.
They start you at a thousand a month. Meh... But you’ll take it.
Now let’s move the very same situation to 2019. Just keeping even pace with inflation (3.8% over same period) ,they start you at $70,000 per year.
In 1973, $12,873 per year is
In 2019, $70,000 per year.
Just throwin’ that out there.
30
@Tommy Schmitz Keep in mind also that Federal Minimum Wage in 1973 was $1.60, which yields $3200 per year. It doesn't sound like much now, but $12k was pretty good pay in 1973.
Nearly 10 years later, after a period of high inflation, my first office job paid about $3.50/hr or $7000 per year.
5
$12K a year in 1973 was good money. I was making $1.65 an hour then, and $14K full time around 1981. Twenty years later it was $35K, not a lot of growth over time but then we’d been through inflation (our first mortgage in 1981 was 13.5% interest rate!) and recessions, the great mid 1980’s market crash etc.
1
I remember making $8,500 per year in 1973 and judged how rich I was based on the price of a new Chevy Corvette ($5,500).
2
Yet another example of how Republicans completely show there cards as being far more in favor of a rich few over a healthy middle class. It's nice Gravity had benevolent owners willing to acknowledge they had enough to share with others, but it's unfortunate it requires benevolence.
10
It’s a heart-warming story but it changes nothing about the underlying logic of capitalism: it is based on economic inequality. Marx’s analysis of the capitalist mode of production is still spot-on. But his solution for this problem turned out to be far worse than the problem itself. And this indicates that pursuit of equality is a wrong goal. No society is ever equal, especially those that claim to be. Getting rid of capitalists brings to power dictators. So the only way to mitigate economic inequality is via a social safety net as in the Nordic countries. But these countries are just as capitalist as the US. I came back from Norway a couple of months ago, and it has glittering shopping malls and run-down suburbs; rich and poor; beautiful homes and tiny apartments. It is better because there are few homeless (most are locked up in mental institutions) and people can go to a doctor when they need to. So stop pursuing the utopia of equality and start trying to rebuild the safety net for those who work and are willing to contribute.
14
@Mor -- and Socialism (aka Communism) works? It doesn't. AOC touted a benefits plan for those "who don't want to work... If there is no motivation to prosper, then the economy will tank... And now AOC is complaining that she can't make it on her Congressional salary. Two words: Budget buttercup!
Now, I am for nat'l healthcare, but not platinum plans -- Medicare for all.
1
The state of hard-working Americans unable to afford a middle class living is solely attributable to the GOP's priorities of busting unions to ensure the rich don't lose their stranglehold on the 90% as well as their place in the oligarchy that has replaced democracy.
24
@historicalfacts. I agree with you on oligarchy; it seems to running us ordinary people over. However, it doesn't take a deep study to see that BOTH sides of the aisle in DC and some state capitols are baked-in with their corporate counterparts -- partners in oligarchy. Sometimes I wonder if this is the driver of at least some of today's virulent partisan battling.
1
Respect for employees is laudable and sustaining. But it is not the only reason to gain more balance between workers and their leadership. Developing businesses that treat the world fairly, as in doing their business in a way that is sustainable and not environmentally destructive needs to be the norm, not the outlier. In the very near future businesses everywhere are going to be obsessed with fairness and sustainability of all types. We may be in a low point now but it is going to change. And this company will be remembered as one of the pioneers.
9
Maybe Gravity succeeds because it is so expensive to live in Seattle. Maybe paying workers a decent wage attracts the best people. Maybe a person performs much better when treated respectfully as a human being, not simply as an expendable commodity. There are many variables to consider.
We need those who engage in economic and workplace theory. But what we desperately need are more empiricists who take risks by actually performing the experiments. Dan Price is one such person. We are lucky to have him.
41
Thank you!! :) @Blue Moon
2
The real reason for disproportionately high CEO salaries is because they are actually **adversarial** to employees, and instead, act as proxies to the board and shareholders to inversely and disproportionately counter employee costs.
Until this dynamic is changed, the CEO will continue to be salaried disproportionately.
44
@latweek Interesting idea. The other thing that comes into play is that employees are not considered assets but costs. That also has an effect as does our system of insuring people through their jobs.
26
Yes, interesting. So CEO as union chief, fighting for employee income and benefits at the cost of retained earnings and biz growth? I like it but need to understand how balance is achieved. Maybe a labor stake in ownership.
1
At the risk of presumptuousness about Dan Price's cultural leanings, as well as judging someone partly on appearance, I say as a proud Hippie-American: right on Dan!
48
Presume away! Right on Michael! @Michael Simmons
5
@Dan Price
HA! Thanks Dan -- you made my day, brother! Along with a lot of other folks!
3
After listening for three hours a day to Limbaugh, Price still manages to exhibit a heart? Will miracles never cease?
171
@Bill M I know Price's Dad. He's a wonderful human being. I think this story vastly mischaracterizes his upbringing.
4
Working is corporate America was hard when I had to witness the execs take so much while giving a pittance to those who worked hard but got so little to scrape by on. I was the oddball for caring. That’s were we are today. We need to know that to move forward.
18
Here is something to consider in the dark heart of enterprise capitalism: have we moved all that far from slave days if people can work and not make enough to live in a decent house or apartment, support themselves and have access to health care? How far removed are we?
Billionaires and mere multi-millionaires need the work of slobs who make less than 20 to 10 dollars an hour. In short, the billionaire world would come crashing down without the labor of the underpaid. First, the profit of corporations, large and small, comes from the spending of the wage earners. Without them, how much would ever be sold? Second, the lifestyle of the wealthy depends on those willing to work to support the wealthy, to bring them what they want.
If someone is working full time consistently and can't make enough money to support themselves, that can be seen as a form of slavery, an easier, more gentle form of slavery but slavery nonetheless.
Here's another factor to consider: if everyone got a raise to 70K at once, the buying power of that money would drop over night. Rent seekers of all sorts would simply increase their prices to match the new level of income. So, raises have to be gradual to have any impact.
We should have an ironclad understanding, however, that everyone who works should be paid enough to support themselves and their families with at least a little left over. In hyper-rich enclaves like San Francisco, that means housing has to be made available at a reasonable cost.
35
@Doug Terry Is it your intention that every unskilled worker in SF make enough to support a family of four, with a little left over? That's probably about $100k in San Francisco today. Nice dream. The reality is that today's latter day slaves, the unskilled and poorly paid workers, particularly the illegal immigrants, won't have jobs if that becomes the case. When a worker at McDonalds makes $100k (or $60K) there won't be any workers at McDonalds, Peets, Starbucks, and any of the low or medium prices restaurants in SF, nor at any of the smaller retail stores. That's not a moral issue, it's an economic reality.
4
The real issue is the disparity between highest and lowest paid. You point out correctly that if all wages rose, then all employer costs would rise, and all prices would rise. More or less true. So where does the problem arise? When wealth ends up disproportionately in the hands of a few. Compounding the problem is that when one person has a billion dollars instead of a half a million having an extra two thousand dollars, that billion dollars effectively leaves the economy because the billionaire can’t spend it. The half a million people with extra spending money spend it very easily. An economy is strong when money flows, not when it sits is a pot somewhere.
17
@Ed Op Yes and no. That billion dollars seldom sits in bank accounts, and if it does, it is used as bank capital to bank loans. Otherwise it's invested in stocks, real estate, building infrastructure and other activities that employ humans and create more capital. It's certainly not the most desirable situation, but the trope is just that. The fact that I may have a million dollars does not induce poverty in another. Their lack of education, drive, or poor health, or poor upbringing also play hugely. The sad fact is that simple solutions are, well, simple minded.
Capitalism's rebirth via 'gravity'? As for all things with mass or energy (hence, people) gravitate towards each other? I suppose that 'capitalism', if well regulated and with public supervision, on ethical grounds, may escape our selfishness and avarice, and become pragmatic, and ease our current inequality. For now, however, "Gravity" is an outlier.
2
If you are generating enough revenue to pay employees minimum salary of $70,000 or $700,000 per year, you have no problem doing so. Internet firms may have such revenue, but McDonald's does not.
6
@Quiet Waiting I disagree and here's why. Note that this came from Wikipedia and has citations.
1. According to two reports published in 2018, McDonald's is the world's forth-largest private employer with 1.7 million employees (behind Walmart with 2.3 million employees)
2. For the fiscal year 2017, McDonalds reported earnings of US$5.2 billion, with an annual revenue of US$22.8 billion, an decrease of 7.3% over the previous fiscal cycle. McDonald's shares traded at over $145 per share, and its market capitalization was valued at over US$134.5 billion in September 2018.
Even with this decrease they could pay more than they do.
Last but not least: In late 2015, Anonymous aggregated data collected by Glassdoor suggests that McDonald's in the United States pays entry-level employees between $7.25 an hour and $11 an hour, with an average of $8.69 an hour. Shift managers get paid an average of $10.34 an hour. Assistant managers get paid an average of $11.57 an hour.[106] McDonald's CEO, Steve Easterbrook, currently earns an annual salary of $1,100,000.[107] His total compensation for 2017 was $21,761,052.
Tell me again that McDonald's doesn't make enough money to pay its employees a decent wage.
57
Those hourly employees whom you cite are entirely paid by the franchisees, not the corporate entity. In fact, those same franchises pay the C-suite salaries as well through the fees they return to McDonald’s.
4
@hen3ry
"For the fiscal year 2017, McDonalds reported earnings of US$5.2 billion . . . ."
Let's suppose McDonalds' 1.7 million workers work 2000 hours per year. Suppose McDonalds gives each worker a pay raise of $2/hour,
1.7 x 2000 x $2 = $6.8 billion -- an annual loss to McDonalds of $1.6 billion.
McDonalds either goes out of business or raises its prices resulting in the other fast food companies eating McDonalds' lunch.
Which is why the Dan Price solution can't be a solution for McDonalds and its like.
A federal minimum wage is required.
3
I'm not sure what "processing credit card payments" is all about, but I imagine accuracy and customer service are key to keeping clients and the growing a reputation to get more. That means, the lowliest employees are very valuable to this company, just as they are at Target, McDonald's, and in fact any business or institution. A company can have brilliant CEOs and VPs and managers but it the employees dealing with the customers personally or making the product are always messing up orders and mishandling complaints, pretty soon business will suffer. I've never understood why big salaries and bonuses are assumed to motivate the top executives and "highly skilled" technologists but not the "unskilled" production and customer service ranks. Every job in a business is a job that needs doing and money motivates everybody to do a good job.
46
I wonder...who will be the more productive worker--the minimum wager or the employee whose boss recognizes the importance of a living wage and decides to walk the walk?
30
@bobg. What about the workers in the same job and making the same amount as people that come to work late, leave early, take long coffee breaks, spend their time on their phones with friends? How about their productivity?
9
@Lisa Stiles. You are not addressing the question. The problems you mention have nothing to do with salary level, but rather, management.
4
@Lisa Stiles. That happens regardless of how much anyone is paid. Personnel issues need to be addressed and have nothing to do with pay rates. I've found that fairness, and respect for the work they do, is what means most. If someone can't show up on time, get rid of them--theyre morale killers--whether they're making $7,000 or $70,000.
3
I am a bit mystified by the “values” that are attracting employees to Gravity. I assume this is a business that takes a cut of credit card fees. So is skimming fees a social good representing the “values” that are attracting folks, or is it simply the “value” of a high salary? Sounds like the free market to me.
6
@LTJ -- Really? You don't see any value in his deciding to treat his employees well? In his realizing that their salaries were too low, given the cost of living, to enable them to shake off money worries? In his slashing his own salary to ensure that his employees are well paid?
And, he isn't "skimming," for heaven's sake. He provides a service -- he processes credit-card transactions for various businesses -- and he charges a fee for doing so. He's a middle man in an industry that has, and needs to have, middle men; there's nothing wrong, shameful, or shady about this.
Maybe you need to reread the article.
The main point here is not that higher wages solve problems, but that large sums of money don’t make people happy. All the ceos making tens of millions aren’t happier as a result. Putting that wealth back into their employees might.
16
@Frank Actually, the whole reason Gravity made this change was because Price learned of a study that found a significant jump in life happiness for workers making over versus under $70k. I for one believe that. Now how much *more* of an increase in happiness one gains at $1.1M is another question...
11
@Frank
Please, go ahead and make me unhappy. Give me that higher than average salary -- the much higher than average salary. I will work harder and long hours for it.
.
I can take the pain. I can suffer with it. I'll take that" large sum of money".
3
So thankful to hear the follow up to this story. Although not scalable to all businesses (e.g. restaurants) Dan Price's conviction and actions embody Adam Smith's thesis that Capitalism will not survive without ethical leadership.
21
@Dave
Thank you for citing Adam Smith. The capitalist classes falsely flaunt him as a hero for their brand of capitalism solely because of one phrase they extracted from his teachings. They conveniently proclaim the invisible hand of the market, while self-servingly ignoring all of Smith's caveats.
00:25 EDT, 3/31
2
It seems to me the lesson is individual companies should have the right to set wages and incentive compensation programs based on their business, profitability, competitive environment and workforce. One size doesn’t fit all.
6
@Brad I think the lesson is that individual companies should carefully consider the concept that a well-paid worker is happier, more stable, more reliable, and more productive.
5
@Brad -- Thanks for more neoliberal nonsense. That's what has shredded the US, by creating gross income inequality and massive hopelessness in big swathes that can't find decent-paying jobs.
Most American businesses have not learned an important lesson: if they don't value their employees their employees will return the favor and business will suffer accordingly. I write from experience. I have worked in many places and the worst ones were those where employees who weren't management or C level received no consideration at all for anything.
I've been downsized a few times and as hard as that is to deal with, it's worse when you've been at a place for a long time and you are treated like a criminal on your last day. Or when you need a decent desk, chair, computer, and lighting and management ignores you because everything flows up to the CEO who never visits the dungeon where the rest work.
50 years ago minimum wages were enough to live on. They weren't a training wage or viewed as wages for teens. It was a decent day's pay for decent day's work. There were more people in unions. Tax rates were higher and the country was not a mess. We had public services. Now we have a failing infrastructure, a government that is run by and for the richest and the corporations, and jobs that require more than a few skills but pay much less than is necessary to live a decent life, save for the future, or attempt to improve one's lot in life.
It's nice to know that average Americans are not considered worth paying or hiring if they are too experienced by businesses that create and sell consumer goods.
99
@hen3ry
"50 years ago minimum wages were enough to live on. They weren't a training wage or viewed as wages for teens."
Minimum wage opponents always like to cite how they appreciated having a job when they were in college that paid tuition. When I went to school, minimum wage was about $3.00 and tuition was $24 a credit hour - or about 8 hours of work. Today, tuition is about $450 a credit hour meaning that a minimum wage that would pay for it with an 8 hour shift would need to be in excess of $56 an hour.
80
@yeti00 same here. My parents didn't want me to work and take classes at the same time. That was in the late 70s when college tuition was reasonable. I went to a state school and it cost us less than $1500/year books included.
16
@yeti00 Because of the explosion of bureaucrats at colleges (think of the "diversity department") and free money flowing from the US Department of Education, tuition rates have exploded.
Let's go back to the mode when you worked at McDonald's. If we did, tuition would be a small fraction of what it is today.
2
Dan Price's story is Priceless! I was waiting, hoping and praying for you, Mr. Kristof, to find out about his story and share it with everyone.
This guy believed in himself, his ideas, his employees and his customers. The rest is history. His naysayers always were and always will be on the wrong side of history while jealous of his hard earned success.
His is the new American Dream writ large.
Price defied , then redefined gravity with a capital G.
22
Thank you Guido!! @Guido Malsh
1
@Dan Price
Wrote about you four years ago. Keep up the good work. Love You, Man! Stay true ..,
I'm not sure why Mr. Kristof needs us to know the staff isn't unionized. Of course, unionized labor forces command higher wages without needing to depend on their employer's benevolence. They also provide vital protection to workers, and higher levels unionization is closely correlated with lower income equality.
Perhaps rather than lauding one employer (while also fanning flames about Seattle's minimum wage that should've been extinguished by reams of data since the increase), Mr Kristof could look into this?
19
OK, $70 K isn't a "realistic" minimum wage. The real question, however, is what should be the real minimum wage. As an old guy who was ready to leave home in the mid-1960's, I'll say that it should be enough for a reasonably intelligent (100+ IQ ) individual to live on. That means minimally adequate transportation, health care, housing, clothing, and food. One could do that in the mid-sixties. No one can can now.
Every time this issue comes up, the right wing always conflates it with an economic apocalypse. But, as right wing provocateur and talking head Pat Buchanan proved in the1992 Presidential race, it is irrelevant. Pat went to the missile factory where St. Ronny's "Patriot" missiles were produced. The workers there complained about their lousy wages, which were based on the minimum wage. Old Paddy B started talking about the horrible minimum wage in his presidential run and, low and behold, the Republicans in Congress fell all over themselves to raise it—nationally. This was only part and parcel of the strong economy that President Clinton handed over to President W to squander.
When the minimally employed have a little extra cash (let alone enough to live on) to spend, guess what? they spend it. The economy surges.
$35 an hour might be a stretch. But how about 110% of poverty? After all, working full time should keep you out if poverty.
57
Wages cannot be higher than the value of the output of ones labor.
1
@From Where I Sit
And yet, we had mandated minimum wages in this country since 1938. How is this possible Professor Smith?
4
@From Where I Sit
Is that the output before, or after the subtraction of the extortionate share taken by investors and management?
What is the true value?
6
I just read that Wall Street bonuses have increased by more than 1000% since 1985. If the federal minimum wage had increased at a similar pace it would be $33.51 an hour today, instead of $7.25 (Jeffrey St Clair, Counterpunch). The statistic sure made me think - something's got to give.
215
@Ellen Interestingly, that is just about what a $70K salary works out to be.
23
Ellen, the problem is that Wall Street bonuses and the ratio of CEO pay to that of average workers have both expanded grotesquely. Is the solution to do the same with the minimum wage? A better solution would revolve around reining in these bonuses/CEO pay, along with costs that have not remotely kept pace with inflation (e.g., a college education). But I don't mean to imply that I have some magic elixir that will solve the problem; I see your point. Eisenhower 90% upper-level income tax rates would really help, if we could ever get back there ...
7
@Ellen
Revolution, anyone?
It won't be pretty --cf. Oct-Nov 1917
3
I am surprised (and disappointed) at the many negative comments below.
Why can’t we take the owner’s intentions at face value? That he felt it was important that his company prioritise employees, just as it does customers, suppliers and of course shareholders....
While in America it’s clear that the trend over the past thirty years is to prioritise shareholders and senior executives over employees, it’s not necessarily the only model. Select companies in Japan or Germany, for example, operate on a philosophy more analogous to this situation. And frankly, don’t forget the 1950s and 1960s America, where pay levels were much more balanced from top to bottom.
I think we should give thanks to this business owner for pursuing a differentiated compensation model, and wish him all great success. There is more than ‘just one way’ to run a business.
89
@Chin C ... and the gap between executive and staff pay hasn't always been so great. There was a time when our legendary capitalists considered themselves in business to benefit their employees as well as themselves. “The majority of Americans support private enterprise, not as a God-given right but as the best practical means of conducting business in a free society,” pulp and paper executive J. D. Zellerbach told the magazine. “They regard business management as a stewardship, and they expect it to operate the economy as a public trust for the benefit of all the people.”
22
This opinion piece would be laughable if we’re not so tragic.
Let’s explain who pays for the $70,000 min wage at Gravity.
You and me through credit and debit card transaction fees each time you swipe your card!
The fees are invisible to the consumer but are remitted to banks and card companies every day or once per month.
With fee percentages running from 1 to 5%, the dollar amounts generated are astronomical and give processing companies huge profits.
Not to say the banks and financial companies.
It’s really one of the biggest scams in the financial industry.
Nothing of real value is produced by Gravity and so called merchant services firms of their ilk.
Merely reams of data sent through payment networks and never ending fees skimmed along the way.
19
@Andrew
It’s not a big company. I’m sure anyone who could perform the same service better than they do at a cheaper price could put them out of businesss.
The point is, how will the earnings the company is able to bring in be distributed between the company’s owners and its employees?
9
@Andrew Exactly. Folks, remember what Andrew has written above when you are paying/ tipping for services from someone that works for themselves or otherwise has a smaller business. Such as your hair stylist. If you use a credit card, and especially if they are swiping it through a hand held reader with their phone or tablet, add in a few bucks for those fees, if you can afford it. Or pay cash. If you put it on a credit card add a little more of a tip.
I recently wondered if the fees these merchants pay to accept credit cards are taxed...I got a confusing answer from a CPA. I could probably research it myself, but, in the meantime. I’ve started asking people how much they’ll be hit with for a credit card transaction, and, if I have small bills with me, I manage to lose them just as I’m walking out the door.
@Andrew -- So you think that we should pay zero fees? I don't. Just because all of the humans involved in all of these transactions are invisible to you when you swipe, that doesn't mean they don't exist. They do, and they need to be paid, as do the bills for all of their overhead.
If e-payments and ATMs didn't exist -- if we were a cash-and-check economy -- then you would spend time at the bank (probably once a week) depositing your paycheck and withdrawing cash for various purchases. And you'd be paying fees at the bank, because more branches and more tellers would be required, plus overhead for the branches.
Every business you patronize would make daily deposits, again necessitating lots of branches and tellers and overhead -- and fees, passed on to the customer, to pay for all of the above.
There's no way to do business without some economic intermediary, and that intermediary needs to be paid. Don't slam the e-intermediaries in this largely e-transaction economy -- and especially don't slam an intermediary who has a conscience.
37
The question is whether capitalism is a tool to serve the Constitution or the Constitution is merely a tool to serve capitalism.
The purpose of our entire system of government, all its laws and rules and regulations, is encapsulated in the Constitution’s preamble - establish justice, domestic tranquillity, the common defense, general welfare, liberty for all.
Capitalism is the best economic system on the planet - I’ve seen the face of Socialism first hand in the Eastern Europe of the 1980’s - but in America we must be able to control it so that it serves to form the more perfect union that our Constitution demands.
7
While I appreciate Dan Price’s generosity - that’s what it is, and he’s far from the first - it’s a utopian model for capitalism because of the system’s underlying dynamic of survival and growth through competition, domestic and international, and the need for the accumulation of capital toward that end (other factors aside). Price can get away with this approach in the context of a long economic upturn and because his specific business is in an emerging market. But let the economy turn down and his company encounter greater competition, if not pressure from other capitalists, especially financial, and we’ll see how his approach endures.
6
@Roger. Yes. All it takes is a competitor with as good or better service with employees willing to work for a minimum of $60,000 a year.
3
If everybody is making $70K a year, all prices will rise. We've seen it in San Francisco. It's called inflation.
14
@Bob G. I don't think it's the people making $70k causing inflation. It's the people making $200k and those making $1 million+. If all that wealth was being distributed to all the workers nationwide who make it possible, then maybe we would see the reverse effect. Where prices would drop because the rapacity to sell to the luxury market would decrease.
33
@Bob G.
Not everyone in San Francisco is making $70,000. Moreover, our specific inflation concern here - housing - is complicated by many factors other than wage growth.
6
@Jay F. Why did you pick $200,000 as the income at which people cause inflation, and over which the money should be more distributed among workers? And what kind of businesses do you consider to be in “luxury markets” for which decreasing demand is desired?
Mr. Price has put his money where his mouth is, and anyone who has ever worked in a corporate environment where the compensation is top heavy will know how rare THAT is. This article gives me hope.
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Thanks, Jeffrey!
@Jeffrey Gillespie
2
None of those jobs were minimum wage to begin with.
7
Paying each employee an actual living wage should be the purpose of every company so I don't see what the fuss is about one company actually doing it. Although I too do love a feelgood story, what I really want to know is : did the two brothers make up ? I'd be sad to know they did not reconciliate after a silly money issue.
5
@Emilie -- The fuss has arisen bc the vast majority of companies *don't* do this. Yes, they should -- but the gulf between what *should* happen and what does happen is vast, and lots of people drown in that gulf.
Dan Price deserves every drop of ink and energy that have been used to write positively about what he does.
And to speak of this as a "silly money issue" -- how can you? There's nothing "silly" about being worried every day about whether one can pay one's bills. The piece made clear that the pre-$70K wages weren't enough, given the high cost of living in Seattle, and that one person couldn't even afford to fly home to see their family.
There's nothing "silly" about money and wages, nothing "silly" about two brothers disagreeing on something as fundamental as whether employees deserve to be treated as valued human beings who provide crucial services.
I guess you've never lived paycheck to paycheck; it would be lovely if you would muster a little compassion for those who do, because living that way wears people down, affects sleep and health, destroys lives.
15
@Emilie The purpose of every company should be to pay “each employee an actual living wage?”
Is that regardless of revenue? Profit? Before or after taxes? In addition to other benefits? Is the owner expected to pay the “actual living wage” if the company loses money? Or if it requires owners to forgo any salary or “paying themselves” anything out of the profits? Is an owner obligated to take on debt to pay “actual living wages” when the company is losing money? What If the company has multiple investors, and paying unskilled or low-skilled workers “actual living wage(s)” results in substantial loss in profits and/or net loss and many of the investors pull out, what do you think should happen then?
How many hours a week should someone earning these wages be expected to work? Does that include vacation or sick time?
A job with a salary of $70,000 can be expected to cost an employer about $100,000 a year. An additional $100K for a new business owner to already have to invest, or to be able to borrow from a bank, or to be 100% confident in the necessary profit margin. You'll have no opportunity to enforce your morality expectations, or taxes, on companies that never get started in the first place.
1
@DW not being able to fly halfway across the country is now a sign of poverty and unfair financial distress? Is airline travel a “right” now, too?
Holy Toledo we’ve become a nation of self-righteous ignoramuses. What we consider “poor” in this country compared to so much of the rest of the world...
There is zero question in my mind --- ZERO --- that more companies, from AT&T to Walmart to US Bank to Google to Monsanto and beyond --- are able to pay their employees significantly more, and the only consequence would be less of the inefficient and needless stockpiling of multi-generational wealth by a relatively tiny fraction of people on a planet where the fate of all is, ultimately, inseparable.
I'm all for it, and as a small business owner my company can't afford to pay everyone on the team $70k a year, but we can and do pay everyone at least 5x minimum wage regardless of how menial your job is. As the company grows, so too will that multiplier.
Anyone who doesn't believe this is a healthy and necessary model for capitalism is either misinformed or greedy, or both.
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It is not a model if capitalism, it is a charity, meaning it is not a system, but singular act of single person. Capitalism is based on maximizing profit and minimize cost, in this model paying as little as possible is a norm, and these norm is much more spread than your example.
2
Federal min wage is $7.25/hr and five times that would come to $36.25/hr, $290/day (assuming an 8-hr work day) and $72,500 per year (assuming 250 work days). And if you live in LA or NYC, that annual total would be much higher. For someone who claims that $70k per year is unaffordable, that “charitable” 5x min wage doesn’t quite add up.
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@yulia -- No, you're describing vulture capitalism.
Capitalism isn't one, monolithic system; it is practiced very differently in different nations, with different outcomes -- as a look at humane capitalism in the Scandi nations shows.
As Elizabeth Warren says, "Capitalism without rules is theft."
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I really can't express how happy it makes me to see Gravity succeed. Thank you for this coverage.
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Time Magazine reported on the Princeton University study in 2010, of the correlation between happiness and an income of $75,000. Per the Bureau of Labor Statistics, the $75,000 income should be updated to an income of $86,000.
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@Vicki
Not in a coastal city. Maybe $150-$175k (each for a two income household).
To all those lauding Henry Ford for his decision to dramatically raise wages, hold your applause. Ford did this because he had to in order to retain workers. Conditions were so mind-numbingly bad on the assembly line that turnover was much worse than that of today's fast food restaurants. Only a huge salary increase could keep workers on the job. Of course the assembly line reduced the cost of producing a vehicle by enough that Ford could afford to pay his workers more and still make money. (It's that productivity thing again.)
12
@J. Waddell A key part of Henry Ford's motivation was that he wanted his employees to be able to afford to buy a Ford Model-T. He recognised that he needed not just super efficient production, he also needed a mass market of cashed up customers. That seems to have been forgotten in modern capitalist thinking. It's all very well to crush production costs and make the owners fabulously rich but it's ultimately a dead end if the consumer market can't afford your products.
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No, Henry Ford did NOT increase wages so his workers could buy his cars. The biggest input cost for his cars was the materials, not wages. No matter how much he paid his workers, they could not be a large source of demand for his cars. He increased them because work on his assembly line was physically painful and merited a premium wage. Early assembly lines were not ergonomically correct.
1
No, Henry Ford did NOT increase wages so his workers could buy his cars. The biggest input cost for his cars was the materials, not wages. No matter how much he paid his workers, they could not be a large source of demand for his cars. He increased them because work on his assembly line was physically painful and merited a premium wage. Early assembly lines were not ergonomically correct.
39 people and counting recommended a comment because it comported with their values, even though it logically makes no sense. not a good sign for the future of democratic policy-making.
Presumably, the $70,000 per year extended to the janitorial staff? (Not a rhetorical question.)
If not, why not (also not a rhetorical question)?
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@EB
It's likely that janitorial services were outsourced to a company paying minimum wage.
22
@J. Waddell - So, why not hire janitors, and pay them $70.000? Now, *that* would be capitalism with a heart. As we all know (but seem not to want to admit), the minimum wage does not allow a human being to live with even a modicum of dignity--or even to live at all, making it necessary instead to take on two jobs and essentially to have zero quality of life. Until we see this kind of thing start to happen, please not pretend that there's anything at all compassionate about the way we interpret capitalism in this country.
1
The key to paying an employee $70,000/year is that that employee must generate sufficient revenue to pay his/her salary, benefits, overhead and other expenses, and generate sufficient profits to reinvest in growing the business. That may work is some highly technical fields like payment processing, but it certainly won't work in low skill fields like restaurants.
As economists - including Paul Krugman - have noted, productivity is the key to raising wages. Without productivity improvements, wage increases are immediately transferred to price increases, leaving workers no better off.
6
@J. Waddellhttps://www.epi.org/productivity-pay-gap/
productivity has risen almost 250% since 1970. Wages have not kept up so increases are long overdue.
36
Wall Street rules America.
The strutting, proud members of Congress can be thought of as just employees or, in other moments, complete stooges trying to keep their $174,000 a yr. jobs+benefits. We have seen recently that most of them possess the moral courage of a hamster. In the middle of a freeway. With an 18 wheeler bearing down. They constitute the greatest certified useless human beings ever assembled into a representative body. Well, the Italian parliament might, just might, compare at times...
From the column:
"The question remains whether raising pay so much would also be a good move for public companies answerable to shareholders."
The answer: NO.
Because Wall Street rules public corporations by pulling their puppet strings, stock corporations are virtually forbidden to treat employees well. I have seen quotes from companies saying they can't possibly pay better because the interests of the stockholders must come first. This is an argument for moral bankruptcy and the ultimate spinning, flying collapse of enterprise capitalism as it chases its tail into the darkness of the cold earth.
If a public company isn't making enough, isn't growing fast enough, Wall Street will move in and punish it by driving the stock down. Then, companies like Bain Capital (Romney) will buy the corporation, spin off parts, take out big loans and go public all over again.
We can have decency and fairness, but it is almost impossible when every corporation is under constant threat.
18
@Doug Terry -- Please don't demean hamsters -- lovely creatures -- by comparing the most vile members or Congress to them.
How many small businesses in the U.S. can afford to pay their employees $70,000 per year? Not too many, I think. And not so many large businesses, either.
A scalable concept? Hardly.
6
@Mal T -- Then take some of the pressure off of small businesses by providing Medicare for All. Employers would contribute less to that than they now contribute to employee health plans, and the surplus could be paid directly to employees.
In addition, if every biz paid the same sum per employee into a federal fund for MFA, that would go a long way toward leveling the playing field for employers, which would be a huge boon for small employers (who now struggle to retain employees bc they can't afford to provide some of the bennies that their larger competitors can).
And how do we pay for this? Simple. We stop the nonsense of welfare for corporations (notorious tax cheats) and for wealthy individuals, who have been excused from paying their fair share by every GOP prez since Reagan.
8
@DW You forgot that the employer's payroll tax would skyrocket to provide "free" healthcare. It's a wash.
1
@DW Do you really believe McDonald's or Burger King or the local hardware store could ever afford to pay burger-flippers and clerks $70,000 per year with benefits? They can't even afford to pay benefits, and most of these employers are already stretched to pay $15 per hour.
Thank you for highlighting my personal hero, Dan Price.
I've been checking his website from time to time over the last few years, always hoping to find that he's still doing okay.
He's a man with a different way of looking at our capitalistic system. Here's what he had to say at a 'Seattle Tech Talks' get-together last September:
"We’re creating a situation where we claim to value freedom, but we’re so caught up in our dogmatic capitalistic ideology that we don’t actually care about freedom. We don’t care about democracy, and we are continuing to consolidate all the wealth and power in the hands of a few. It doesn’t take a lot of imagination to know that if this is the situation, everybody’s either going to need security guards walking around them, or they’re going to be at the bottom."
https://gravitypayments.com/highlights/dan-price-at-seattle-tech-talks/
Thanks, Dan, for being the face of inclusive capitalism in this country.
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Very enlightened management. The rise of populism, which could well bring a bloody end to Western Corporate Capitalism, is largely due to the decimation of the Western middle class.
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@Brendan
What on earth are you talking about? Decimation of the middle class?
It's better now for most of that class then anytime in recorded history.
How are the homeless in Seattle doing?
Last I heard the city council has no answers to the relive the problems of filth, crime and disease that is spreading in the city.
So a few hundred people had their salary nearly double because the owner could afford the increase taking in part from his win pocket, but do you think all companies can do the same and is the City of Seattle any better off?
If you think they can then you are living in a fantasy.
Personally I have taken nearly a $30,000 drop in total compensation after having my position eliminated by corporation that is struggling and many I’d worked with list theirs jobs as well.
I did find work with a much smaller company but they cannot pay everyone a managers salary let alone benefits, but at least I found work ....
3
Most, or almost all of those who are CEOs' of companies, Presidents, are into being very greedy, and very entitled. It usually happens that some of those who are running small companies will do this, as the spiritual state of being this type of person, was more than likely already embedded in the psyche. I, personally, don't like that after they make $100 million, or $1billion, that they decide to give back, usually not from the workers who they made it off of. In Minnesota, we had a gentlemen who grew up in a small town, Springfield, started a wedding announcement business called Taylor Corporation, in Mankato State, and became very wealthy off the workers. He paid the average worker just a about two dollars over minimum wage, then he took all the money he earned off of them, and bought the Minnesota Timberwolves, where most players make $10 million or more a year. Not only am I not impressed, I don't believe in it. If he had paid his workers for times what he paid them, and still made a lot of money, that is one thing to decide what to do with extra money. Otherwise, the whole idea is just plain arrogance, entitlement, ignorance, greed, etc. driving most of the rich.
24
Sorry, my fellow Democrats, but this is little more than a moderately clever publicity stunt and a cynical one at that. I’m glad for the people who got the raise, which likely won’t go far in an super-expensive city like Seattle. But they should keep in mind that their boss did this for one reason, namely, to make himself look good.
1
@Mark Siegel Well then we should see many more entrepreneurs taking the very same step for publicity very soon, right ? I'll wait
8
@Mark Siegel - From the first sentence: "...raising everyone’s salary to a minimum of $70,000, partly by slashing his own $1.1 million pay to the same level." He must awfully concerned about looking good if he'll abandon a million dollars per year.
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@Mark Siegel
So--what is the greater good and what is the moral failure?
Making oneself "look good"........or enriching oneself to the detriment of hundreds of employees?
"There is now a broad recognition that American capitalism is flawed"--which means what exactly? "American capitalism" is the kinder, gentler form of "capitalism" that leads to income equality for all? Then it isn't "capitalism" because "capitalism" is about ambition, insight, determination, innovation, and get-it-done before the next guy beats you to it--and when you do, crush him.
If nice things can happen along the way, great but second place often offers little beyond a slow spiral of negative cashflow and debt to a "dusty-death", e.g., most recently WOW Air.
For "pay equality" uber alles to work anywhere in the world, for any company--save public-subsidized wages and benefits in socialist economies--the idea and the sustained positive cash-follow must succeed first, e.g., Gravity.
3
Capitalism is about profit only, all other things are optional and valued only as long as they help to maximize profit and minimize the cost. If lies could maximize profit, capitalists will lie as much as possible. Actually, obscuring truth is a huge part of American capitalism. We witness it everyday. You go to a shop, you see the price, but this price is not correspond to the amount of money you have to pay for merchandize, because it doesn't include the tax.
1
@Alice's Restaurant
I will take issue with your -" the idea and the sustained positive cash-flow must succeed first" There are companies that have a positive cash flow but still lose money. Many times because the govnmt gives the companies deductions on equipment as expenses (all at once) rather than depreciating "capital" expenses. This increases returns by reducing income and taxes through accounting not by increasing production that capitalism is known for.
The part that makes the most sense is for executives to stop bleeding their companies. Why does the CEO of Bank of America need to make 21 Million Dollars a year plus perks? And he is no high on the list of executive pay. Workers should be paid enough to live on. That is obvious. But corporations don't care. They'd rather have bragging rights. "Oh, Joe, I bought a new yacht. Let's go out on it this summer." All about "stuff." That's where we've come to. so sad.
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@Alexis Powers
Presumably, the CEO of BoA makes so much money for the company that he's very valuable and might be poached by another company. My family trusts are in BoA and they've gone up a lot over the past decade. I guess I'm happy that he's CEO (even though he's not managing my trusts). Highly paid CEO's are paid highly to prevent them from going to other companies. It's like highly paid athletes. Someone else will pay them.
If BoA didn't increase my money, I might be tempted to move it to another bank. Banks need to show profit to keep clients.
1
@Alexis Powers How about the heads of nonprofits that make $15-20 million a year? A local nonprofit health care provider is headed up by a CEO making that much--and we wonder why people are priced out of health care.
6
@Alexis Powers Isn't it odd that in all the discussions of income inequality you never hear about Hollywood stars or sports figures raking in millions for activities that basically add nothing to our economy. A CEO has essentially sold his soul to the company with a very short life if he doesn't produce. He's welcome to all his money in my opinion.
1
I’d like Paul Krugman’s take on this for companies in general. If he says it’s possible, I’ll go along with him. As much as I admire Price, it’s unfeasible for most companies, including brick and motor stores.
3
@Elizabeth Scala. Maybe $70,000 is not feasible for everyone but it makes reasonable business sense. Top employees generate greater revenue per hour but attracting and keeping them is difficult. Paying top dollar puts him in the position to pick only top performers and the employees have a strong incentive to remain high quality workers too since all of the alternate jobs offer less compensation.
4
But it is only work when there are alternative jobs with higher salaries. If there is none, capitalist can pay just a fraction higher to be attractive.
@yulia -- Stop drinking the Russian-oligarchy-model-of-vulture-capitalism KoolAid. Instead, read up on the Scandi nations, where humane capitalism has resulted in strong, stable economies and strong, stable societies.
Money doesn’t buy happiness, but a severe lack of money is stressful and a real problem. Kudos to Gravity for paying a solid wage - and probably getting their pick of quality employees.
136
@Business Owner Depends what you spend your money on. The more money I make the happier I get;)
1
@Business Owner It probably has gone up a bit with inflation but there is research to show that above a $75K salary in the US, further increases don't have as much an impact on happiness. I wonder if this fact played a role in their $70K minimum income.
7
@james
That’s interesting. The more money I make, the less I spend. The less I spend, the more aware I am of the ever-present Delight underlying all life.
5
Nothing special about this business model, it’s called a cooperative—all employees own a stake in the company. Look up the two largest supermarket chains in Switzerland, Migros and Coop, this is how they operate and on a much larger scale. It’s like the Walton family deciding to share their wealth with all Walmart employees, which of course is never going to happen in the US.
14
@Louis
It's not a co-op, it's a single owner paying an actual competitive wage.
28
It is not competitive salary, because if it was, we would not even notice that, because it would be norm. We are talking about that because it is not usual.
Wait a minute. Nicholas Kristof points out how this company, which Trumpists all thought would go bust, is prospering. Yet he then concludes: "But Gravity shows that at least for some companies in some industries, it is possible to thrive while treating even the lowest-level workers with dignity."
He can't bring himself to advocate for treating the lowest-level workers everywhere "with dignity"? He can't find it within himself to advocate for a living wage for all workers?
Bernie Sanders is a great American. Nicholas Kristof needs to learn from him.
17
The level of wages depends very much on the competition a business is facing. Business selling “non-tradeable” goods and services and facing no foreign competition, and specialty firms, like Gravity seems to be, have more room to increase wages, but this is not the general case. Commendable as Gravity policy is, it’s not easy to replicate.
6
its great that this worked out well for this one business, but its doubtful it would work in the economy at large. that is why this is a perfect example of pure capitalism at its best. one company is able to do what the owners of its capital see fit to do with out impacting other owners of capital. anyone who would label this experiment as socialism is either being grossly disingenuous or is completely ignorant about capitalism and socialism are. the fact is that the true purveyors of socialism in American are the republicans. republicans in government collude with the wealthy and industrialists to transfer wealth from the poor and middle classes to the top 1 percent. republicans also promote white supremacy, and white nationalism. this is known as National Socialism or fascism.
6
Even ol' Henry Ford knew that it was good business to pay his workers a living wage.
34
A friend of mine who worked for the Forest Service once had a wealthy businessman join him as a volunteer in the Boundary Waters for a week on patrol. One night out in the woods, they were discussing money and houses, and the businessman asked my friend how much he owed on his home, a small cabin several miles from town.
"Nothing," said my friend. "I have no debts."
"I'd give anything to be like that," replied the businessman.
My friend has been dead a dozen years now, but I canoed with him many times far into the Boundary Waters. He was a wildland firefighter, he was respected in his community, he was a professional, and he and his wife raised two good children.
The older I get, the more I ask myself, "What good have you done in your life?" There's a difference between having enough money to live comfortably and chasing every last tenth of a percentage of yield, every dollar, and living a zero sum existence.
354
There is no law mandating that we treat employees as disposable, replaceable servants. We can be kind and fair, and we can reward hard work handsomely. It's a choice. It's too bad that those at the top rarely make that choice...
175
@Another Human You have every right to start and run a company as you see fit including treating employees as kind and as generous as you wish. Hopefully you will stay in business.
Thank you, Mr. Price. A shining example for all of us, and another reason why Seattle is my favorite place on the Planet. No, I’m not saying that all Employers can do the same, or at this level. But some certainly can afford to pay more, much more. After all, how many houses and cars are enough ? If your Company can afford private planes for Executives and/or Board Members, you can afford to pay employees more. Especially low-level employees. Yes, I’m talking to YOU, Walmart.
Among others. It’s shameful that your Workers must rely on Taxpayer funds for basic living. Stop that, and I’ll shop in your stores. Until then, NO WAY.
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@Phyliss Dalmatian
Good to hear that you boycott the businesses of billionaires who pay so many of their workers crumbs. Some here, including me, try to do the same.
10
@Phyliss Dalmatian
Phyliss, we always enjoy your comments here and look forward to them.
But in this case, have to wonder: Do you contact the upper levels of management to let them know you feel & why you avoid/boycott their stores?
4
@Out of Stater
Yes. I’m a proud and unrepentant NAG.
A great hobby.
9
I always liked Henry Ford’s idea (and he was no saint): pay your workers enough to be able to buy the product they are manufacturing. The other thing is that paying more at the lower end of the scale means that far more money flows through the economy. The rich tend to hide it in tax havens or, like corporations. invest heavily in reducting taxes to almost nothing. Not good for the general welfare, a concept that seems to be disappearing.
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@Geoffrey James
This is a myth. Ford paid more to reduce turnover.
https://www.willricciardella.com/myth-henry-ford-paid-workers-can-afford-product-make/
Sorry, but I'm more frustrated than inspired by this lovely anecdote.
The path toward making American capitalism work again for Americans doesn't lie in the altruism of individual business leaders, however self-interested that altruism may be. Forgive me for having to explain the obvious here, but the problem is, it's not inherently in the self-interest of employers to do right by their employees, and in a market-based economy, one business's altruism is an opening for another business to come in and gain an advantage over them.
Not to mention, sometimes even when big employers do look out for their employees, it only ends up hurting American workers in the aggregate. See: our accidental, anachronistic system of employer-provided health insurance.
Oh, and what good is it for American employers to treat their American workers well if they can find assorted ways--some more legal than others, some more ethical than others--to offload work to cheaper workers who aren't American? We can't pretend that globalization doesn't exist, but that doesn't mean there isn't a role for government to play in making American workers more competitive in the global labor market. Working in the tech industry, I've seen all too often how bottom-line-focused American businesses see no obligation to develop American talent, even if this failure means eating their own (collective) seed corn. And I've seen how the law has been manipulated to actually make things worse.
7
@Mitch
Don't underestimate the power of a select bunch of dedicated individuals to change the world, because in the end , who else will ? (forgive me for internalizing the West Wing)
I read an interview with a billionaire once, where they said that if they absolutely had to, they could do with ONLY 2 million. (or if they had to start over) That billionaire never did give away their wealth. so I suppose it was a moot point.
However, the point is that we need to celebrate these people that are perhaps a few rungs lower on the pay scale, but can make just as much difference. In fact, they can make more, since they are given up such a larger percentage, than what a billionaire would.
It is not about using taxpayer money to give back (which billionaires do when they do their self promotion altruism along with tax breaks), but rather changing the overall culture. I know a little about this, because I have hired many and done the same. (albeit on a much smaller scale)
At some point in our future (sooner than people can imagine) we are going to have to do away with money altogether, as the problems we will be facing will be on such a massive scale, that it will be trivial.
From now until then, it is about evening things out, giving back. making our world and milieu a better place. (all of above)
You may nor even see results in your lifetime friend, but keep pushing and never give up.
7
@FunkyIrishman: "Don't underestimate the power of a select bunch of dedicated individuals to change the world."
I agree. But ultimately, the only effective way to change the world is to change the laws.
There's another point of yours I have to call out my agreement over: "It is not about using taxpayer money to give back."
Sadly, the Democratic Party seems too focused on redistribution and not focused enough on incentivizing and rewarding work. The most progressive outcomes are going to be achieved not by fighting markets but by embracing them.
5
@Mitch
Fair points, and I will always defer to a conversation, instead of talking at one another.
I concur. Changing laws is changing our world from the ground up, instead of the top down. I always say that if Progressives want to change the world, then all they have to do is show up as a massive majority ONCE. Then policies would be initiated that people would love almost instantly and want to keep.
"Redistribution'' is an accurate description, but it is an inflammatory word that denotes a series of negative connotations from conservatives. It is about fairness, and Progressively paying your taxes upwards into the society that nurtured you to get rich in the first place. Essentially if you make more, then you should be paying more taxes - not less.
Markets are the common place where people are allowed to change hands for goods and services. No one is wanting to change that, but rather the changing of hands must be at a fair price and for fair value. - NOT subsidized by the taxpayer (Socialism, but for rich people), nor for less value. - meaning people need to be paid what they are worth and not at a substandard level.
I hope I have answered.
7
Beto O’Rourke picked up an idea earlier this week from someone at his rally: “ One job is enough”.
In an America where many people work two and three jobs just to get by and put food on the table, a small Seattle company should be lauded,for the $70k minimum wage.
But the reality is that the food service worker, the mom cleaning hotel rooms and most school teachers, just working one job at a living wage backed by union representation could be done in the foreseeable future.
11
What kind of a founder gets paid $1 million as salary? Here in the north east, we have plenty of start ups, people don't get paid that kind of salary. It might be a common occurrence out on the west coast and Silicon Valley, but here in the high technology world of start ups in the Boston area, no one gets that kind of crazy salary.
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@petey tonei
While I agree a 1 million dollar salary would be consider outrageous for many start ups CEO's. His 1 million dollar salary was not the point of the article. His humanitarian and respectful approach to his employees is what the article is about. He is a winner in the eyes of many employees. A wonderful story.
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@petey tonei
Okay, but how did John Abele amass 600 million?
@petey tonei
unlike most startups, a payment processing platform probably actually makes money.
As a retired teacher with years of experience and multiple degrees I moved to California and sought a part time job with a tutoring agency. They paid around $14 per hour. Apparently that is typical of the industry but is not widely known to outsiders, including the parents who undoubtedly pay far more to the agencies. At least at McDonalds there is food.
Good for anyone who treats employees with respect.
27
I worked for a company that had a significant employee profit sharing plan. This plan was a major incentive to the employees. We had an employee buyout and the major part of the purchase was the profit sharing funds that converted to an ESOP (employee stock ownership plan).
As an employee owned company we thrived. The moral was excellent. Employees were motivated to be focused on service, efficiency and cost savings, including salaries. The end result was every employee at every level benefited well beyond the norm. Employees were able to enter a financially secure retirement and share the benefits with family.
Not exactly the same as $70k minimum salary, but an example of how sharing the entrepreneurial benefits works for all. BTW, Hillary Clinton was proposing employee ownership during her campaign.
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I'm confused. Workers get locked into a 70k/yr ceiling? I think most finance companies in Manhattan would LOVE to lock employees in at 150k/yr. Give them that as a starting AND an ending salary. With no bonuses.
I'm sure may 24 yr olds will be happy to start at 70k/yr. That's a terrific starting salary in the Northwest for a twentysomething. But most workers want raises, if partially to reflect improvement and increased value to the company. In twenty years, the people starting now will resent being paid the same as new hires. Also, while 70k/yr is great for a childless 26 yr old, it's low for a 42 yr old with two kids.
Imagine being the 40 yr old getting 70k having to explain everything to the 23 yr old newbie who's also getting 70k.
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@Anti-Marx
The $70K is the minimum, according to the article, not the limit.
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@Anti-Marx He writes, "he was raising everyone’s salary to a minimum of $70,000." Don't know where you get 70K max from.
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@Grace
Because there's no mention of either raises or bonuses. If there were, someone would have cited it in reply to my comment.
It's entirely possible that minimum is also the maximum.
It's not about the $70K salaries; it's about respect for employees. When CEOs make salaries in the stratosphere, then lay off workers because they need to downsize, how do they expect to retain and keep company loyalty. Oh wait...I guess they don't. People quit, hire more. They're expendable, right. A friend of mine worked for a company with a Japanese owner. He treated his employees like gold. He didn't pay across the board high salaries (which I think in the long run won't work anyway), but he did give very generous annual bonuses based on the company's profits for the year. The employees were loyal and worked hard...everyone wins. Then the Japanese owner sold his company to an American buyer, and within a year, it was just like all the other greedy, heartless, arrogant US businesses. Money talks. Kindness walks.
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@Galway
Respect for employees equates to $70,000 salaries. There, fixed it for you.
9
@Jake News Ideally, both money and respect. However, $$ is hardly everything. For positions that are mostly high-paying to begin with, features like autonomy over your hours, variety, great colleagues, ability to innovate, etc. make a big difference. I chose the latter over a more lucrative option and have never regretted my choice. Friend and colleagues often complain about their work environment; I don't.
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@Galway Please don't forget the "Japanese Model" was the mantra for many years in the 80s. Lifetime employment, government planning, etc. How did that work out---total stagnation. They still haven't recovered.
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"Tammi Kroll, a Yahoo executive, took an 80 percent pay cut to move to Gravity, where she is now chief operating officer."
Count on Nicholas Kristof to give us the feel-good story we need to believe there may be good capitalists in the world. Kroll evidently decided that believing in what she did and whom she did it for was worth the move despite the huge cut in pay.
I've always wondered why, for some of the nation's wealthy, "enough" never seems to be. One might think if you know you'll always be able to afford whatever you want, wouldn't your focus change, wouldn't you seek a challenge beyond amassing pure wealth?
But then I read something great said by the Oracle of Omaha and it renews my faith in human goodness (about extinguished in this corrupt era).
I doubt this will catch fire throughout corporate America, but I can say his: I suspect the employees who work at Gravity won't soon forget their good fortune, and may end up paying it forward as they travel though life.
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@ChristineMcM Not to be too cynical, but as a former New Yorker I am inclined to suspect that Tami Kroll and Gravity's founder have quite a bit of equity in the company, which more than makes up for the salary cuts.
If 70k a year is necessary for a minimum wage worker to survive, how seniors supposed to survive on less than 12k a year?
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@me: You make a good point, it’s just not the point of the article. The owner of Gravity did what he was able to do, raising the salaries of those who worked with him. He has no control over how much seniors live on.
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@Cat Lover Maybe employers should consider hiring seniors. Plenty are exceptionally well-qualified, tech-savvy, and motivated. Ageism is rampant in Seattle companies.
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@me
If you've ever met those seniors, they are very, VERY thin. Very frail. They often supplement their groceries from food banks. Sometimes they lose their homes because they cannot pay the taxes.
Many of them are women.
Why?
Because child rearing is not considered "work" and Social Security does not give work credits for years spent doing it. If you've been a Stay at Home Mom and you subsequently become disabled, all you qualify for is a paltry stipend SSI payment, not enough to feed you.
4
Price and Gravity make a great case study in what can go right when a company and its leadership show they value their employees.
Neither capitalism or socialism are good or bad in and of themselves. It is how they are implemented that matters. This is a great example of melding the two into a company that will draw and retain employees.
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@Barbara
No, I'd argue that capitalism, the concern for the abstract concept of capital, is not morally neutral depending upon implementation. It is, in fact, a bad thing, amoral.
Humans can't live with amorality.
Socialism, with it's concern for our well-being and comity isn't neutral, either. It is fundamentally moral.
False equivalencies, like saying both Democrats and Republicans have our best interests in their governing philosophies, need to be called out in every instance.
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@Jake News
Thank you for pointing that out. Many people believe many false things about capitalism and socialism.
To say that one is just as good as the other is a false equivalence.
Socialism asks: "From each according to his ability; to each according to his need."
The first Christians were communists, as were the Pilgrims. It didn't work out, due to greed, but their hearts were in the right places.
If only we could grasp and hold the belief that we are our brother's keeper: He ain't heavy, he's my brother.
Dream on, eh?
4
Agree about implementation. But as I read the comments, people are missing that a fundamental difference is that under capitalism, industry and trade are owned and run by private individuals, for profit, rather than by the State.
Price took a step back to a time when the CEO’s salary in a given US company was about 30 times that of the average worker. Today the number is closer to 500. The real value added by any CEO has become perversely distorted.
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@Larry Jordan Or even 3 to 5 times as much--did the calculations for a client whose dad was a top exec at a major U.S. company and the ratio was 3-5x the average worker's salary (1980).
14
@Larry Jordan Good point. Those top people have convinced most of the rest of us that they are so rare, so talented, all Einsteins that no one else could do the job as well, while everyone else is replaceable. As a result, they claim to deserve to demand from stockholders a much larger piece of the profits than other individual employees get. Why American workers ever originally accepted the assertion that the CEO is 500 times more valuable to a company than each of them is (when the CEO doesn't make the product or provide the service from which the company garners its profits), I don't know. How many companies suffer serious financial trauma when a member of top management retires or dies? Some do, but its surely a small minority. Turns out everyone will be replaced eventually. If you think you are indispensable, you shouldn't take the job in the first place, knowing that you are dooming the company to failure once you leave, for whatever reason, and are replaced.
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@Larry Jordan
That CEOs make 500 times as much as their workers is a common talking point but it's absolutely false. According to the BLS, the average annual CEO salary is around $200,000 and the median is around $190,000.
https://www.bls.gov/oes/current/oes111011.htm
Need more data, who pays the benefits?
When I was a non union wage earner, after many years I finally got union level pay as the family owned company never wanted a union. It was a top 10 in USA employer.
Also really good benefits, until the business sold us down the river and every benefit was removed, one at a time, with a constant threat the new owners would close our division.
2008, I was forced out, no retirement. Never got another job. Too old, too specialized and now on Social Security.
By all standards I fit 45 POTUS voter profile.
Fix this country, now!
19
@NotJammer I wonder how your SS benefits would compare to even half of this company's minimum wage. But no NYT columnist has ever written a column on that subject.
Loyalty is a two way street between management and employees. The more appreciation, especially financial, workers are shown, the lower turnover rate a company will have.
70
A refreshing antidote to the current trend of increasing inequality. Income inequality can be considered the new slavery, as it enables the rich to command more time and service from the less wealthy. Equality of income demonstrates respect for the employees while granting them dignity. What a wonderful model. Thank you for sharing.
14
I suspect that a company trying to implement a higher and tighter salary range will face its own unique challenges. Contrast a company like Gravity Payments with a biomedical laboratory where there is likely to be greater variability in educations, skill sets and responsibilities.
If we focus more on benefits like quality health care, savings plans and better considerations for family raising, the salary component can stay at least somewhat more traditionally capitalistic.
12
If Dan Price couldn't sell this idea to his own brother, imagine how hard it would be for a CEO of a public owned company to implement this wonderful idea.
Workers shouldn't rely on the kindness of their bosses to acquire a decent middle class wage, and in Seattle, 70 G's is needed to put you somewhere in the middle.
In a perfect world all companies would want their employees to have adequate salaries to raise a family and own a nice home, but this is rare enough to make this column quite remarkable.
The tech world is in dire need of strong unionization as are most of the sources of employment in this country.
Of course, that is not the only strategy that might put the brakes on the runaway train of inequitable wealth distribution in this country. We need a government that works for salaried workers instead of focusing on the investment class.
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@alan haigh
He didn't sell the idea to his brother, that's why his brother took him to court.
@alan haigh It wouldn't be hard at all for a CEO to voluntarily lower their own salary. Shareholders would be delighted!
It's the part where they would pay employees more that would get shareholder push-back.
It's not about scaling it up, or duplicating this exact model, but rather, having the will and sentiment to run a business, where maximum profits at the expense of workers, is NOT the goal.
The goal is to of course be a success, but also to bring as many people along with you as you can. The goal is to have piece of mind that you are doing the correct thing. The goal is sustainability across all levels and facets.
The goal is to insert a level of Socialism ON TOP of capitalism that not only compliment each other, but makes the lives of everyone included so much more fulfilling.
You cannot put a price tag on that.
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@FunkyIrishman
"The goal to of course be a success, but also to bring as many people along with you as you can."
I retired last week, grateful for the people who practiced this philosophy at the beginning of my career. As I grew more senior it was natural for me to do the same for others. Give opportunities, knowledge transfer and grow people to make the company stronger. It helped me, as I had trained my replacements and kept moving up the ranks. What happened? The company grew and became the recognized leader in our field. Our offices' profits increased by 50% and stayed there. We became the most profitable geography in a global company. People participated in the success and were paid more.
Then, the unthinkable happened, our global leadership focussed on remote management would, local decisions were overridden and education and training were essentially eliminated. In a professional firm, they abused the people, placing them in repetitive roles as they did not need local leadership. People left as did I. Oh, and the profits disappeared. Sad.
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@FunkyIrishman I purchased a business and immediately raised the wages of the folks that worked there. Within a week I fired everyone of them as they had continued to steal from me and my wife by giving product away to friends and taking cash out of the til. I was vilified and eventually left the business and town to rot. And I don’t regret it. Oh by the way everyone of my former employees voted for trump
5
@FunkyIrishman
"It's not about scaling it up, or duplicating this exact model, but rather, having the will and sentiment to run a business, where maximum profits at the expense of workers, is NOT the goal."
Except for the fact that that's exactly the goal of capitalism. Profits, by definition, can only come at the expense of the workers.
1