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Gravity Payments' Revenue and Profits Doubled After $70,000 Minimum Wage Set

112 points by schwaps 11y ago

neilellis 11y ago
I think the right-wing backlash against him shows that they're not really so bothered by state intervention as they are ideologically opposed to a fairly paid society. Everyone getting paid the same is communism, and yes massively de-motivating that if you work harder you get paid the same. Massive pay disparity is the end result of unchecked capitalism, look at any country with low taxation, same result always. Socialism just works to get a happy compromise where you have the chance of making more through your efforts, but less people get a huge head start and fewer fall through into poverty. I'm not sure what there really is to fear here. The difference between America's mean and median wage is quite shocking (and the worst amongst developed countries I believe). Clearly we see that this is what the right want to hold onto at all costs. This guy should be lauded and applauded for having the balls to do such an amazing social experiment which benefits all his employees.
- SixSigma 11y ago
  "Free markets until someone uses their freedom"
  - neilellis 11y ago
    Is that a quote from someone, it should be!
    - SixSigma 11y ago
      I was lampooning Fox thought, but you can quote me if you like :)
- seivan 11y ago
  Have I misunderstood? Does everyone get the $70k so a software engineer is getting as much as a data entry or a receptionist? And how much does it scale? Will it work when the company is forced to look into profit? Right now they seem to have revenue but no profits. How will retaining employees work when someone who has to work over time to deal with bugs is getting paid as much as the person's job it is to hold meetings. "right-wing backlash" - anyone who might suspect that this isn't sustainable and will probably end up going away in the long run. Sounds like a PR fluff piece. Even dev salaries today isn't sustainable and will eventually crash.
  - yaps8 11y ago
    It is a minimum wage, everyone is not paid the same.
  - enraged_camel 11y ago
    >>Have I misunderstood? You indeed have. $70k is the minimum salary. It is possible to make more.
  - reboog711 11y ago
    I never understood this as everyone gets $70K; I only understood it as the lowest paid full time employee gets $70K. I understand in this situation, that some of the previously higher paid employees got upset [and left].
    - ceejayoz 11y ago
      From the article. > Only two employees quit—a nonevent.
- ams6110 11y ago
  I'm pretty conservative, but I don't object to him doing this in any way. I also highly doubt it will be sustainable. Unless all along he really was paying below market for the work his employees are doing. I also have no disagreement with the notion that higher paid employees will be more productive (though I've certainly seen individual examples where the opposite is true) but that doesn't mean it's affordable for the business owner in all situations. If I were paid $70,000/yr to bag groceries I'd be productive as hell but I'd also bankrupt my employer. If it does end up working for him and he's more profitable and has happier employees and customers, wonderful. I don't understand why any free-market person would object to that, as long as it's his business decision and he's not being forced to pay what he pays. Clearly a $70,000 minimum wage would not work for any and all employment situations.
  - matwood 11y ago
    I'm more libertarian leaning and agree with you. It's a private business doing what it wants with its money. I imagine it helps the business find the best employees up and down the chain and ends making people super loyal. Turnover can be a huge expense because the cost to hire and brain drain. It's also in no way related to an actual minimum wage. Letting companies do it on their own like this one is what makes the higher wage work.
    - whatok 11y ago
      Over enthusiastic press without observing the effects of something like this years down the road absolutely affects the debate over minimum wage though.
      - matwood 11y ago
        The debate sure. But the reality of it is that right now this company has a competitive advantage because it is the only one or one of few that pay more than the others. It is likely swamped with resumes and can pick and choose the best of the best in nearly every position. If an actual minimum wage was mandated by the government at this level, the advantage falls apart and it likely no longer works.
- prostoalex 11y ago
  Paying above average to reduce churn and establish long-term attitude towards career is not new, has been pioneered (or made mainstream in American industry, to be pedantic) by Henry Ford, and is now used by companies like Costco, In'n'Out Burger and variety of tech companies as a competitive advantage.
  - JupiterMoon 11y ago
    This is key. By paying better than other companies for equivalent roles (requiring anything above no skill and diligence) a company gains a competitive advantage since it can recruit and retain the best workers. It is however usually coupled with the ability to let go poorly performing workers -- something that socialist aren't keen on.
  - mizchief2 11y ago
    I saw this in practice in the small town I grew up in that had 3 big supermarkets where the population could only really keep 2 going. Publix paid employees about a dollar an hour more than the other two (and would assume the same for management staff) and had very low tolerance for poor performance. So they always had the friendliest and helpful staff, cleanest stores, best stocked shelves, best kept meat and produce sections, etc. and was able to charge a higher price. Once someone was fired from Publix, they would start working at one of the other two stores within the next week.
  - bigtex 11y ago
    Don't forget about Chick-fil-A as well.
- afsina 11y ago
  To be honest, what he did is completely fine with free market capitalism. He had enough excess money so he choose to give higher salaries to all his employees. He does what he believes the right thing to do. Plus side, giving higher salaries usually has a positive effect on your job after all, as long as you can afford it. It seems to work for him and hopefully it will lead some others to do similar things. But just by looking at this and universally forcing higher minimum wages may create unwanted consequences (Such as Lay offs, increase in un-documented exchanges or tax evasion simply because employers with already razor thin profits cannot afford salaries anymore.). Especially for small and medium sized companies.
- jerf 11y ago
  If you're going to draw such sweeping conclusions about how obviously evil the right half the people in the country are, you should probably avoid doing it from third-hand reports on Slate. It's more than a wee bit probable they're stacking the deck. Personally, I'd observe that if "he has sold all his stocks, emptied his retirement accounts, and mortgaged his two properties—including a $1.2 million home with a view of Puget Sound—and poured the $3 million he raised into Gravity." actually translates to "all that was necessary to fuel this", then it isn't exactly out of line to complain that a grand unsustainable stunt being used for the purpose of trying to force this on everybody else is a very silly thing to do, and has little to nothing to do with the problem of "wealth inequality". Everybody already knows that if it were possible to just pull wealth out of thin air everybody could have more. The problem is precisely that it isn't. If it does turn out to be sustainable, then of course more power to him, but I'll wait for that judgment when the millions of dollars have run out and either have or have not been replaced by revenue. Seriously. I will in fact wait for that. Paying people well doesn't bother me, and I doubt it actually bothers anybody. But I'm certainly skeptical in a way that, say, a report from left-wing Slate about how this didn't work would leave me less skeptical, because they'd clearly be reporting it against their will, and probably have examined it within an inch of its life. And even through what I would consider substantial bias, the article's own text leaves a lot of room to be concerned about this maneuver. He's basically spending almost the entire profit of the firm on salary, then promising not to lay anybody off or cut salaries even if times turn bad. Well... guess what that translates to... if the company hits problems, he'll end up going out of business and these people will suddenly not have their jobs at all. Or his glittering promises that you're so excited about will turn out to only have been words. Or something that does not involve everybody keeping their jobs at way above-market pay in a company that can't make payroll. He's welcome to do this experiment, but maybe we should all wait to make sure it succeeds before getting too excited about it, and demanding that anyone who thinks it likely to fail consider themselves bad people who should feel bad. All the best to him (again, no sarcasm at all), but the most likely outcome is that he goes out of business in the next recession.
  - jfindley 11y ago
    A company has a finite amount of money to spend on payroll. The less you can get away with paying the low and middle level employees, the more you free up for the higher level employees. Part of the reason high-end salaries have increased so much is because low-end salaries haven't significantly increased at all. An experiment that drastically raises low-end salaries can therefore be viewed as a big threat to those whose wealth depends on being able to get away with paying their employees low wages. We can all argue endlessly about what constitutes a low wage, to what degree we should let the market decide, etc, etc - but the idea that "If there was more money available, we'd happily use it to raise entry-level wages instead of giving it to the top-tier employees" is demonstrably false. This is why this has everything to do with wealth equality.
- noonespecial 11y ago
  Everyone getting paid the same is communism is only communism when the government forces this on everyone with laws. Some guy saying to himself "hey, I've got lots of money, I'm gonna pay everyone more" is the freest of capitalism even if (especially if) he chooses to pay them "unfairly" and is able to do so despite the objections of others. His money, his way. Anyone who disagrees is still free to use their own money to pay their own employees peanuts from their mega-yacht.
  - crimsonalucard 11y ago
    Capitalists propose that free market forces replace government enforcement. With Gravity being the exception, this is not what happens in reality.
- wobbleblob 11y ago
  > they are ideologically opposed to a fairly paid society. The problem is that there isn't one universal definition of fair. Conservatives, liberals, libertarians, socialists, they generally all (with individual exceptions of course) want a society that is fair, but with different, mutually incompatible definitions of fair. Conservatives tend to preach that in a fair society, everyone gets what they deserve. Harder working, more talented? Then you deserve more. Socialists tend to preach that in a fair society, everyone gets what they need. The group who need the most doesn't overlap with the group who is most talented and able to work hard, so conservatives and socialists will never agree on what is fair, or even that the other group believes in fairness.
  - dmichulke 11y ago
    Great comment! Just to add: The definition of fairness is subject to research under the name equity theory [0] The three extremes are (AFAIR): - equal distribution - distribution proportional to contribution - distribution proportional to need The problem with extreme 1 and 3 is that they provide no incentive to increase your contribution which is why "capitalism" is superior to "socialism" in terms of productivity. [0] https://en.wikipedia.org/wiki/Equity_theory https://en.wikipedia.org/wiki/Equity_theory
    - crimsonalucard 11y ago
      Well, looking at the status quo the distribution of wealth in the current economy is not following Any of the definitions. Right now wealth is distributed according to your rank. Rank unfortunately is nowhere near proportional to contribution.
      - bko 11y ago
        The current system isn't perfect but in a market economy, new entrants challenge incumbents with systems that better tap the talents of the labor pool. You are free to design your own incentive system and compete with those you believe rely too much on rank.
- bko 11y ago
  > Socialism just works to get a happy compromise where you have the chance of making more through your efforts, but less people get a huge head start and fewer fall through into poverty That, or leads to a repressive state and economic ruin. You can't pretend that Denmark is socialist but not many of the failed South American countries. Paul Graham has an interesting perspective of inequality: > Economic inequality is not just a consequence of startups. It's the engine that drives them, in the same way a fall of water drives a water mill. People start startups in the hope of becoming much richer than they were before. And if your society tries to prevent anyone from being much richer than anyone else, it will also prevent one person from being much richer at t2 than t1. He acknowledges that people don't do things just for financial reward. People build products because they love building things. The things you have to pay founders for is doing the mundane operational support that is required for most projects. No one likes doing that. He goes on to argue that inequality is the result of people being able to more effectively use their talents. The "10x programmer" isn't paid 10x as much, but few programmers could argue that he should not get paid a lot more than just an average programmer despite being much more effective. I get that inequality is distasteful, but I would rather be richer in a less equal economy that be poorer but average. [0] http://www.paulgraham.com/inequality.html http://www.paulgraham.com/inequality.html
  - chii 11y ago
    > I would rather be richer in a less equal economy that be poorer but average. there's no debate that anyone would choose to be the richer one in any situation. The question is whether you'd rather be the poorer one in a less equal economy, or the poorer one in a more equal economy.
  - crdoconnor 11y ago
    >many of the failed South American countries. The CIA had a lot to do with that. It instigated coups against democratically elected heads of state and supported repressive dictators in most of South America in order to protect American businesses there.
- xlm1717 11y ago
  I'm not so sure this should be applauded. He mortgaged his house, emptied his retirement accounts, and sold all his stock, to what? Make a statement? It just seems reckless to me.
  - knd775 11y ago
    He's still the majority owner of Gravity Payments. So, while this is somewhat reckless, he still owns a pretty valuable company.
- wyager 11y ago
  What right-wing backlash?
  - whatok 11y ago
    I'm reading a lot of accounts of this but as far as I'm aware it's just random anecdotes of some idiot foaming at the mouth on Fox. People may think this guy is an idiot but no one is saying he can't do what he has done.
- tbrooks 11y ago
  Why does "pay disparity" or income inequality matter? Suppose two people start at 10. One person finds a way to go to 20 and the other goes to 11. The inequality has increased and the wealth of both people has increased. Technically, this is a social improvement. But egalitarians would say this is a terrible situation because the gap has gone from 0 to 9.
  - cryoshon 11y ago
    A disparity of 2X wealth or income isn't what people are upset about-- try 30-100X or larger. Then there's also the real problem of the person with 10 dollars ending up with 7 instead of 11.
  - gglitch 11y ago
    There's also the political power attached to extreme wealth.
- cryoshon 11y ago
  Strongly agree; the "just world fallacy" types are frequently right-wing. Seeing a disruption of inequality is offensive to them because they view it as a refutation of the social Darwinism they worship at the church of capitalism. It doesn't matter if the right wingers are poor or struggling themselves: rather than envisioning a world in which they don't have to struggle as hard, they envision a world in which they have broken beyond their struggle somehow and are now being bled by the "taker" leeches as a result of left wing political goals being met. The sad side of this is that many of these people have zero chance of breaking beyond their struggle specifically because there is not wider political support for redistributing resources. The fall into poverty is an act of justice in this perverse mindset. Poverty is the result of bad choices of the individual in their view. Of course we can dismiss this kind of simplification as childish (the result of an intentionally crafted propaganda campaign designed to cause people to vote against their interests), but there are millions of people who will have hateful fire in their eyes if you deny that poverty is avoidable for any person with the proper magical choices.
- specialist 11y ago
  Agreement. Massive pay disparity... Profit sharing. What's fair? The rhetoric about minimum wage is a distraction, used to obfuscate the simple fact that labor is getting its teeth kicked in. If corporations (et al) weren't racking up record profits and warehousing cash, I'd be more sympathetic to their plight.
- Agustus 11y ago
  Your comment about right-wing backlash is not documented in most publications and falsely directed at a group to reinforce your group-think against them. The only critique I could find was Rush Limbaugh saying it was “I hope this company is a case study in MBA programs on how socialism does not work, because it's gonna fail,”, although this is not a backlash in suggesting that it should be boycotted, so if you have others it would be appreciated. Rush Limbaugh is incorrect as the community does not own the company i.e. socialism, but to be fair, there is no theory on what to call this politically; it is not communism, socialism, or any other -ism. Those in the Seattle [2] Times article suggesting "backlash" point to companies behaving rationally in the market expecting fee increases in the future. The alleged companies quitting usage based on political concerns is not given to a number and without direct quotes from the companies as to the reason for quitting, I find it simply a buffer for the story. An Entrepreneur critique piece specifically mentions no ill-will to the company. [3] The criticism, mostly originating from Austrian based economic thought not right-wing groups (however most individuals on the right subscribe to the Austrian thought), was that the economics of the $70,000 wage was not going to end well for the company, not any suggestion of opposition to fairly paid society. Comments varied between what the profit margin would be and the effect on role distinction. The main comments were how the effect would play out for those employees that the company had previously valued at $75,000 with a double pay differential from the $35,000 now having the individuals who performed the same task being given the $50,000 wage and phased up to the $70,000; eliminating the meritocracy of a $75,000 wage. Additionally, the internal machinations and reports bore out the Austrian point of view as valued employees quit citing unequal pay raise values for the lowest valued employees. [1] To be fair, MarketWatch and Slate bring up a doubling in profits and revenues, but how much of this is based on an increase from the publicity and is it a long term sustainable idea. Gravity Payments is profiting $2.2 million on $150 million in revenue. The Seattle Times article notes that payment processing services are razor thin margins. Let's do the following financial analysis: * Gravity Payments has a 1.5% profit margin at its current rate of burn, $2.2 million over $150 million. * Gravity at announcement time had 120 employees, of which a documented 25% would see a double in their pay, 30 employees who were making $35,000. Estimating the rest of the company's effected staff, estimate another 30 will be brought up to $50,000, another 20 brought up next year to $60,000 and then finally another 20 to $70,000, for a total of estimated 100 employees affected by this move. * Costs have now increased for the 30 base salary employees to $1.5 million more, assuming a cost increase of $20,000 per person average for the remaining group of 70, you are an additional $1.4 million. * After the full effect of the increase is factored in, the costs outweigh the current operating situation. * The counter-argument of increases in business are offset by the companies need to hire additional staff to handle the increase. These individuals are brought into the existing cost structure and are not able to move the profit margin. The company will be having some issues next year making good on its promise of wage increases and certainly in 2017. This basic analysis is why the finance person quit, she saw what I am showing. [1] https://mises.org/library/what-happened-when-one-company-set-minimum-wage-70000 https://mises.org/library/what-happened-when-one-company-set... [2] http://www.seattletimes.com/seattle-news/seattle-company-copes-with-backlash-on-70000-minimum-wage/ http://www.seattletimes.com/seattle-news/seattle-company-cop... [3] http://www.entrepreneur.com/article/249313 http://www.entrepreneur.com/article/249313 [4] http://www.businessinsider.com/employees-reaction-to-70000-minimum-wage-at-gravity-payments-2015-4 http://www.businessinsider.com/employees-reaction-to-70000-m...
ascorbic 11y ago
Remember the four other submissions of this in the past three days? Why aren't these dupes being detected? https://news.ycombinator.com/item?id=10445012 https://news.ycombinator.com/item?id=10445012 https://news.ycombinator.com/item?id=10442726 https://news.ycombinator.com/item?id=10442726 https://news.ycombinator.com/item?id=10441107 https://news.ycombinator.com/item?id=10441107 https://news.ycombinator.com/item?id=10446171 https://news.ycombinator.com/item?id=10446171
- neilellis 11y ago
  Yeah I've submitted a few articles only for them to fall off the 'new' section, then later that day almost identical URLs have reached the front page. With all these smart people about surely someone can write a de-dup detector for articles (and I don't mean URL comparison).
  - chris_wot 11y ago
    You'd honestly be better to email hn@ycombinator.com than post comments on this story.
  - mhb 11y ago
    There seems to be some sentiment that it is a good thing that duplicates are posted if they eventually gain attention. Perhaps it would assuage the irritation of the initial posters (which I have often felt) if the dup detector awarded karma points to both the duplicate that caught everyone's attention as well as the previous (recent-ish) duplicates.
  - falcolas 11y ago
    Dang said this is intentional, to allow stories which didn't receive much attention the first time another chance to be viewed. I, for one, appreciate this, since I did not see this article the first time around.
    - snowwrestler 11y ago
      A lot of people don't like dupes because they feel that karma for posting a story should go to the first person to post it. To them, it seems unfair to post a story and get no karma points, and then someone else posts (reposts?) it a day later and gets hundreds of karma points. Personally, my opinion is that since karma points are made up and worthless, it doesn't matter. Allowing dupes makes it more likely that cool stories will hit the front page, at the cost of annoying a few people. Seems like a good tradeoff to me.
yaps8 11y ago
This quote strikes me most: "Here I am walking around making $1 million a year, and I'm working shoulder to shoulder with people in her situation who are every bit as good and valuable as I am." I wish more people would realize that those earning less than themselves are not necessarily less deserving but merely less valuable in a marketed job force.
- yitchelle 11y ago
  I had a similar conversation with my wife the other day. Before the kids, she was an elderly care attendant, providing care for the elderly folks who are in their sunset years of their lives, and I worked in tech. Although my salary is not high, it is still about 5x of hers. I feel rather embarrass during my discussion as I feel that she is contributing a lot more to people lives than I am, the essential services. The stuff that I make would not make much difference in everyday life if it did not exists. She is much more valuable to society than I am. edit: grammar
  - JoeAltmaier 11y ago
    I hesitate to disagree. But ... the value of services can be easily calculated because they are so visible. Every interaction has an emotional link, and we count that highly. The value to 'society' of improving a toaster by a small percentage, or the hits to a website by a larger one, are hard to calculate except by a bottom line. Any emotional impact is so indirect as to be invisible. Still exist; but we don't see them so can't count them. Add to this: one-on-one services are limited by the time and attention one person can put into them - two hands, one heart, 24 hours in a day. Absolutely no leverage at all, in the economic sense. Exceeding that (admittedly large and important) impact happens at some point in less-direct exchanges (economic, technological) and can go up from there geometrically. So I console myself, as a technician, that what I do affects those unseen people. And if successful, it affects millions, not just tens. It adds up to something important too.
  - deleted 11y ago
    [deleted]
  - lujim 11y ago
grhmc 11y ago
TL;DR: He and his company are both doing great.
- PhrosTT 11y ago
  Six months after Price's announcement, Gravity has defied doubters. Revenue is growing at double the previous rate. Profits have also doubled. Gravity did lose a few customers: Some objected to what seemed like a political statement that put pressure on them to raise their own wages; others feared price hikes or service cutbacks. But media reports suggesting that panicked customers were fleeing have proved false. In fact, Gravity's customer retention rate rose from 91 to 95 percent in the second quarter. Only two employees quit—a nonevent. Jason Haley isn't one of them. He is still an employee, and a better paid one.
iaskwhy 11y ago
"More than half the cost will be offset by Price's pay cut."
massysett 11y ago
Not a very interesting article: 1) it's only been six months 2) doesn't say whether a $70,000 minimum is particularly high for the jobs that are at his company
- rubidium 11y ago
  It's an interesting article: 1) It's been six months. I've recently wondered how it's going. 2) The article did say starting wage was $35K at his business.
  - hodwik 11y ago
    Caucasian median income is $67k/yr in Seattle, so he's actually not paying them that much considering he only hires attractive young white people. (http://s3.amazonaws.com/media.eremedia.com/uploads/2015/08/06110047/gravity1.jpg http://s3.amazonaws.com/media.eremedia.com/uploads/2015/08/0...)
hodwik 11y ago
Caucasian median income is $67k/yr in Seattle, so he's actually not paying them that much considering he only hires attractive young white people. (http://s3.amazonaws.com/media.eremedia.com/uploads/2015/08/06110047/gravity1.jpg http://s3.amazonaws.com/media.eremedia.com/uploads/2015/08/0...)
- noxToken 11y ago
  Yes, but does everyone in his company hold the same position? As I look around my office space at the many different positions, $70,000 (roughly $38,000 adjusted for cost of living differences) starting would be on par for some building staff, low-balling for some business staff, laughably low for the dev staff (but worth it with good benefits and some desperation), and a flat out no for some other positions. $38k is the median average in my area, but tech is in its infancy here. If this place does have the tech boom that so many are pushing for, then the median average (based on current market rates) is going to shift upwards by a nice chunk of change. As such, it would seem as if other industries are being underpaid if the only metric is median income.
  - hodwik 11y ago
    Right. It would be about $34k here in Philadelphia, which would be very low at my company.
- benihana 11y ago
  Listen, I love me some good ole fashioned hate-filled ignorance just as much as the next American, but whoa nelly. You're making some crazy assumptions about the ethnicity and lifestyles of people based solely on what they look like and that's pretty fucking racist.
  - hodwik 11y ago
    Huh? I was just saying that given that he only hires white people, the median income for people at his company should be $67k.
cryoshon 11y ago
"While financiers and C-suite honchos have showered themselves in compensation, most Americans haven't had a raise, in real dollars, since 2000" One company can't fix this problem alone, though Gravity's effort is laudable.

112 points by schwaps 11y ago

I think the right-wing backlash against him shows that they're not really so bothered by state intervention as they are ideologically opposed to a fairly paid society. Everyone getting paid the same is communism, and yes massively de-motivating that if you work harder you get paid the same. Massive pay disparity is the end result of unchecked capitalism, look at any country with low taxation, same result always. Socialism just works to get a happy compromise where you have the chance of making more through your efforts, but less people get a huge head start and fewer fall through into poverty. I'm not sure what there really is to fear here. The difference between America's mean and median wage is quite shocking (and the worst amongst developed countries I believe). Clearly we see that this is what the right want to hold onto at all costs. This guy should be lauded and applauded for having the balls to do such an amazing social experiment which benefits all his employees.

SixSigma 11y ago
"Free markets until someone uses their freedom"
- neilellis 11y ago
  Is that a quote from someone, it should be!
  - SixSigma 11y ago
    I was lampooning Fox thought, but you can quote me if you like :)
seivan 11y ago
Have I misunderstood? Does everyone get the $70k so a software engineer is getting as much as a data entry or a receptionist? And how much does it scale? Will it work when the company is forced to look into profit? Right now they seem to have revenue but no profits. How will retaining employees work when someone who has to work over time to deal with bugs is getting paid as much as the person's job it is to hold meetings. "right-wing backlash" - anyone who might suspect that this isn't sustainable and will probably end up going away in the long run. Sounds like a PR fluff piece. Even dev salaries today isn't sustainable and will eventually crash.
- yaps8 11y ago
  It is a minimum wage, everyone is not paid the same.
- enraged_camel 11y ago
  >>Have I misunderstood? You indeed have. $70k is the minimum salary. It is possible to make more.
- reboog711 11y ago
  I never understood this as everyone gets $70K; I only understood it as the lowest paid full time employee gets $70K. I understand in this situation, that some of the previously higher paid employees got upset [and left].
  - ceejayoz 11y ago
    From the article. > Only two employees quit—a nonevent.
ams6110 11y ago
I'm pretty conservative, but I don't object to him doing this in any way. I also highly doubt it will be sustainable. Unless all along he really was paying below market for the work his employees are doing. I also have no disagreement with the notion that higher paid employees will be more productive (though I've certainly seen individual examples where the opposite is true) but that doesn't mean it's affordable for the business owner in all situations. If I were paid $70,000/yr to bag groceries I'd be productive as hell but I'd also bankrupt my employer. If it does end up working for him and he's more profitable and has happier employees and customers, wonderful. I don't understand why any free-market person would object to that, as long as it's his business decision and he's not being forced to pay what he pays. Clearly a $70,000 minimum wage would not work for any and all employment situations.
- matwood 11y ago
  I'm more libertarian leaning and agree with you. It's a private business doing what it wants with its money. I imagine it helps the business find the best employees up and down the chain and ends making people super loyal. Turnover can be a huge expense because the cost to hire and brain drain. It's also in no way related to an actual minimum wage. Letting companies do it on their own like this one is what makes the higher wage work.
  - whatok 11y ago
    Over enthusiastic press without observing the effects of something like this years down the road absolutely affects the debate over minimum wage though.
    - matwood 11y ago
      The debate sure. But the reality of it is that right now this company has a competitive advantage because it is the only one or one of few that pay more than the others. It is likely swamped with resumes and can pick and choose the best of the best in nearly every position. If an actual minimum wage was mandated by the government at this level, the advantage falls apart and it likely no longer works.
prostoalex 11y ago
Paying above average to reduce churn and establish long-term attitude towards career is not new, has been pioneered (or made mainstream in American industry, to be pedantic) by Henry Ford, and is now used by companies like Costco, In'n'Out Burger and variety of tech companies as a competitive advantage.
- JupiterMoon 11y ago
  This is key. By paying better than other companies for equivalent roles (requiring anything above no skill and diligence) a company gains a competitive advantage since it can recruit and retain the best workers. It is however usually coupled with the ability to let go poorly performing workers -- something that socialist aren't keen on.
- mizchief2 11y ago
  I saw this in practice in the small town I grew up in that had 3 big supermarkets where the population could only really keep 2 going. Publix paid employees about a dollar an hour more than the other two (and would assume the same for management staff) and had very low tolerance for poor performance. So they always had the friendliest and helpful staff, cleanest stores, best stocked shelves, best kept meat and produce sections, etc. and was able to charge a higher price. Once someone was fired from Publix, they would start working at one of the other two stores within the next week.
- bigtex 11y ago
  Don't forget about Chick-fil-A as well.
afsina 11y ago
To be honest, what he did is completely fine with free market capitalism. He had enough excess money so he choose to give higher salaries to all his employees. He does what he believes the right thing to do. Plus side, giving higher salaries usually has a positive effect on your job after all, as long as you can afford it. It seems to work for him and hopefully it will lead some others to do similar things. But just by looking at this and universally forcing higher minimum wages may create unwanted consequences (Such as Lay offs, increase in un-documented exchanges or tax evasion simply because employers with already razor thin profits cannot afford salaries anymore.). Especially for small and medium sized companies.
jerf 11y ago
If you're going to draw such sweeping conclusions about how obviously evil the right half the people in the country are, you should probably avoid doing it from third-hand reports on Slate. It's more than a wee bit probable they're stacking the deck. Personally, I'd observe that if "he has sold all his stocks, emptied his retirement accounts, and mortgaged his two properties—including a $1.2 million home with a view of Puget Sound—and poured the $3 million he raised into Gravity." actually translates to "all that was necessary to fuel this", then it isn't exactly out of line to complain that a grand unsustainable stunt being used for the purpose of trying to force this on everybody else is a very silly thing to do, and has little to nothing to do with the problem of "wealth inequality". Everybody already knows that if it were possible to just pull wealth out of thin air everybody could have more. The problem is precisely that it isn't. If it does turn out to be sustainable, then of course more power to him, but I'll wait for that judgment when the millions of dollars have run out and either have or have not been replaced by revenue. Seriously. I will in fact wait for that. Paying people well doesn't bother me, and I doubt it actually bothers anybody. But I'm certainly skeptical in a way that, say, a report from left-wing Slate about how this didn't work would leave me less skeptical, because they'd clearly be reporting it against their will, and probably have examined it within an inch of its life. And even through what I would consider substantial bias, the article's own text leaves a lot of room to be concerned about this maneuver. He's basically spending almost the entire profit of the firm on salary, then promising not to lay anybody off or cut salaries even if times turn bad. Well... guess what that translates to... if the company hits problems, he'll end up going out of business and these people will suddenly not have their jobs at all. Or his glittering promises that you're so excited about will turn out to only have been words. Or something that does not involve everybody keeping their jobs at way above-market pay in a company that can't make payroll. He's welcome to do this experiment, but maybe we should all wait to make sure it succeeds before getting too excited about it, and demanding that anyone who thinks it likely to fail consider themselves bad people who should feel bad. All the best to him (again, no sarcasm at all), but the most likely outcome is that he goes out of business in the next recession.
- jfindley 11y ago
  A company has a finite amount of money to spend on payroll. The less you can get away with paying the low and middle level employees, the more you free up for the higher level employees. Part of the reason high-end salaries have increased so much is because low-end salaries haven't significantly increased at all. An experiment that drastically raises low-end salaries can therefore be viewed as a big threat to those whose wealth depends on being able to get away with paying their employees low wages. We can all argue endlessly about what constitutes a low wage, to what degree we should let the market decide, etc, etc - but the idea that "If there was more money available, we'd happily use it to raise entry-level wages instead of giving it to the top-tier employees" is demonstrably false. This is why this has everything to do with wealth equality.
noonespecial 11y ago
Everyone getting paid the same is communism is only communism when the government forces this on everyone with laws. Some guy saying to himself "hey, I've got lots of money, I'm gonna pay everyone more" is the freest of capitalism even if (especially if) he chooses to pay them "unfairly" and is able to do so despite the objections of others. His money, his way. Anyone who disagrees is still free to use their own money to pay their own employees peanuts from their mega-yacht.
- crimsonalucard 11y ago
  Capitalists propose that free market forces replace government enforcement. With Gravity being the exception, this is not what happens in reality.
wobbleblob 11y ago
> they are ideologically opposed to a fairly paid society. The problem is that there isn't one universal definition of fair. Conservatives, liberals, libertarians, socialists, they generally all (with individual exceptions of course) want a society that is fair, but with different, mutually incompatible definitions of fair. Conservatives tend to preach that in a fair society, everyone gets what they deserve. Harder working, more talented? Then you deserve more. Socialists tend to preach that in a fair society, everyone gets what they need. The group who need the most doesn't overlap with the group who is most talented and able to work hard, so conservatives and socialists will never agree on what is fair, or even that the other group believes in fairness.
- dmichulke 11y ago
  Great comment! Just to add: The definition of fairness is subject to research under the name equity theory [0] The three extremes are (AFAIR): - equal distribution - distribution proportional to contribution - distribution proportional to need The problem with extreme 1 and 3 is that they provide no incentive to increase your contribution which is why "capitalism" is superior to "socialism" in terms of productivity. [0] https://en.wikipedia.org/wiki/Equity_theory https://en.wikipedia.org/wiki/Equity_theory
  - crimsonalucard 11y ago
    Well, looking at the status quo the distribution of wealth in the current economy is not following Any of the definitions. Right now wealth is distributed according to your rank. Rank unfortunately is nowhere near proportional to contribution.
    - bko 11y ago
      The current system isn't perfect but in a market economy, new entrants challenge incumbents with systems that better tap the talents of the labor pool. You are free to design your own incentive system and compete with those you believe rely too much on rank.
bko 11y ago
> Socialism just works to get a happy compromise where you have the chance of making more through your efforts, but less people get a huge head start and fewer fall through into poverty That, or leads to a repressive state and economic ruin. You can't pretend that Denmark is socialist but not many of the failed South American countries. Paul Graham has an interesting perspective of inequality: > Economic inequality is not just a consequence of startups. It's the engine that drives them, in the same way a fall of water drives a water mill. People start startups in the hope of becoming much richer than they were before. And if your society tries to prevent anyone from being much richer than anyone else, it will also prevent one person from being much richer at t2 than t1. He acknowledges that people don't do things just for financial reward. People build products because they love building things. The things you have to pay founders for is doing the mundane operational support that is required for most projects. No one likes doing that. He goes on to argue that inequality is the result of people being able to more effectively use their talents. The "10x programmer" isn't paid 10x as much, but few programmers could argue that he should not get paid a lot more than just an average programmer despite being much more effective. I get that inequality is distasteful, but I would rather be richer in a less equal economy that be poorer but average. [0] http://www.paulgraham.com/inequality.html http://www.paulgraham.com/inequality.html
- chii 11y ago
  > I would rather be richer in a less equal economy that be poorer but average. there's no debate that anyone would choose to be the richer one in any situation. The question is whether you'd rather be the poorer one in a less equal economy, or the poorer one in a more equal economy.
- crdoconnor 11y ago
  >many of the failed South American countries. The CIA had a lot to do with that. It instigated coups against democratically elected heads of state and supported repressive dictators in most of South America in order to protect American businesses there.
xlm1717 11y ago
I'm not so sure this should be applauded. He mortgaged his house, emptied his retirement accounts, and sold all his stock, to what? Make a statement? It just seems reckless to me.
- knd775 11y ago
  He's still the majority owner of Gravity Payments. So, while this is somewhat reckless, he still owns a pretty valuable company.
wyager 11y ago
What right-wing backlash?
- whatok 11y ago
  I'm reading a lot of accounts of this but as far as I'm aware it's just random anecdotes of some idiot foaming at the mouth on Fox. People may think this guy is an idiot but no one is saying he can't do what he has done.
tbrooks 11y ago
Why does "pay disparity" or income inequality matter? Suppose two people start at 10. One person finds a way to go to 20 and the other goes to 11. The inequality has increased and the wealth of both people has increased. Technically, this is a social improvement. But egalitarians would say this is a terrible situation because the gap has gone from 0 to 9.
- cryoshon 11y ago
  A disparity of 2X wealth or income isn't what people are upset about-- try 30-100X or larger. Then there's also the real problem of the person with 10 dollars ending up with 7 instead of 11.
- gglitch 11y ago
  There's also the political power attached to extreme wealth.
cryoshon 11y ago
Strongly agree; the "just world fallacy" types are frequently right-wing. Seeing a disruption of inequality is offensive to them because they view it as a refutation of the social Darwinism they worship at the church of capitalism. It doesn't matter if the right wingers are poor or struggling themselves: rather than envisioning a world in which they don't have to struggle as hard, they envision a world in which they have broken beyond their struggle somehow and are now being bled by the "taker" leeches as a result of left wing political goals being met. The sad side of this is that many of these people have zero chance of breaking beyond their struggle specifically because there is not wider political support for redistributing resources. The fall into poverty is an act of justice in this perverse mindset. Poverty is the result of bad choices of the individual in their view. Of course we can dismiss this kind of simplification as childish (the result of an intentionally crafted propaganda campaign designed to cause people to vote against their interests), but there are millions of people who will have hateful fire in their eyes if you deny that poverty is avoidable for any person with the proper magical choices.
specialist 11y ago
Agreement. Massive pay disparity... Profit sharing. What's fair? The rhetoric about minimum wage is a distraction, used to obfuscate the simple fact that labor is getting its teeth kicked in. If corporations (et al) weren't racking up record profits and warehousing cash, I'd be more sympathetic to their plight.
Agustus 11y ago
Your comment about right-wing backlash is not documented in most publications and falsely directed at a group to reinforce your group-think against them. The only critique I could find was Rush Limbaugh saying it was “I hope this company is a case study in MBA programs on how socialism does not work, because it's gonna fail,”, although this is not a backlash in suggesting that it should be boycotted, so if you have others it would be appreciated. Rush Limbaugh is incorrect as the community does not own the company i.e. socialism, but to be fair, there is no theory on what to call this politically; it is not communism, socialism, or any other -ism. Those in the Seattle [2] Times article suggesting "backlash" point to companies behaving rationally in the market expecting fee increases in the future. The alleged companies quitting usage based on political concerns is not given to a number and without direct quotes from the companies as to the reason for quitting, I find it simply a buffer for the story. An Entrepreneur critique piece specifically mentions no ill-will to the company. [3] The criticism, mostly originating from Austrian based economic thought not right-wing groups (however most individuals on the right subscribe to the Austrian thought), was that the economics of the $70,000 wage was not going to end well for the company, not any suggestion of opposition to fairly paid society. Comments varied between what the profit margin would be and the effect on role distinction. The main comments were how the effect would play out for those employees that the company had previously valued at $75,000 with a double pay differential from the $35,000 now having the individuals who performed the same task being given the $50,000 wage and phased up to the $70,000; eliminating the meritocracy of a $75,000 wage. Additionally, the internal machinations and reports bore out the Austrian point of view as valued employees quit citing unequal pay raise values for the lowest valued employees. [1] To be fair, MarketWatch and Slate bring up a doubling in profits and revenues, but how much of this is based on an increase from the publicity and is it a long term sustainable idea. Gravity Payments is profiting $2.2 million on $150 million in revenue. The Seattle Times article notes that payment processing services are razor thin margins. Let's do the following financial analysis: * Gravity Payments has a 1.5% profit margin at its current rate of burn, $2.2 million over $150 million. * Gravity at announcement time had 120 employees, of which a documented 25% would see a double in their pay, 30 employees who were making $35,000. Estimating the rest of the company's effected staff, estimate another 30 will be brought up to $50,000, another 20 brought up next year to $60,000 and then finally another 20 to $70,000, for a total of estimated 100 employees affected by this move. * Costs have now increased for the 30 base salary employees to $1.5 million more, assuming a cost increase of $20,000 per person average for the remaining group of 70, you are an additional $1.4 million. * After the full effect of the increase is factored in, the costs outweigh the current operating situation. * The counter-argument of increases in business are offset by the companies need to hire additional staff to handle the increase. These individuals are brought into the existing cost structure and are not able to move the profit margin. The company will be having some issues next year making good on its promise of wage increases and certainly in 2017. This basic analysis is why the finance person quit, she saw what I am showing. [1] https://mises.org/library/what-happened-when-one-company-set-minimum-wage-70000 https://mises.org/library/what-happened-when-one-company-set... [2] http://www.seattletimes.com/seattle-news/seattle-company-copes-with-backlash-on-70000-minimum-wage/ http://www.seattletimes.com/seattle-news/seattle-company-cop... [3] http://www.entrepreneur.com/article/249313 http://www.entrepreneur.com/article/249313 [4] http://www.businessinsider.com/employees-reaction-to-70000-minimum-wage-at-gravity-payments-2015-4 http://www.businessinsider.com/employees-reaction-to-70000-m...

ascorbic 11y ago

Remember the four other submissions of this in the past three days? Why aren't these dupes being detected? https://news.ycombinator.com/item?id=10445012 https://news.ycombinator.com/item?id=10445012 https://news.ycombinator.com/item?id=10442726 https://news.ycombinator.com/item?id=10442726 https://news.ycombinator.com/item?id=10441107 https://news.ycombinator.com/item?id=10441107 https://news.ycombinator.com/item?id=10446171 https://news.ycombinator.com/item?id=10446171

neilellis 11y ago
Yeah I've submitted a few articles only for them to fall off the 'new' section, then later that day almost identical URLs have reached the front page. With all these smart people about surely someone can write a de-dup detector for articles (and I don't mean URL comparison).
- chris_wot 11y ago
  You'd honestly be better to email hn@ycombinator.com than post comments on this story.
- mhb 11y ago
  There seems to be some sentiment that it is a good thing that duplicates are posted if they eventually gain attention. Perhaps it would assuage the irritation of the initial posters (which I have often felt) if the dup detector awarded karma points to both the duplicate that caught everyone's attention as well as the previous (recent-ish) duplicates.
- falcolas 11y ago
  Dang said this is intentional, to allow stories which didn't receive much attention the first time another chance to be viewed. I, for one, appreciate this, since I did not see this article the first time around.
  - snowwrestler 11y ago
    A lot of people don't like dupes because they feel that karma for posting a story should go to the first person to post it. To them, it seems unfair to post a story and get no karma points, and then someone else posts (reposts?) it a day later and gets hundreds of karma points. Personally, my opinion is that since karma points are made up and worthless, it doesn't matter. Allowing dupes makes it more likely that cool stories will hit the front page, at the cost of annoying a few people. Seems like a good tradeoff to me.

yaps8 11y ago

This quote strikes me most: "Here I am walking around making $1 million a year, and I'm working shoulder to shoulder with people in her situation who are every bit as good and valuable as I am." I wish more people would realize that those earning less than themselves are not necessarily less deserving but merely less valuable in a marketed job force.

yitchelle 11y ago
I had a similar conversation with my wife the other day. Before the kids, she was an elderly care attendant, providing care for the elderly folks who are in their sunset years of their lives, and I worked in tech. Although my salary is not high, it is still about 5x of hers. I feel rather embarrass during my discussion as I feel that she is contributing a lot more to people lives than I am, the essential services. The stuff that I make would not make much difference in everyday life if it did not exists. She is much more valuable to society than I am. edit: grammar
- JoeAltmaier 11y ago
  I hesitate to disagree. But ... the value of services can be easily calculated because they are so visible. Every interaction has an emotional link, and we count that highly. The value to 'society' of improving a toaster by a small percentage, or the hits to a website by a larger one, are hard to calculate except by a bottom line. Any emotional impact is so indirect as to be invisible. Still exist; but we don't see them so can't count them. Add to this: one-on-one services are limited by the time and attention one person can put into them - two hands, one heart, 24 hours in a day. Absolutely no leverage at all, in the economic sense. Exceeding that (admittedly large and important) impact happens at some point in less-direct exchanges (economic, technological) and can go up from there geometrically. So I console myself, as a technician, that what I do affects those unseen people. And if successful, it affects millions, not just tens. It adds up to something important too.
- deleted 11y ago
  [deleted]
- lujim 11y ago

grhmc 11y ago

TL;DR: He and his company are both doing great.

PhrosTT 11y ago
Six months after Price's announcement, Gravity has defied doubters. Revenue is growing at double the previous rate. Profits have also doubled. Gravity did lose a few customers: Some objected to what seemed like a political statement that put pressure on them to raise their own wages; others feared price hikes or service cutbacks. But media reports suggesting that panicked customers were fleeing have proved false. In fact, Gravity's customer retention rate rose from 91 to 95 percent in the second quarter. Only two employees quit—a nonevent. Jason Haley isn't one of them. He is still an employee, and a better paid one.

iaskwhy 11y ago

"More than half the cost will be offset by Price's pay cut."

massysett 11y ago

Not a very interesting article: 1) it's only been six months 2) doesn't say whether a $70,000 minimum is particularly high for the jobs that are at his company

rubidium 11y ago
It's an interesting article: 1) It's been six months. I've recently wondered how it's going. 2) The article did say starting wage was $35K at his business.
- hodwik 11y ago
  Caucasian median income is $67k/yr in Seattle, so he's actually not paying them that much considering he only hires attractive young white people. (http://s3.amazonaws.com/media.eremedia.com/uploads/2015/08/06110047/gravity1.jpg http://s3.amazonaws.com/media.eremedia.com/uploads/2015/08/0...)

hodwik 11y ago

Caucasian median income is $67k/yr in Seattle, so he's actually not paying them that much considering he only hires attractive young white people. (http://s3.amazonaws.com/media.eremedia.com/uploads/2015/08/06110047/gravity1.jpg http://s3.amazonaws.com/media.eremedia.com/uploads/2015/08/0...)

noxToken 11y ago
Yes, but does everyone in his company hold the same position? As I look around my office space at the many different positions, $70,000 (roughly $38,000 adjusted for cost of living differences) starting would be on par for some building staff, low-balling for some business staff, laughably low for the dev staff (but worth it with good benefits and some desperation), and a flat out no for some other positions. $38k is the median average in my area, but tech is in its infancy here. If this place does have the tech boom that so many are pushing for, then the median average (based on current market rates) is going to shift upwards by a nice chunk of change. As such, it would seem as if other industries are being underpaid if the only metric is median income.
- hodwik 11y ago
  Right. It would be about $34k here in Philadelphia, which would be very low at my company.
benihana 11y ago
Listen, I love me some good ole fashioned hate-filled ignorance just as much as the next American, but whoa nelly. You're making some crazy assumptions about the ethnicity and lifestyles of people based solely on what they look like and that's pretty fucking racist.
- hodwik 11y ago
  Huh? I was just saying that given that he only hires white people, the median income for people at his company should be $67k.

cryoshon 11y ago

"While financiers and C-suite honchos have showered themselves in compensation, most Americans haven't had a raise, in real dollars, since 2000" One company can't fix this problem alone, though Gravity's effort is laudable.