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Owner of a Credit Card Processor Is Setting a New Minimum Wage: $70,000 a Year

268 points by greeneggs 12y ago

clarky07 12y ago
They might be less happy when they have to have layoffs because they can't actually afford to pay people more than the value they provide the company.
- chisleu 12y ago
  I'm with you, but did you read that the increase was already paid for out of profits and by reducing his own salary? I'm not sure if he is still head of the board or what, but this is definitely a bold move. Still, $70k in Seattle is only like $52k in my lowly city of Myrtle Beach, SC. It isn't a whole lot of money for any professional salesperson, clerk, or the like to make. It will certainly be a big win for morale and one would expect, performance, and retainment/turnover. I guess we will see.
  - clarky07 12y ago
    As I noted below, I have no problems with him cutting his salary. Those profits stop being profits though and are now expenses. If revenue comes downs little bit they are losing money. Personally I think it would make more sense to raise salaries by whatever he wants to cut his salary, and then add some profit sharing in as opposed to just removing all the profit and adding significant risk to the business.
    - cdcarter 12y ago
      My understanding is that he is using this years profit to fund the expense of the three year plan, not 80% of the profit EVERY year. And then, after three years, hopefully the ROI on this will be quite high, and then at that point, yes it becomes an expense.
  - ChristianGeek 12y ago
    It's only going to increase the morale of the 70 employees receiving the wage increase. I suspect it will cause some degree of resentment in the rest of the company. It also removes the incentive to improve for the lower tiers, since they have further to move up the ladder before they see an increase in pay. Personally, I think it's a noble but foolish move.
    - tannk11001 12y ago
      > I suspect it will cause some degree of resentment in the rest of the company. Why is that? While some people might be that petty, it's very possible that Gravity never hired those kinds of people in the first place. > It also removes the incentive to improve for the lower tiers, since they have further to move up the ladder before they see an increase in pay. Why is that? I don't think the idea here is to raise everybody's wage and then institute some kind of 30 year wage freeze. It's to establish a baseline living wage so that none of your employees need to be hustling for other opportunities just to pay their living expenses. They can focus on their work and their lives. Rewarding exceptional behavior is a small cost once that's out of that way, and I don't see why we shouldn't expect to see it here.
      - abandonliberty 12y ago
        >While some people might be that petty, it's very possible that Gravity never hired those kinds of people in the first place. Yes, that petty university graduate with thousands of dollars of debt and many years invested in his craft should just be a better person. Until the world is a very different place, return on investment is a huge factor in people's career.
      - digitalabyss 12y ago
        > Why is that? While some people might be that petty, it's very possible that Gravity never hired those kinds of people in the first place. It may be petty for someone making several hundred thousand a year to resent someone who's market value being 30-40K being bumped up to 70K but for the vast majority of college graduates that is a slap in the face. Your giving everybody the rewards they worked their asses off for. I don't consider that petty, I consider that basic human disposition. Especially in a place like a credit card payment processor. I doubt many people working there go home and take pride in telling their family and friends about the work they did that day and how its making the world a better place. The majority of them are probably working for the paycheck. Now don't get me wrong. I do admire the guy for what he is doing. Its a great selfless act. But I'm just saying its completely reasonable and understandable for those employees who where currently making ~ 70K to feel resentment and it does not make the petty or bad people. I would hope they thought this side effect through and have plans to deal with it. Since its not going to just be one or two bad apples but the vast majority of people in that position.
- ghshephard 12y ago
  If you read the article, the owner is offsetting all the wage increases by reducing his salary and using existing company profit. And, I suspect he'll be able to hire/retain his best employees - which is important in a customer service centric business.
  - clarky07 12y ago
    I have no problem with him cutting his salary, but the 80% of profits won't be profits. They will now be going to expenses. If revenue is a little less, that means they are now losing money.
  - kondro 12y ago
    I don't understand. Their current profit this year will be $2.2m, after the CEO takes a $1m salary. The current average salary is $48k (x70 employees == $3.36m/yr). If the CEO drops his salary to $70k and ups everyone's salary to $70k it will be a net increase in expenses of around $600k. Their profit of $2.2m can more than deal with an extra $600k. I'm also assuming they're still growing and will grow a little more due to some publicity from this.
    - ghshephard 12y ago
      Based on your math, there is more than enough headroom to do this then, right?
      - kondro 12y ago
        Yes? My math was very naive (no tax impacts positive or negative) but even if he phased in the change on day one (as opposed to the 3 years he is planning on), it would move his $2.2m profit (assuming that is before tax) to $1.6m. As the only (majority?) shareholder, wouldn't that be sufficient to live comfortably off… assuming stagnant growth? [edit: sorry, my above comment was meant to originally be posted to the parent, rather than the comment I posted this too… if only I could reassign it!]
        12y ago
- tannk11001 12y ago
  You're assuming that the wage market is already efficient and that Gravity's employees aren't worth $70k or more. We know that your first assumption is wrong, and I don't think any of us are in a position to know if your second assumption is wrong or not. It certainly doesn't seem unreasonable.
- jonah 12y ago
  How do you define "the value they provide the company"? It appears the people working at this company company are providing enough value for the company to be able to pay them this amount. If it can sustain revenues, who's to say it has to return its profit to the shareholders rather than to its employees. [edit] removed duplicate word
  - icebraining 12y ago
    That raises an interesting question. Assuming the profit levels haven't suddenly risen, if the workers are now producing enough value for the company to be able to pay them this amount now, they presumably already were producing that value. Isn't this an implicit admission that the company was underpaying them before?
    - briandear 12y ago
      Pay should always be less than the value an employee provides otherwise there's be no profit.
      - icebraining 12y ago
        Sure, but if the raises are portrayed as a question of fairness (rather than simply as a business tool to retain and attract better employees), then implicitly they're saying that the salaries weren't fair before, no?
    - deleted 12y ago
      [deleted]
- zem 12y ago
  except that workers, perhaps especially lower-wage workers, aren't typically paid based on the value they provide the company, but rather on the market rate it would cost the company to replace them with someone else.
  - e12e 12y ago
    ^This. The whole premise of making money by providing capital and hiring labour is that you do not pay according to value created/contributed, but as little as the labour market will allow. Some people think that the invisible hand of the market will ensure that the difference approaches zero. These people often tend to believe that unions are worse than hiring right-wing thugs to bust up unions, too.
- e12e 12y ago
  Well, they could apparently afford half to one-third of that by paying Price more than the "value he provided". Maybe. I don't really think they can measure that in any meaningful way, anyway. Can you?
therealdrag0 12y ago
> "Under a financial overhaul passed by Congress in 2010, the Securities and Exchange Commission was supposed to require all publicly held companies to disclose the ratio of C.E.O. pay to the median pay of all other employees, but it has so far failed to put it in effect. Corporate executives have vigorously opposed the idea, complaining it would be cumbersome and costly to implement." -- Why would a ratio be costly to implement?
- reustle 12y ago
  Is this information already publicly available? Can we calculate it ourselves?
- putlake 12y ago
  Perhaps not costly, but definitely cumbersome. What's more, it will have the opposite consequence. In his book "Influence", Robert Cialdini wrote that making CEO pay public had the effect of raising exec pay across the board rather than check it, as the lawmakers had hoped.
  - seunosewa 12y ago
    Isn't CEO pay of public companies already public? If so, the ratio would merely disclose the median employee's salary level.
  - lotsofmangos 12y ago
    I can't see how it would be that cumbersome, calculators are lightweight, widely available and easily fit in a pocket. The thing about CEO pay rising after the information was made public was because it became a metric used by traders, so it started making financial sense to raise the CEO pay as it was thought to raise the company share price by more than the wage increase. Of course this only works until someone matches your raise, then you have to raise again to keep the signaling going to the market and then the returns from this strategy rapidly diminish. Now if the ratio was also public, then that would also become a market signal, but if you are a trader trying to gauge the health of a company then it should work in the favour of the employees, as if you are comparing two competing companies and trying to decide which one to bet on, if the CEO pay is the same and they are making similar profits, then the one with a smaller ratio will look like a much better bet. edit - also, given that publicising CEO compensation can increase CEO compensation, why do you think that publicising employee compensation would reduce employee compensation?
recondite 12y ago
I commend the spirit of what this CEO is trying to do, but if I am an investor, director, or just even regular employee I would have serious reservations about this business strategy. > pay for the wage increases by cutting his own salary from nearly $1 million to $70,000 and using 75 to 80 percent of the company’s anticipated $2.2 million in profit this year. I don't know what the financials for Gravity look like, but this really only makes sense from a financial standpoint if (1) the company can't re-invest the profits with a better ROI (rate of return) and (2) they aren't worried about competition - i.e. have a serious business moat. In addition, the company will have a higher payroll tax burden because of the higher salaries. (1) is somewhat justifiable as investing in your employees may garner loyalty/harder work which may raise the top-line, but (2) seems unlikely. There are a lot of credit card processing companies. What happens if profits aren't as good next year? Are they going to slash wages to previous levels (or lower)? Or, if he's intent on sticking to the $70k minimum wage, this means he'll have to let go more people if the time comes. Did they look at alternatives - issuing more equity, special dividend, more generous bonuses?? I wonder how the conversation with finance went on this one.
- cdcarter 12y ago
  > Did they look at alternatives - issuing more equity, special dividend, more generous bonuses?? Well it seems he specifically wanted to increase salary compensation, but I can bet that any organization making a choice this big went so far as to consider alternatives. Paying your staff seems like a very good reinvestment of profit. In fact, it may well be what will allow them to pull ahead of their competition! The biggest problem I see with this plan is not increased payroll tax but increased HR costs to weed through the many more job apps they're going to get these days.
- tannk11001 12y ago
  If profits are unexpectedly worse next year, the compensation structure is probably the least of their worries. What they're really doing is investing in their brand as an employer, in the belief that loyal, eager employees make a sustainable company. For a company working a space like credit card processing, that's probably a better bet than a big ad campaign or R&D investment.
- 12y ago
reustle 12y ago
> Mr. Price, who started the Seattle-based credit-card payment processing firm in 2004 at the age of 19, said he would pay for the wage increases by cutting his own salary from nearly $1 million to $70,000 and using 75 to 80 percent of the company’s anticipated $2.2 million in profit this year. What a crazy world we live in where people can start companies and pay themselves a salary of $1 million. Wouldn't that money be better off being reinvested into the company? Sure, they are doing it now, but didn't it cross their minds when they (he?) first decided his contributions were worth $1m per year?
- pan69 12y ago
  A lot of people tend to change between the age of 19 and 30. PS: I didn't down vote you.
- jacquesm 12y ago
  If it's his company he can pay himself whatever salary he sees fit as long as the company doesn't tank, in which case it might be looked at as 'bad management'. After all, it's mostly a taxation issue, if he pays himself a million in salary he'll pay one tax rate, but if he pays himself a lower salary and a chunk of the profits as dividends that's simply another tax rate. So you can start your own company and pay yourself whatever you want as long as you stay liquid as long as you own the thing. As soon as you have other shareholders or co-founders you won't be able to do that any more.
- kondro 12y ago
  Who said he was drawing $1m in 2004? That was 11 years ago. You're assuming that he's not the only shareholder. Did they grow to be a billion dollar business in 11 years? No. Has he created a successful business? I'm pretty sure you could argue a business with $23k/employee net profitability (after his changes in minimum salary) for a SME is pretty successful.
- modeless 12y ago
  Yeah, what a crazy world where a person who creates 70 jobs after taking on great personal risk and working hard gets rewarded after 10 years. I suppose you'd rather that he never got rich, and didn't even bother to take on risk and work hard and create those jobs in the first place, because why bother if he's just going to make the same money he would otherwise?
pcurve 12y ago
I'm not sure why he would not phase this in gradually. Also, I've read somewhere that paying someone significantly above market rate can lead to more stress due to increased fear of job-loss. $70,000 is great, but only if you're able to convince your employees that they're worth $70,000. (edit: I missed the part about 3 year phase in. I still wonder about the effects of paying someone 60% above market rate.)
- AJ007 12y ago
  If an employee is living paycheck to paycheck on an above market salary it is a set up to lose everything. This is definitely an intentional management technique.
  - caseysoftware 12y ago
    It's worse than that. About half of people spend more than they make at least a few months each year. While they may still be net positive for the year, there are times they are likely paycheck to paycheck in there. And about half have no plan for building savings either, so they're unlikely to change the situation. Ref: http://www.huffingtonpost.com/2012/05/17/americans-spending-more-than-they-earn_n_1523920.html http://www.huffingtonpost.com/2012/05/17/americans-spending-...? Further, I forgot about another aspect.. many tax deductions start phasing out at $50k and are completely gone by $80k (iirc), so at $70k they're not only in a higher tax bracket, they also have less deductions so their overall tax burden will go up.
- caseysoftware 12y ago
  Hopefully he adds some money management training to go along with this. Someone who is used to living on $48k/year (their current average) suddenly making $70k/year is a huge change. And unfortunately, most people will adjust their standard of living to whatever their making instead of banking the difference. As a result, I can easily see your concern about "increased fear of job-loss" because of what they're making.. and how hard it is to be "poor" again. It's the definition of golden handcuffs.
  - 12y ago
jonah 12y ago
I wonder if they're considering becoming a B-Corporation. It sounds like they're beginning to espouse the triple bottom line concept. http://www.bcorporation.net/ http://www.bcorporation.net/
joshpadnick 12y ago
This is really interesting because it juxtaposes two fundamental issues: (1) The business need to make sensible, sustainable decisions that increase the ability of the company to prosper, and (2) the human need to address the day-to-day realities of getting by on a sub-$50k salary. Notably, the article focuses almost entirely on #2, but doesn't really try to claim that this is a strong business move. I have really mixed feelings on this. Too many businesses are all about profits and have forgotten the critical human need for compassion. But what are the consequences of one business offering way above market salary for a given position? What happens if a better man for the job shows up? At such a market premium, the business could reasonably hire the slightly better person and terminate the other person, but then this is hardly "compassionate." And will employees remain with the company even if they're no longer in love with their job because the salary is substantially higher than a comparable position elsewhere? Does this serve or hurt the company? I'm not really criticizing or supporting this move. I'm just really curious how it will play out.
- lotsofmangos 12y ago
  Well, Ford didn't do too badly. As for what if someone better shows up, well if you were swapping out staff every time someone you thought was better showed up, irrespective of money, you would kill off your business. Stability is more important than chasing some vision of perfection if you are wanting to get stuff done.
  - joshpadnick 12y ago
    That's a good point. Part of me is trained to think about this like an economist (the subject of one of my bachelor's), but in the end I really hope that human compassion triumphs and this proves to be a win-win. I'm routing for Mr. Price.
    - lotsofmangos 12y ago
      Ford wasn't doing it to be nice. Ford was trying to cut turnover as that was costing him loads.
kleer001 12y ago
Looks like a good trend to me. WallMart upping it's pay, Starbucks paying for college. Etc... I think value added from workers not under the poverty line is a force multiplier for business. Source? Arm Chair economics.
sebastianavina 12y ago
Yeah, I kind of do the same at my company, but it's not a public matter. Once an employee gets enough training and is valuable enough for the company, my minimum wage is 1200 pesos weekly. (I'm from Mexico). It's not a huge change, but almost any employee reach that salary within a year in my company. (The minimum wage in mexico is about 402 pesos weekly)
- edgarvaldes 12y ago
  The real (legal) mininum wage in Mexico is a joke. How much do you pay until the employee gets to that "level"?
  - sebastianavina 12y ago
    the entrance wage is about 700 a week, its the wage most people earn on maquilas. Thats the wage for the first 2 or 4 weeks for testing the subject. In Mexico is very expensive to lay off people, if you lay off somebody without a reason is called "Despido injustificado" and you're mandated by law to pay 3 months of wage. Also, if the subject has been on your company for a while, you have to pay about 20 days per year worked at your company. Laying off somebody with about 20 years working for you, is paying about a year of wage as compensation. Mandated by law.
- e12e 12y ago
  ~4000 USD a year, given paid vacation time? Did I get that right? Any tax/medical/etc comming out of that? I knew there was a big difference from the US to Mexico... but... wow.
  - hobarrera 12y ago
    Yeah, that sound quite a bit above the minimum for Argentina as well (though a lot less than any software developer or similar professional would make). Remember how they say that you can feed someone in Africa with just 1USD per day (356USD a year?). Well, you've got plenty of countries that are halfway between these places and USA, and a lot more than you'd guess.
honksillet 12y ago
Ahem... Inflation.
JohnLen 12y ago
A great employer. Appreciate the employees. But one big question, if he ever do this , will he feel satisfied with his income in future?
- lotsofmangos 12y ago
  One of the few things that money genuinely cannot buy is the satisfaction of proving to yourself that the lustre of a shiny coin is not what rules you.
  - meric 12y ago
    You can - withdraw all your money as bank notes and convert to gold bullion coins in suitcases, sail in a hired boat to the middle of an ocean, drop suitcases into the ocean. Sail back to port, yell "The lustre of a shiny coin is not what rules me!". Or do what this CEO did and buy it using a reduction of income.
    - lotsofmangos 12y ago
      You could say that turning down or throwing away money is purchasing the experience of turning down or throwing away money, but I think that is stretching the definition somewhat. Buying tends to usually involve an exchange of items of value with another entity, rather than not exchanging anything or dumping gold in the sea. By your definition, it would seem I purchase my sleep by not working while unconscious, which is obviously ridiculous. Just because you can look at something as a financial loss, whether it is something of value being destroyed or an opportunity to profit not taken, does not automagically mean that something was therefore purchased.
      - meric 12y ago
        It was meant to be a humorous post, but I'm glad you humoured me anyway. Let's do this. By your definition, it would seem I purchase my sleep by not working while unconscious, which is obviously ridiculous. My definition of buying means giving up tangible goods, i.e. gold, money, shares, in return for a change in the world (e.g. receiving a massage). So, to exchange time for sleep would not fit as your time is not a tangible good. And since you require sleep to work, it would be more accurate to say you earn the ability to work by sleeping. I stipulate no buying is involved. Opportunity cost does not necessarily mean buying. Exchanging a tangible good for something else does. I suppose where your definition and mine differ, is in your definition you require a sentient seller, and in mine the seller could be non-sentient, or could be metaphorically represented by a collective of gold owners who would benefit from you losing your gold to the ocean.
deleted 12y ago
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DigitalSea 12y ago
It will be interesting to see if the salary increase (for some it will be double) will result in overall better workplace happiness, higher retention rates (meaning less resources required to train replacements) and a better end product as a result of employees being happier. This is really great, other startups and companies should take note of what is happening here. While it will result in a temporary downfall because profits are being used to fund this in combination with Dan Price's pay-cut, I think the long-term results will mean the company eventually makes that money back and then some more. We need more risk like this in the business world, invest in your employees who in turn will want to be at work and want to do a good job to keep their salary.
- cmdkeen 12y ago
  I imagine he'll be getting calls from management theorists wanting to do some long term studies to see what happens to happiness, motivation etc. Traditional management theory has that money is a poor motivator because the effects wear off quickly and people soon come to believe they are "worth" their pay increase. Other perks / benefits are often valued disproportionately more than money. Now a massive pay rise that takes people out of a problematic income zone may completely upend that, or over time it might have unintended negative consequences. Off the top of my head I wonder what consequences might be for the workers who were on higher salaries now perhaps feeling relatively under compensated.
  - wwweston 12y ago
    If I recall correctly (I'm thinking this is from some of Daniel Pink's work), some recent studies show that more money does help up to the point where employees basically don't have to think about their own material problems... and can therefore focus on solving their employer's problems. And beyond that, it's a poor motivator. My guess is that the ~$70k mark is about right for ensuring middle class security outside of major metro areas.
nazgulnarsil 12y ago
Yes, boost the lives of already rich people instead of figuring out where that money could do real good. And he gets reinforced for it by getting a news article.
- j_jochem 12y ago
  I would hardly call earning 48k "rich" in the US. Sure, the same money could buy education for lots of bolivian children, but do we really have to point out a "more noble cause" any time somebody tries to do some good?
snksnk 12y ago
This does not work in businesses with either low margins (profitability) and/or high labor intensity. You will not be able to obtain any new funding. In addition, this policy being only selectively applicable will increase wage differentials.
- grrowl 12y ago
  > Mr. Price ... would pay for the wage increases by cutting his own salary from nearly $1 million to $70,000 There's money in every successful company that could be redistributed — it's a moral choice whether you do so. If you prioritise your own comfort over that of the people you stand on, feel free to do so.
  - deleted 12y ago
    [deleted]
  - snksnk 12y ago
    > and using 75 to 80 percent of the company’s anticipated $2.2 million in profit this year. You forgot this part of the source of funds. This will not be a one-off reduction in profits. Increasing the wages of the 70 affected employees from an average of USD 48k to USD 70k translates into an annual cash outflow of at least ca. USD 1.5m. This reduction in cash flow will make it more difficult to (re)finance the business. As said before, this is not viable for businesses with low margins and/or high labor intensity. So you imply that those business owners (i.e., with low margins or high labor intensity) prioritize their own comfort over that of the people they stand on?
pjc50 12y ago
It's interesting to see just how many people are willing to argue against a business paying their employees more, when those commentators have no involvement in the issue at all.
- ptaipale 12y ago
  I don't think people argue against a business paying their employees more. It's up to the owner of that business to decide. What people argue against is legal requirements for other, or all, companies to do the same.
  - spacemanmatt 12y ago
    A lot of the heated responses I've seen seem to respond to the assumption that a successful business experiment is obviously being showcased to model a mandate around it. Can't get some people off their scripts to save them, I tell ya.
    - ptaipale 12y ago
      Well, "under a financial overhaul passed by Congress in 2010, the Securities and Exchange Commission was supposed to require all publicly held companies to disclose the ratio of C.E.O. pay to the median pay of all other employees, but it has so far failed to put it in effect" sounds a little bit like someone wants to mandate this kind of a practice. (I'm not in the US so such a law does not impact me directly, at least not at the moment, but as experienced with the totally nuts application of SOX laws, such things passed by US Congress may mean WTF moments to people at the other side of the world). [edit: typo]
- lexcorvus 12y ago
  There's a broader political context, of course, which naturally attracts interest from outsiders. It's apparent from the article that this decision is motivated, at least in part, by progressive ideology. This might sound good, especially to those who believe in "progress", but progressivism at its worst is terrifying (see, e.g., "Comrade Stalin—Leader of Progressive Mankind" [1]). As a result, a move like this, whose potential for capture and enforcement by the state is apparent, understandably gives some people pause. [1]: https://www.marxists.org/archive/malenkov/1949/12/21.htm https://www.marxists.org/archive/malenkov/1949/12/21.htm
stared 12y ago
"[happiness] rises with income, but only to a point. And that point turns out to be about $75,000 a year." It seems that there is no such limit. See the second plot from http://danluu.com/dunning-kruger/ http://danluu.com/dunning-kruger/, or the original paper: http://www.brookings.edu/~/media/research/files/papers/2013/04/subjective%20well%20being%20income/subjective%20well%20being%20income.pdf http://www.brookings.edu/~/media/research/files/papers/2013/... Just the scaling is logarithmic. However, the main conclusion remains the same - to maximize happiness, some redistribution is good.
- vidarh 12y ago
  If you read the article linked in the NY Times article, it is more nuanced than that. From the abstract: "We report an analysis of more than 450,000 responses to the Gallup-Healthways Well-Being Index, a daily survey of 1,000 US residents conducted by the Gallup Organization. We find that emotional well-being (measured by questions about emotional experiences yesterday) and life evaluation (measured by Cantril's Self-Anchoring Scale) have different correlates. Income and education are more closely related to life evaluation, but health, care giving, loneliness, and smoking are relatively stronger predictors of daily emotions. When plotted against log income, life evaluation rises steadily. Emotional well-being also rises with log income, but there is no further progress beyond an annual income of ~$75,000. Low income exacerbates the emotional pain associated with such misfortunes as divorce, ill health, and being alone. We conclude that high income buys life satisfaction but not happiness, and that low income is associated both with low life evaluation and low emotional well-being."
- seunosewa 12y ago
  It's a unfortunate that an expensive business decision was made based on an article that wrongly interpreted a graph.
  - stared 12y ago
    As I said, the conclusion remains the same. $50k->$70k is a huge boost, with a very practical impact (especially given some constant living costs), while e.g. $150k->$170k is a very gradual change.
elcct 12y ago
Minimum wage is in favour of big corporations because it raises barrier of entry for the competition.
whybroke 12y ago
Interesting that paying marginally adequate wages is allegedly a difficult business decision from a competitive standpoint (although judging from the steady rise in profitability in industries across the board, I doubt it). But if so, perhaps running trade deficits for decades on end with nations that brutalize their work force was not such a good idea after all.
netcan 12y ago
Interesting. A couple of thoughts: (1) It effectively sets a certain bar at the company. There are no poor people working here. There are no disappointing dead ends. All jobs here are decent, by general standards. I'm sure that's culturally significant within the company. (2) It sets a certain bar for employee productivity. (3) The famous 'pirate codes' usually had rules for distributing booty. Captains got between 2 and 10 shares, while regular crewmen got 1. It's striking how much more CEOs get compared to pirate captains.
- grecy 12y ago
  > There are no poor people working here. There are no disappointing dead ends. All jobs here are decent, by general standards. I'm sure that's culturally significant within the company. I just visited Australia for the first time in 9 years, after having lived there for the first 23 years of my life. I've been living in North America (Canada and the US) Your comment is exactly how Australia feels. There are virtually no poor people, nobody is left behind. Even people working "dead end jobs" like retail are perfectly happy. I would say they're happier than "career" people in North America.
  - puranjay 12y ago
    I went to see some of my cousins in Australia earlier this year (and well, to watch the world cup). This is what surprised me as well. Maybe it was the weather, or maybe it was the atmosphere of the world cup, but everywhere in Australia felt like a vacation. People were generally happy, welcoming and relaxed. I've never seen anything like that after traveling through more than 20 countries (not in Europe though).
  - maxerickson 12y ago
    A significant confounder is that resource exports are a major fraction of the Australian economy: http://www.tradingeconomics.com/australia/exports-of-goods-and-services-percent-of-gdp-wb-data.html http://www.tradingeconomics.com/australia/exports-of-goods-a... I'm not insisting that policy differences are necessarily less important than that, but it's possible that Australia simply has better outcomes to select from.
chernevik 12y ago
I'm curious how quickly the company's manpower model already progresses people from entry levels to more productive and higher paid roles. Can they do this by making their people more productive, and thus worth more in the labor market or as part of the company? And if so, how are they going to do that? That's a workforce-led business model: We're going to provide value in the market place by taking people and training them up to do productive stuff for customers. We're basically investing in training people to enhance their productivity. So what would be really interesting is if Gravity were to say, if we've got people stuck at entry level after two years, then we're doing something wrong and we've got figure out how to grow them better. That is a model that all managements and investors would want to emulate. And then you're paying people more not out of noblesse oblige but because they are literally empowered to go make more. It's a much better model, economically and morally, than CEOs and investors paying more because they're such great people. Probably most profitable and growing companies are already doing this to one degree or another. Your best workforce strategy is finding good people and then making them better.
tropchan 12y ago
This is amazing, the new triple bottom-line company...? not for the environment but for the people. Interesting times call for innovation everywhere. Go Pro announced the opposite news today as highest compensated CEO (sold shares). Personally, I think companies that have decent margins should create a culture of well paying jobs and high value for their employees. I guess this already occurs with companies like FB, Google, Banks, etc.

268 points by greeneggs 12y ago

They might be less happy when they have to have layoffs because they can't actually afford to pay people more than the value they provide the company.

chisleu 12y ago
I'm with you, but did you read that the increase was already paid for out of profits and by reducing his own salary? I'm not sure if he is still head of the board or what, but this is definitely a bold move. Still, $70k in Seattle is only like $52k in my lowly city of Myrtle Beach, SC. It isn't a whole lot of money for any professional salesperson, clerk, or the like to make. It will certainly be a big win for morale and one would expect, performance, and retainment/turnover. I guess we will see.
- clarky07 12y ago
  As I noted below, I have no problems with him cutting his salary. Those profits stop being profits though and are now expenses. If revenue comes downs little bit they are losing money. Personally I think it would make more sense to raise salaries by whatever he wants to cut his salary, and then add some profit sharing in as opposed to just removing all the profit and adding significant risk to the business.
  - cdcarter 12y ago
    My understanding is that he is using this years profit to fund the expense of the three year plan, not 80% of the profit EVERY year. And then, after three years, hopefully the ROI on this will be quite high, and then at that point, yes it becomes an expense.
- ChristianGeek 12y ago
  It's only going to increase the morale of the 70 employees receiving the wage increase. I suspect it will cause some degree of resentment in the rest of the company. It also removes the incentive to improve for the lower tiers, since they have further to move up the ladder before they see an increase in pay. Personally, I think it's a noble but foolish move.
  - tannk11001 12y ago
    > I suspect it will cause some degree of resentment in the rest of the company. Why is that? While some people might be that petty, it's very possible that Gravity never hired those kinds of people in the first place. > It also removes the incentive to improve for the lower tiers, since they have further to move up the ladder before they see an increase in pay. Why is that? I don't think the idea here is to raise everybody's wage and then institute some kind of 30 year wage freeze. It's to establish a baseline living wage so that none of your employees need to be hustling for other opportunities just to pay their living expenses. They can focus on their work and their lives. Rewarding exceptional behavior is a small cost once that's out of that way, and I don't see why we shouldn't expect to see it here.
    - abandonliberty 12y ago
      >While some people might be that petty, it's very possible that Gravity never hired those kinds of people in the first place. Yes, that petty university graduate with thousands of dollars of debt and many years invested in his craft should just be a better person. Until the world is a very different place, return on investment is a huge factor in people's career.
    - digitalabyss 12y ago
      > Why is that? While some people might be that petty, it's very possible that Gravity never hired those kinds of people in the first place. It may be petty for someone making several hundred thousand a year to resent someone who's market value being 30-40K being bumped up to 70K but for the vast majority of college graduates that is a slap in the face. Your giving everybody the rewards they worked their asses off for. I don't consider that petty, I consider that basic human disposition. Especially in a place like a credit card payment processor. I doubt many people working there go home and take pride in telling their family and friends about the work they did that day and how its making the world a better place. The majority of them are probably working for the paycheck. Now don't get me wrong. I do admire the guy for what he is doing. Its a great selfless act. But I'm just saying its completely reasonable and understandable for those employees who where currently making ~ 70K to feel resentment and it does not make the petty or bad people. I would hope they thought this side effect through and have plans to deal with it. Since its not going to just be one or two bad apples but the vast majority of people in that position.
ghshephard 12y ago
If you read the article, the owner is offsetting all the wage increases by reducing his salary and using existing company profit. And, I suspect he'll be able to hire/retain his best employees - which is important in a customer service centric business.
- clarky07 12y ago
  I have no problem with him cutting his salary, but the 80% of profits won't be profits. They will now be going to expenses. If revenue is a little less, that means they are now losing money.
- kondro 12y ago
  I don't understand. Their current profit this year will be $2.2m, after the CEO takes a $1m salary. The current average salary is $48k (x70 employees == $3.36m/yr). If the CEO drops his salary to $70k and ups everyone's salary to $70k it will be a net increase in expenses of around $600k. Their profit of $2.2m can more than deal with an extra $600k. I'm also assuming they're still growing and will grow a little more due to some publicity from this.
  - ghshephard 12y ago
    Based on your math, there is more than enough headroom to do this then, right?
    - kondro 12y ago
      Yes? My math was very naive (no tax impacts positive or negative) but even if he phased in the change on day one (as opposed to the 3 years he is planning on), it would move his $2.2m profit (assuming that is before tax) to $1.6m. As the only (majority?) shareholder, wouldn't that be sufficient to live comfortably off… assuming stagnant growth? [edit: sorry, my above comment was meant to originally be posted to the parent, rather than the comment I posted this too… if only I could reassign it!]
      - 12y ago
tannk11001 12y ago
You're assuming that the wage market is already efficient and that Gravity's employees aren't worth $70k or more. We know that your first assumption is wrong, and I don't think any of us are in a position to know if your second assumption is wrong or not. It certainly doesn't seem unreasonable.
jonah 12y ago
How do you define "the value they provide the company"? It appears the people working at this company company are providing enough value for the company to be able to pay them this amount. If it can sustain revenues, who's to say it has to return its profit to the shareholders rather than to its employees. [edit] removed duplicate word
- icebraining 12y ago
  That raises an interesting question. Assuming the profit levels haven't suddenly risen, if the workers are now producing enough value for the company to be able to pay them this amount now, they presumably already were producing that value. Isn't this an implicit admission that the company was underpaying them before?
  - briandear 12y ago
    Pay should always be less than the value an employee provides otherwise there's be no profit.
    - icebraining 12y ago
      Sure, but if the raises are portrayed as a question of fairness (rather than simply as a business tool to retain and attract better employees), then implicitly they're saying that the salaries weren't fair before, no?
  - deleted 12y ago
    [deleted]
zem 12y ago
except that workers, perhaps especially lower-wage workers, aren't typically paid based on the value they provide the company, but rather on the market rate it would cost the company to replace them with someone else.
- e12e 12y ago
  ^This. The whole premise of making money by providing capital and hiring labour is that you do not pay according to value created/contributed, but as little as the labour market will allow. Some people think that the invisible hand of the market will ensure that the difference approaches zero. These people often tend to believe that unions are worse than hiring right-wing thugs to bust up unions, too.
e12e 12y ago
Well, they could apparently afford half to one-third of that by paying Price more than the "value he provided". Maybe. I don't really think they can measure that in any meaningful way, anyway. Can you?

therealdrag0 12y ago

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

reustle 12y ago
Is this information already publicly available? Can we calculate it ourselves?
putlake 12y ago
Perhaps not costly, but definitely cumbersome. What's more, it will have the opposite consequence. In his book "Influence", Robert Cialdini wrote that making CEO pay public had the effect of raising exec pay across the board rather than check it, as the lawmakers had hoped.
- seunosewa 12y ago
  Isn't CEO pay of public companies already public? If so, the ratio would merely disclose the median employee's salary level.
- lotsofmangos 12y ago
  I can't see how it would be that cumbersome, calculators are lightweight, widely available and easily fit in a pocket. The thing about CEO pay rising after the information was made public was because it became a metric used by traders, so it started making financial sense to raise the CEO pay as it was thought to raise the company share price by more than the wage increase. Of course this only works until someone matches your raise, then you have to raise again to keep the signaling going to the market and then the returns from this strategy rapidly diminish. Now if the ratio was also public, then that would also become a market signal, but if you are a trader trying to gauge the health of a company then it should work in the favour of the employees, as if you are comparing two competing companies and trying to decide which one to bet on, if the CEO pay is the same and they are making similar profits, then the one with a smaller ratio will look like a much better bet. edit - also, given that publicising CEO compensation can increase CEO compensation, why do you think that publicising employee compensation would reduce employee compensation?

recondite 12y ago

I commend the spirit of what this CEO is trying to do, but if I am an investor, director, or just even regular employee I would have serious reservations about this business strategy. > pay for the wage increases by cutting his own salary from nearly $1 million to $70,000 and using 75 to 80 percent of the company’s anticipated $2.2 million in profit this year. I don't know what the financials for Gravity look like, but this really only makes sense from a financial standpoint if (1) the company can't re-invest the profits with a better ROI (rate of return) and (2) they aren't worried about competition - i.e. have a serious business moat. In addition, the company will have a higher payroll tax burden because of the higher salaries. (1) is somewhat justifiable as investing in your employees may garner loyalty/harder work which may raise the top-line, but (2) seems unlikely. There are a lot of credit card processing companies. What happens if profits aren't as good next year? Are they going to slash wages to previous levels (or lower)? Or, if he's intent on sticking to the $70k minimum wage, this means he'll have to let go more people if the time comes. Did they look at alternatives - issuing more equity, special dividend, more generous bonuses?? I wonder how the conversation with finance went on this one.

cdcarter 12y ago
> Did they look at alternatives - issuing more equity, special dividend, more generous bonuses?? Well it seems he specifically wanted to increase salary compensation, but I can bet that any organization making a choice this big went so far as to consider alternatives. Paying your staff seems like a very good reinvestment of profit. In fact, it may well be what will allow them to pull ahead of their competition! The biggest problem I see with this plan is not increased payroll tax but increased HR costs to weed through the many more job apps they're going to get these days.
tannk11001 12y ago
If profits are unexpectedly worse next year, the compensation structure is probably the least of their worries. What they're really doing is investing in their brand as an employer, in the belief that loyal, eager employees make a sustainable company. For a company working a space like credit card processing, that's probably a better bet than a big ad campaign or R&D investment.
12y ago

reustle 12y ago

> Mr. Price, who started the Seattle-based credit-card payment processing firm in 2004 at the age of 19, said he would pay for the wage increases by cutting his own salary from nearly $1 million to $70,000 and using 75 to 80 percent of the company’s anticipated $2.2 million in profit this year. What a crazy world we live in where people can start companies and pay themselves a salary of $1 million. Wouldn't that money be better off being reinvested into the company? Sure, they are doing it now, but didn't it cross their minds when they (he?) first decided his contributions were worth $1m per year?

pan69 12y ago
A lot of people tend to change between the age of 19 and 30. PS: I didn't down vote you.
jacquesm 12y ago
If it's his company he can pay himself whatever salary he sees fit as long as the company doesn't tank, in which case it might be looked at as 'bad management'. After all, it's mostly a taxation issue, if he pays himself a million in salary he'll pay one tax rate, but if he pays himself a lower salary and a chunk of the profits as dividends that's simply another tax rate. So you can start your own company and pay yourself whatever you want as long as you stay liquid as long as you own the thing. As soon as you have other shareholders or co-founders you won't be able to do that any more.
kondro 12y ago
Who said he was drawing $1m in 2004? That was 11 years ago. You're assuming that he's not the only shareholder. Did they grow to be a billion dollar business in 11 years? No. Has he created a successful business? I'm pretty sure you could argue a business with $23k/employee net profitability (after his changes in minimum salary) for a SME is pretty successful.
modeless 12y ago
Yeah, what a crazy world where a person who creates 70 jobs after taking on great personal risk and working hard gets rewarded after 10 years. I suppose you'd rather that he never got rich, and didn't even bother to take on risk and work hard and create those jobs in the first place, because why bother if he's just going to make the same money he would otherwise?

pcurve 12y ago

I'm not sure why he would not phase this in gradually. Also, I've read somewhere that paying someone significantly above market rate can lead to more stress due to increased fear of job-loss. $70,000 is great, but only if you're able to convince your employees that they're worth $70,000. (edit: I missed the part about 3 year phase in. I still wonder about the effects of paying someone 60% above market rate.)

AJ007 12y ago
If an employee is living paycheck to paycheck on an above market salary it is a set up to lose everything. This is definitely an intentional management technique.
- caseysoftware 12y ago
  It's worse than that. About half of people spend more than they make at least a few months each year. While they may still be net positive for the year, there are times they are likely paycheck to paycheck in there. And about half have no plan for building savings either, so they're unlikely to change the situation. Ref: http://www.huffingtonpost.com/2012/05/17/americans-spending-more-than-they-earn_n_1523920.html http://www.huffingtonpost.com/2012/05/17/americans-spending-...? Further, I forgot about another aspect.. many tax deductions start phasing out at $50k and are completely gone by $80k (iirc), so at $70k they're not only in a higher tax bracket, they also have less deductions so their overall tax burden will go up.
caseysoftware 12y ago
Hopefully he adds some money management training to go along with this. Someone who is used to living on $48k/year (their current average) suddenly making $70k/year is a huge change. And unfortunately, most people will adjust their standard of living to whatever their making instead of banking the difference. As a result, I can easily see your concern about "increased fear of job-loss" because of what they're making.. and how hard it is to be "poor" again. It's the definition of golden handcuffs.
- 12y ago

jonah 12y ago

I wonder if they're considering becoming a B-Corporation. It sounds like they're beginning to espouse the triple bottom line concept. http://www.bcorporation.net/ http://www.bcorporation.net/

joshpadnick 12y ago

This is really interesting because it juxtaposes two fundamental issues: (1) The business need to make sensible, sustainable decisions that increase the ability of the company to prosper, and (2) the human need to address the day-to-day realities of getting by on a sub-$50k salary. Notably, the article focuses almost entirely on #2, but doesn't really try to claim that this is a strong business move. I have really mixed feelings on this. Too many businesses are all about profits and have forgotten the critical human need for compassion. But what are the consequences of one business offering way above market salary for a given position? What happens if a better man for the job shows up? At such a market premium, the business could reasonably hire the slightly better person and terminate the other person, but then this is hardly "compassionate." And will employees remain with the company even if they're no longer in love with their job because the salary is substantially higher than a comparable position elsewhere? Does this serve or hurt the company? I'm not really criticizing or supporting this move. I'm just really curious how it will play out.

lotsofmangos 12y ago
Well, Ford didn't do too badly. As for what if someone better shows up, well if you were swapping out staff every time someone you thought was better showed up, irrespective of money, you would kill off your business. Stability is more important than chasing some vision of perfection if you are wanting to get stuff done.
- joshpadnick 12y ago
  That's a good point. Part of me is trained to think about this like an economist (the subject of one of my bachelor's), but in the end I really hope that human compassion triumphs and this proves to be a win-win. I'm routing for Mr. Price.
  - lotsofmangos 12y ago
    Ford wasn't doing it to be nice. Ford was trying to cut turnover as that was costing him loads.

kleer001 12y ago

Looks like a good trend to me. WallMart upping it's pay, Starbucks paying for college. Etc... I think value added from workers not under the poverty line is a force multiplier for business. Source? Arm Chair economics.

sebastianavina 12y ago

Yeah, I kind of do the same at my company, but it's not a public matter. Once an employee gets enough training and is valuable enough for the company, my minimum wage is 1200 pesos weekly. (I'm from Mexico). It's not a huge change, but almost any employee reach that salary within a year in my company. (The minimum wage in mexico is about 402 pesos weekly)

edgarvaldes 12y ago
The real (legal) mininum wage in Mexico is a joke. How much do you pay until the employee gets to that "level"?
- sebastianavina 12y ago
  the entrance wage is about 700 a week, its the wage most people earn on maquilas. Thats the wage for the first 2 or 4 weeks for testing the subject. In Mexico is very expensive to lay off people, if you lay off somebody without a reason is called "Despido injustificado" and you're mandated by law to pay 3 months of wage. Also, if the subject has been on your company for a while, you have to pay about 20 days per year worked at your company. Laying off somebody with about 20 years working for you, is paying about a year of wage as compensation. Mandated by law.
e12e 12y ago
~4000 USD a year, given paid vacation time? Did I get that right? Any tax/medical/etc comming out of that? I knew there was a big difference from the US to Mexico... but... wow.
- hobarrera 12y ago
  Yeah, that sound quite a bit above the minimum for Argentina as well (though a lot less than any software developer or similar professional would make). Remember how they say that you can feed someone in Africa with just 1USD per day (356USD a year?). Well, you've got plenty of countries that are halfway between these places and USA, and a lot more than you'd guess.

honksillet 12y ago

Ahem... Inflation.

JohnLen 12y ago

A great employer. Appreciate the employees. But one big question, if he ever do this , will he feel satisfied with his income in future?

lotsofmangos 12y ago
One of the few things that money genuinely cannot buy is the satisfaction of proving to yourself that the lustre of a shiny coin is not what rules you.
- meric 12y ago
  You can - withdraw all your money as bank notes and convert to gold bullion coins in suitcases, sail in a hired boat to the middle of an ocean, drop suitcases into the ocean. Sail back to port, yell "The lustre of a shiny coin is not what rules me!". Or do what this CEO did and buy it using a reduction of income.
  - lotsofmangos 12y ago
    You could say that turning down or throwing away money is purchasing the experience of turning down or throwing away money, but I think that is stretching the definition somewhat. Buying tends to usually involve an exchange of items of value with another entity, rather than not exchanging anything or dumping gold in the sea. By your definition, it would seem I purchase my sleep by not working while unconscious, which is obviously ridiculous. Just because you can look at something as a financial loss, whether it is something of value being destroyed or an opportunity to profit not taken, does not automagically mean that something was therefore purchased.
    - meric 12y ago
      It was meant to be a humorous post, but I'm glad you humoured me anyway. Let's do this. By your definition, it would seem I purchase my sleep by not working while unconscious, which is obviously ridiculous. My definition of buying means giving up tangible goods, i.e. gold, money, shares, in return for a change in the world (e.g. receiving a massage). So, to exchange time for sleep would not fit as your time is not a tangible good. And since you require sleep to work, it would be more accurate to say you earn the ability to work by sleeping. I stipulate no buying is involved. Opportunity cost does not necessarily mean buying. Exchanging a tangible good for something else does. I suppose where your definition and mine differ, is in your definition you require a sentient seller, and in mine the seller could be non-sentient, or could be metaphorically represented by a collective of gold owners who would benefit from you losing your gold to the ocean.

deleted 12y ago

[deleted]

DigitalSea 12y ago

It will be interesting to see if the salary increase (for some it will be double) will result in overall better workplace happiness, higher retention rates (meaning less resources required to train replacements) and a better end product as a result of employees being happier. This is really great, other startups and companies should take note of what is happening here. While it will result in a temporary downfall because profits are being used to fund this in combination with Dan Price's pay-cut, I think the long-term results will mean the company eventually makes that money back and then some more. We need more risk like this in the business world, invest in your employees who in turn will want to be at work and want to do a good job to keep their salary.

cmdkeen 12y ago
I imagine he'll be getting calls from management theorists wanting to do some long term studies to see what happens to happiness, motivation etc. Traditional management theory has that money is a poor motivator because the effects wear off quickly and people soon come to believe they are "worth" their pay increase. Other perks / benefits are often valued disproportionately more than money. Now a massive pay rise that takes people out of a problematic income zone may completely upend that, or over time it might have unintended negative consequences. Off the top of my head I wonder what consequences might be for the workers who were on higher salaries now perhaps feeling relatively under compensated.
- wwweston 12y ago
  If I recall correctly (I'm thinking this is from some of Daniel Pink's work), some recent studies show that more money does help up to the point where employees basically don't have to think about their own material problems... and can therefore focus on solving their employer's problems. And beyond that, it's a poor motivator. My guess is that the ~$70k mark is about right for ensuring middle class security outside of major metro areas.

nazgulnarsil 12y ago

Yes, boost the lives of already rich people instead of figuring out where that money could do real good. And he gets reinforced for it by getting a news article.

j_jochem 12y ago
I would hardly call earning 48k "rich" in the US. Sure, the same money could buy education for lots of bolivian children, but do we really have to point out a "more noble cause" any time somebody tries to do some good?

snksnk 12y ago

This does not work in businesses with either low margins (profitability) and/or high labor intensity. You will not be able to obtain any new funding. In addition, this policy being only selectively applicable will increase wage differentials.

grrowl 12y ago
> Mr. Price ... would pay for the wage increases by cutting his own salary from nearly $1 million to $70,000 There's money in every successful company that could be redistributed — it's a moral choice whether you do so. If you prioritise your own comfort over that of the people you stand on, feel free to do so.
- deleted 12y ago
  [deleted]
- snksnk 12y ago
  > and using 75 to 80 percent of the company’s anticipated $2.2 million in profit this year. You forgot this part of the source of funds. This will not be a one-off reduction in profits. Increasing the wages of the 70 affected employees from an average of USD 48k to USD 70k translates into an annual cash outflow of at least ca. USD 1.5m. This reduction in cash flow will make it more difficult to (re)finance the business. As said before, this is not viable for businesses with low margins and/or high labor intensity. So you imply that those business owners (i.e., with low margins or high labor intensity) prioritize their own comfort over that of the people they stand on?

pjc50 12y ago

It's interesting to see just how many people are willing to argue against a business paying their employees more, when those commentators have no involvement in the issue at all.

ptaipale 12y ago
I don't think people argue against a business paying their employees more. It's up to the owner of that business to decide. What people argue against is legal requirements for other, or all, companies to do the same.
- spacemanmatt 12y ago
  A lot of the heated responses I've seen seem to respond to the assumption that a successful business experiment is obviously being showcased to model a mandate around it. Can't get some people off their scripts to save them, I tell ya.
  - ptaipale 12y ago
    Well, "under a financial overhaul passed by Congress in 2010, the Securities and Exchange Commission was supposed to require all publicly held companies to disclose the ratio of C.E.O. pay to the median pay of all other employees, but it has so far failed to put it in effect" sounds a little bit like someone wants to mandate this kind of a practice. (I'm not in the US so such a law does not impact me directly, at least not at the moment, but as experienced with the totally nuts application of SOX laws, such things passed by US Congress may mean WTF moments to people at the other side of the world). [edit: typo]
lexcorvus 12y ago
There's a broader political context, of course, which naturally attracts interest from outsiders. It's apparent from the article that this decision is motivated, at least in part, by progressive ideology. This might sound good, especially to those who believe in "progress", but progressivism at its worst is terrifying (see, e.g., "Comrade Stalin—Leader of Progressive Mankind" [1]). As a result, a move like this, whose potential for capture and enforcement by the state is apparent, understandably gives some people pause. [1]: https://www.marxists.org/archive/malenkov/1949/12/21.htm https://www.marxists.org/archive/malenkov/1949/12/21.htm

stared 12y ago

"[happiness] rises with income, but only to a point. And that point turns out to be about $75,000 a year." It seems that there is no such limit. See the second plot from http://danluu.com/dunning-kruger/ http://danluu.com/dunning-kruger/, or the original paper: http://www.brookings.edu/~/media/research/files/papers/2013/04/subjective%20well%20being%20income/subjective%20well%20being%20income.pdf http://www.brookings.edu/~/media/research/files/papers/2013/... Just the scaling is logarithmic. However, the main conclusion remains the same - to maximize happiness, some redistribution is good.

vidarh 12y ago
If you read the article linked in the NY Times article, it is more nuanced than that. From the abstract: "We report an analysis of more than 450,000 responses to the Gallup-Healthways Well-Being Index, a daily survey of 1,000 US residents conducted by the Gallup Organization. We find that emotional well-being (measured by questions about emotional experiences yesterday) and life evaluation (measured by Cantril's Self-Anchoring Scale) have different correlates. Income and education are more closely related to life evaluation, but health, care giving, loneliness, and smoking are relatively stronger predictors of daily emotions. When plotted against log income, life evaluation rises steadily. Emotional well-being also rises with log income, but there is no further progress beyond an annual income of ~$75,000. Low income exacerbates the emotional pain associated with such misfortunes as divorce, ill health, and being alone. We conclude that high income buys life satisfaction but not happiness, and that low income is associated both with low life evaluation and low emotional well-being."
seunosewa 12y ago
It's a unfortunate that an expensive business decision was made based on an article that wrongly interpreted a graph.
- stared 12y ago
  As I said, the conclusion remains the same. $50k->$70k is a huge boost, with a very practical impact (especially given some constant living costs), while e.g. $150k->$170k is a very gradual change.

elcct 12y ago

Minimum wage is in favour of big corporations because it raises barrier of entry for the competition.

whybroke 12y ago

Interesting that paying marginally adequate wages is allegedly a difficult business decision from a competitive standpoint (although judging from the steady rise in profitability in industries across the board, I doubt it). But if so, perhaps running trade deficits for decades on end with nations that brutalize their work force was not such a good idea after all.

netcan 12y ago

Interesting. A couple of thoughts: (1) It effectively sets a certain bar at the company. There are no poor people working here. There are no disappointing dead ends. All jobs here are decent, by general standards. I'm sure that's culturally significant within the company. (2) It sets a certain bar for employee productivity. (3) The famous 'pirate codes' usually had rules for distributing booty. Captains got between 2 and 10 shares, while regular crewmen got 1. It's striking how much more CEOs get compared to pirate captains.

grecy 12y ago
> There are no poor people working here. There are no disappointing dead ends. All jobs here are decent, by general standards. I'm sure that's culturally significant within the company. I just visited Australia for the first time in 9 years, after having lived there for the first 23 years of my life. I've been living in North America (Canada and the US) Your comment is exactly how Australia feels. There are virtually no poor people, nobody is left behind. Even people working "dead end jobs" like retail are perfectly happy. I would say they're happier than "career" people in North America.
- puranjay 12y ago
  I went to see some of my cousins in Australia earlier this year (and well, to watch the world cup). This is what surprised me as well. Maybe it was the weather, or maybe it was the atmosphere of the world cup, but everywhere in Australia felt like a vacation. People were generally happy, welcoming and relaxed. I've never seen anything like that after traveling through more than 20 countries (not in Europe though).
- maxerickson 12y ago
  A significant confounder is that resource exports are a major fraction of the Australian economy: http://www.tradingeconomics.com/australia/exports-of-goods-and-services-percent-of-gdp-wb-data.html http://www.tradingeconomics.com/australia/exports-of-goods-a... I'm not insisting that policy differences are necessarily less important than that, but it's possible that Australia simply has better outcomes to select from.

chernevik 12y ago

I'm curious how quickly the company's manpower model already progresses people from entry levels to more productive and higher paid roles. Can they do this by making their people more productive, and thus worth more in the labor market or as part of the company? And if so, how are they going to do that? That's a workforce-led business model: We're going to provide value in the market place by taking people and training them up to do productive stuff for customers. We're basically investing in training people to enhance their productivity. So what would be really interesting is if Gravity were to say, if we've got people stuck at entry level after two years, then we're doing something wrong and we've got figure out how to grow them better. That is a model that all managements and investors would want to emulate. And then you're paying people more not out of noblesse oblige but because they are literally empowered to go make more. It's a much better model, economically and morally, than CEOs and investors paying more because they're such great people. Probably most profitable and growing companies are already doing this to one degree or another. Your best workforce strategy is finding good people and then making them better.

tropchan 12y ago

This is amazing, the new triple bottom-line company...? not for the environment but for the people. Interesting times call for innovation everywhere. Go Pro announced the opposite news today as highest compensated CEO (sold shares). Personally, I think companies that have decent margins should create a culture of well paying jobs and high value for their employees. I guess this already occurs with companies like FB, Google, Banks, etc.