5 ms·

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?

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?