The standard retort to the advocates is “Then why not raise the minimum wage to $20 or $25 or $50 or even $100 dollars?”
Well, a “true believer” has. To $70/hour! There’s now a “real world” experiment that has tested those models dreamed up in the “ideal world.”
In June, the CEO of the Seattle-based credit card processing firm Gravity Payments, 31-year-old Dan Price, raised the salaries of its 120 employees to a minimum of $70k/year. To pay the bill, Price cut his $1M/year salary and invested last year’s $2.2M profits into his salary scheme.
Why? Price is deeply concerned about the wage gap and income inequality.
Sounds pretty good, no? Price really “cares” about people on the bottom rungs and is putting his $$$s where his mouth is.
Economists predict that increases to the minimum wage ultimately will cause business to decline (fewer customers due to price increases), jobs will be lost (less income to pay for those jobs), and fewer workers left behind who must labor harder.
So, what happened in the real world?
According to the New York Times, Price lost customers who in this slow economy can ill-afford to absorb the increased costs. They viewed Price’s decision as political, one that could lead to higher costs to subsidize Price’s salary scheme.
Price also lost two employees—his “most valued,” he says—who quit. Why? Again, according to the New York Times, newer, less-skilled hires ended up receiving larger salary increases than those who had been working longer for the company.
One of those two, Gravity’s financial manager—Maisey McMaster—approached Price with her concerns about his wage scheme. McMaster reports that Price treated her as if she was being selfish:
He gave raises to people who have the least skills and are the least equipped to do the job, and the ones who were taking on the most didn’t get much of a bump. That really hurt me. I was taking about not only me, but everyone.
Now the people who were just clocking in and out were making the same as me. It shackles high performers to less-motivated team members.
I’m working as hard as I ever worked to make it work. I’m renting out my house right now to try to make ends meet myself.
Every day [Price] and his four brothers and one sister rose as early as 5 a.m. to recite a proverb, a psalm, a Gospel chapter and an excerpt from the Old and New Testaments. Home-schooled until he was 12 and taught to accept the Bible as the literal truth, Mr. Price also listened to the Rush Limbaugh show for three hours a day—never imagining he would one day be the subject of a rant by the host.
Let the discussion begin…
To read the New York Times article, click on the following link: