The CEO of Gravity Payments in Washington state announced a few months ago that he was going to pay all of his employees a minimum of $70,000 per year — regardless of what position they held in the company. Dan Price was going to be part of the vanguard in the fight against income inequality. If all went well, then history would record him as a leading general in the war against human nature.
The New York Times caught up with Mr. Price, and it appears as though human nature is a worthy adversary. The newspaper reported July 31:
Two of Mr. Price’s most valued employees quit, spurred in part by their view that it was unfair to double the pay of some new hires while the longest-serving staff members got small or no raises. Some friends and associates in Seattle’s close-knit entrepreneurial network were also piqued that Mr. Price’s action made them look stingy in front of their own employees. …
“Income inequality has been racing in the wrong direction,” he said. “I want to fight for the idea that if someone is intelligent, hard-working and does a good job, then they are entitled to live a middle-class lifestyle.”
If someone is “entitled” to a “middle-class lifestyle,” then how does one define “middle-class lifestyle”?
Why does Mr. Price seem to believe it is his role as CEO to play God by defining the kind of material comforts humans are “entitled” to receive?
Why does Mr. Price — a businessman — seem to mistake the wages he pays as a representation of an employee’s value as a person instead of the value their labor brings to the company?
Mr. Price’s intentions are well and good (he took a large pay cut to try and make the numbers work), but they are clouded by intellectual gobbledygook, economic ignorance, and a fundamental misunderstanding of human nature. To make matters worse, he violates his own litmus test for the middle-class lifestyle “entitlement” by issuing a blanket $70,000 minimum wage to employees who may not be “hard-working.”
The Times continued:
Maisey McMaster was also one of the believers. […] She helped calculate whether the firm could afford to gradually raise everyone’s salary to $70,000 over a three-year period, and was initially swept up in the excitement. But the more she thought about it, the more the details gnawed at her.
“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,” she said. To her, a fairer proposal would have been to give smaller increases with the opportunity to earn a future raise with more experience.
A couple of days after the announcement, she decided to talk to Mr. Price.
“He treated me as if I was being selfish and only thinking about myself,” she said. “That really hurt me. I was talking about not only me, but about everyone in my position.”
Already approaching burnout from the relentless pace, she decided to quit.
The new pay scale also helped push Grant Moran, 29, Gravity’s web developer, to leave. “I had a lot of mixed emotions,” he said. His own salary was bumped up to $50,000 from $41,000 (the first stage of the raise), but the policy was nevertheless disconcerting. “Now the people who were just clocking in and out were making the same as me,” he complained. “It shackles high performers to less motivated team members.”
The reason why many “intelligent” and “hard-working” individuals do not live a “middle-class lifestyle” is not because CEOs make a lot of money — it’s because humans are complex, spiritual beings with free will.
Some people invest their cash in fancy cars or expensive vacations, while others obtain human capital. One man puts in 70 hours a week at his job while a team member clocks out a 5:00 p.m. every day. One woman decides to raise children and work part time from home, while another devotes herself solely to her career. One man spends $1,000 per year on Starbucks coffee while the other puts it into an IRA so he can start his own coffee empire by the age of 40.
The businessman’s job is not to try and put a dollar sign on someone’s worth as a person, but instead to try and figure out how valuable their work is to the company.
Mr. Price’s compassion may give Gravity Payments short-term branding as the company with a big heart, but the biggest heart in the world is of little use if warped ideas swirling around the brain bring about an untimely death. Regardless, I am looking forward to a follow-up by The Times that takes place five years down the line.