Imagine having a raise of 100% of your annual income. What will you do? Buy a new car, a new home, or pay off your debt? Let’s see why the CEO of Gravity Payments raised his employees’ annual income and how it changed their lives.
Dan Price said that his company would raise all employees’ salaries to at least $70,000 per year over three years, citing the necessity to protect them against unexpected expenses.
The $70,000 Decision
Dan Price got international headlines in 2015 when he declared that his company would implement a $70,000 minimum wage and that he would cut his $1 million income to pay for it. While many lauded Price’s actions as a courageous step toward addressing income inequality, others criticized him as a radical socialist whose experiment was doomed to fail.
However, beneath the headlines and controversy was a much more nuanced and personal narrative, one of an entrepreneur who saw that he could no longer claim to be honoring his ideals if he continued to pay his employees less than a livable wage. How can a corporation be dedicated to assisting small businesses to fulfill its objective if the individuals charged with helping those businesses cannot meet their own basic needs?
Price’s radical decision started in 2011 with his interaction with one of his employees. Haley, a 32-year-old phone technician, earned approximately $35,000 per year. He was grumpy. Price had seen it and approached Haley when he saw him outdoors on a smoke break. After a conversation with his distressed employee, Price found out how Haley truly felt. Haley felt undervalued and ripped off.
Price was stunned by Haley’s reaction since he is a very reserved person. This sort of outburst was unbecoming of his character. Price then explained that the compensation was based on market rates and that if Haley could provide different data, Price would gladly review. He emphasized that there was no intention of defrauding them. Haley was skeptical and believed that any data would be irrelevant to his problem.
Haley asserted that Price’s motives were nefarious. Price went away, stunned and inconsolable; he felt terrible about the whole ordeal. He went on to complain to family and friends.
Price realized that Haley was correct, not only about his underpayment but also about Price’s motives.
I was so traumatized by the recession that I purposefully and proudly harmed my team.Dan Price
Thus began Price’s metamorphosis from traditional entrepreneur to campaigner against income disparity, determined to profoundly alter the way America does business. Price gave annual raises of 20% to employees for three years following his confrontation with Haley. Over the next three years, he will phase in a minimum wage of $70,000 at Gravity and immediately cut his salary from $1.1 million to $70,000 to help fund it. (Source: Gravity Payments)
Impact of the Income Change
The outpouring of support was unprecedented, with 500 million interactions on social media and NBC’s video becoming the most shared in the network’s history. Gravity was inundated with stories from joyful employees everywhere who received unexpected raises from converted managers from other organizations.
Price definitely touched a nerve with his move, he had also accelerated a debate that is now raging across the American landscape, from presidential forums to barrooms to fast-food establishments. How much – or, more precisely, how little – should workers be compensated?
As a result, people are more productive. According to the CEO of Gravity Payments, they are also flourishing beyond the office. (Source: Inc)