Minimum Salary: $70-thousand
In April 2015, Dan Price, CEO of Gravity Payments, raised the minimum salary at his 120-person company to $70,000 a year. For contrast, a worker being paid federal minimum wage makes just $15,000 a year.
To pay for the minimum salary, he cut his own nearly $1 million annual pay to $70,000 as well. In an interview with CNN, Mr. Price explained that cutting his salary to pay his employees more helps them perform better.
But then there’s the rest of the story . . . as detailed in Inc Magazine in an article entitled Here’s What Really Happened at That Company That Set a $70,000 Minimum Wage.
The sub-head: “Dan Price decided to pay all 120 employees at least $70,000. Grown men cried. Profits soared. Then things got really crazy.”
The article written by contributing editor Paul Keegan begins:
Before Dan Price caused a media firestorm by establishing a $70,000 minimum wage at his Seattle company, Gravity Payments… before Hollywood agents, reality-show producers, and book publishers began throwing elbows for a piece of the hip, 31-year-old entrepreneur with the shoulder-length hair and Brad Pitt looks… before Rush Limbaugh called him a socialist and Harvard Business School professors asked to study his radical experiment in paying workers… an entry-level Gravity employee named Jason Haley got really pissed off at him.”
Jason Haley helped Dan Price realize that being paid a low “market rate” for a role, while it was accepted practice, it wasn’t fair if you couldn’t live on that kind of salary. The article continues:
Thus began Price’s transformation from classic entrepreneur to crusader against income inequality, set on fundamentally changing the way America does business. For three years after his face-off with Haley, Price handed out 20 percent annual raises. Profit growth continued to substantially outpace wage growth. This spring, he spent two weeks running the numbers and battling insomnia before making a dramatic announcement to his 120-member staff on April 13, inviting NBC News and The New York Times to cover it: Over the next three years, he will phase in a minimum wage of $70,000 at Gravity and immediately cut his own salary from $1.1 million to $70,000 to help fund it.”
So far the experiment has worked. Moreover, all the publicity boosted new customer inquiries from “30 per month to 2,000 within two weeks.” It saves a fortune in typically high customer acquisition costs.
We still don’t know how the story will end, but for Gravity, we hope it will be a happy ending, one that other businesses can learn from and ultimately adopt.