"Praise, sneers as executive raises staff pay to $70k; Credit card processor’s high minimum wage sparks heated debates" by Patricia Cohen New York Times April 20, 2015
NEW YORK — When Dan Price said last week that he would cut his own pay and profits to make it possible to raise the minimum wage at his credit card processing company in Seattle to a hefty $70,000 a year, he had little idea of the whirlwind it would stir.
While the overwhelming majority of responses on social media and elsewhere were positive — punctuated with labels like “hero” and hand-clapping emojis — there were also skeptics and naysayers.
Sandi Krakowski, a Facebook marketing expert, posted on Twitter: “His mind-set will hurt everyone in the end. He’s young. He has a good intent, but wrong method.”
Patrick R. Rogers, an associate professor of strategic management at North Carolina A&T State University, wrote in an e-mail: “The sad thing is that Mr. Price probably thinks happy workers are productive workers. However, there’s just no evidence that this is true. So he’ll improve happiness, only in the short term, and will not improve productivity. Which doesn’t bode well for his long-term viability as a firm.”
Yeah, Henry Ford got it all wrong.
Perhaps the most prominent attacker was Rush Limbaugh, the right-wing radio host, who labeled the move “pure, unadulterated socialism, which has never worked.”
“That’s why I hope this company is a case study in MBA programs on how socialism does not work, because it’s going to fail.”
Most were not as ideological as Limbaugh but were nevertheless put off by Price’s deviation from trusting in the market, both to set wages (his own as chief executive and that of his employees) and to maximize his own profits. Overpaying workers may make them lazy and is likely to inspire resentment among colleagues who once sat on the higher end of the pay divide, they warned.
Funny how that doesn't hold true for ob$cenely overpaid CEOs.
During an interview with Price on MSNBC’s “Morning Joe,” co-host Mika Brzezinski said people would probably say “you’re a terrible manager.”
Another guest, Sam Stein, a reporter at The Huffington Post, was simply flummoxed. “Are you crazy?” he asked.
Maybe, Price conceded. But he dismissed the back-seat advice as misguided. Proudly calling himself a capitalist, Price, founder and chief executive of Gravity Payments, argued the new salary structure would benefit his firm in the long run even as it would help, more broadly, to highlight the corrosiveness of income inequality.
He criticized some established business practices, like basing CEO pay on what other chief executives earn. “It’s crazy,” said Price, who is cutting his million-dollar salary to help finance raises for more than half of his 120-person staff.
That's how they rationali$e to us.
Howard M. Anderson, a venture investor who teaches entrepreneurial management at Harvard Business School, agreed Price was on to something in noting that the pay for chief executives and others at the very top is not really set by impersonal market forces.
CEOs bring in compensation consultants to examine what those at comparable companies are earning, Anderson said, but the process is biased, because those consultants tend to look almost exclusively at the highest-paid executives. “CEO compensation has become absurd,” Anderson said.
Diana Furchtgott-Roth, an economist at the conservative Manhattan Institute for Policy Research, said when it comes to the labor market, ultimately, “you get what you pay for.”
Many companies with the highest wages contract out low-skill jobs like janitors, she noted. If Gravity pays above-market wages, then Price “is running it more as a charitable organization, because he could get people for less.”
Yet others, including some conservatives, said Price’s move was shrewd — for Gravity.
“This is going to be great for his business,” said Tim Kane, at the Hoover Institution. “It will reduce turnover, increase morale. . . . But if everybody did it, it wouldn’t have the consequences.”
Three days after the announcement, Gravity had heard from 3,500 job applicants and signed up several new clients, said Ryan Pirkle, a spokesman.
My price to pay is $2 a day plus my time.