[Marxism] Praise and Skepticism as One Executive Sets Minimum Wage to $70, 000 a Year

Louis Proyect lnp3 at panix.com
Mon Apr 20 09:51:07 MDT 2015


NY Times, Apr. 20 2015
Praise and Skepticism as One Executive Sets Minimum Wage to $70,000 a Year
By PATRICIA COHEN

When Dan Price announced last week that he would cut his own pay and 
profits to make it possible to raise the minimum wage at Gravity 
Payments, 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 the responses on social media and 
elsewhere were positive — punctuated with labels like “hero” and 
hand-clapping emojis — there were also a number of skeptics and naysayers.

Sandi Krakowski, an author and 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 the 
School of Business and Economics at North Carolina A&T State University, 
wrote in an email: “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.”

Perhaps the most prominent attacker was Rush Limbaugh, the right-wing 
radio host, who labeled the move “pure, unadulterated socialism, which 
has never worked.”

He added: “That’s why I hope this company is a case study in M.B.A. 
programs on how socialism does not work, because it’s going to fail.”

Most critics were not as ideological as Mr. Limbaugh but were 
nevertheless put off by Mr. 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.

During an interview with Mr. Price on MSNBC’s “Morning Joe,” the co-host 
Mika Brzezinski noted that people would probably say “you’re a terrible 
manager.”

Another guest, Sam Stein, an editor at The Huffington Post, was simply 
flummoxed. “Are you crazy?” he asked.

Maybe, Mr. Price conceded.

But on the whole, he dismissed the back-seat business advice as 
misguided. Proudly calling himself a capitalist, Mr. Price, the founder 
and chief executive of Gravity, argued that the new salary structure 
would benefit his firm in the long run even as it would help, more 
broadly, to highlight the corrosive effects of income inequality in 
American society.

Dan Price, C.E.O. of Gravity Payments, announcing the new base salary. 
“Is anyone else freaking out right now?” he said. “I’m kind of freaking 
out.”One Company’s New Minimum Wage: $70,000 a YearAPRIL 13, 2015
At the same time, he criticized some established business practices, 
like basing chief executive pay on what other chief executives earn. 
“It’s crazy,” said Mr. Price, who is cutting his million-dollar salary 
to help finance raises for more than half of his 120-person staff.

Howard M. Anderson, a venture investor who teaches entrepreneurial 
management at Harvard Business School, agreed that Mr. 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.

Chief executives bring in compensation consultants to examine what those 
at comparable companies are earning, Mr. Anderson said, but the process 
is biased, because those consultants tend to look almost exclusively at 
the highest-paid executives.

“C.E.O. compensation has become absurd,” Mr. Anderson said.

Michael Strain, an economist at the American Enterprise Institute, a 
conservative research group in Washington, said the undercurrent of 
unease probably stemmed less from Mr. Price’s actions themselves than 
from concerns that measures to enforce limits would do more harm than good.

“A lot of people have the sense that this may work for this one firm,” 
he said, “but it is nothing we should take general lessons from.”

Diana Furchtgott-Roth, an economist at the conservative Manhattan 
Institute for Policy Research, said that 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 
janitor or payroll servicer, she noted. If Gravity is paying 
above-market wages, then, she said, Mr. Price “is running it more as a 
charitable organization, because he could get people for less.”

By contrast, other economists, including some conservatives, said they 
thought Mr. Price’s move was very shrewd — for Gravity.

“This is going to be great for his business,” said Tim Kane, an 
economist at the conservative Hoover Institution at Stanford University. 
“It will reduce turnover, increase morale and help him build an even 
greater company,” he said. “But if everybody did it, it wouldn’t have 
the consequences.”

Jeffrey Bussgang, a venture capitalist and a senior lecturer at Harvard 
Business School, agreed that Mr. Price’s move would help him not only 
retain talented workers but also propel Gravity Payments into the ranks 
of admired companies, a widely desired perch in the business world.

Some of that has already happened. Three days after the announcement, 
Mr. Price’s firm, Gravity Payments, heard from more than 3,500 hopeful 
job applicants and had signed up several new clients, according to Ryan 
Pirkle, a company spokesman.

Mr. Bussgang noted that setting a high floor under companywide pay was 
the kind of decision that only an owner without any outside investors 
could easily pursue.

“I sit on a dozen private company boards,” he said, and if a chief 
executive proposed a plan similar to Mr. Price’s, “let’s just say there 
would be robust discussion at the board level and it would be a 
difficult one.”



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