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