Gravity Payments CEO Dan Price Announces $70,000 Company Minimum Wage
Concerned about growing economic inequality, the CEO of a credit card processing company is taking a nearly $1 million pay cut and raising the firm’s minimum salary to $70,000.
The New York Times reports 30-year-old Dan Price, CEO of Seattle-based Gravity Payments, surprised his 120 employees Monday when he announced he plans to raise the salaries of even the lowest-paid clerks and customer sales representatives to $70,000 per year. Currently, the average company employee earns about $48,000.
“Is anyone else freaking out right now?” Price asked after his jubilant workers calmed down. “I’m kind of freaking out.”
Price, who founded Gravity Payments when he was 19 years old, will help offset the cost of the company-wide raise by slashing his own salary from nearly $1 million to $70,000. The rest will come out of the firm’s profits, which are projected at $2.2 million for 2015. Price expects to apply 70 to 80 percent of profits toward higher salaries.
“There’s greater inequality today than there’s been since the Great Recession,” Price told The Huffington Post on Tuesday. “I’d been thinking about this stuff and just thought, ‘It’s time. I can’t go another day without doing something about this.’”
Price told the Times he began considering how he could do his part to combat income inequality after reading an article which basically asserted that money can indeed buy happiness, up to about $75,000 per year.
Under Price’s plan, about 70 company employees will get raises. Around 30 people will see their paychecks double.
Will Price suffer as a result of his ambitious plan?
“There will be sacrifices,” he told the Huffington Post, “but once the company’s profit is back to the $2.2 million level, my pay will go back. So that’s good motivation.”
“This is a capitalist solution to a social problem,” he added. “I think it pays for itself, I really do.”
Price doesn’t see his move as an act of charity, but rather as an investment, as workers—in theory—will perform better, motivated by their higher salaries.
The story highlights what is arguably the most pressing economic issue affecting the United States today, economic inequality and the yawning—and growing—gap between the top income earners and everyone else. The average US CEO earns more than 350 times as much as the average worker, by far the largest disparity in the world.
US wealth inequality has reached levels unseen since the Great Depression. According to a 2014 study by Emmanuel Saez of the University of California at Berkeley and Gabriel Zucman of the London School of Economics, the richest 0.1 percent of Americans have as much wealth as the poorest 90 percent. According to 2012 figures from the non-partisan Congressional Research Service, the bottom 50 percent of US households have just 1 percent of the nation’s wealth, while the top 1 percent have 34.5 percent of the nation’s net worth.
One in six Americans is living in poverty, with even greater impoverishment among racial minorities and children—according to the Census Bureau, nearly 40 percent of black children and one-third of Hispanic children were living in poverty in 2010.
Economic mobility, long a hallmark of the ‘American Dream,’ has taken a huge hit. According to the World Bank, the odds of escaping poverty are about the same today in India as in the United States.
US income inequality, which is closely connected to wealth inequality, has also increased dramatically in recent decades, beginning with the largely discredited ‘trickle-down’ economic policies instituted by the Ronald Reagan administration, which lavished tax cuts and preferential treatment on wealthy corporations and individuals at the expense of the middle and working class and, especially, the poor. Social safety nets were shredded, even while corporate welfare reached historic levels. Successive administrations, both Republican and Democrat, have favored the rich over the poor for decades.
Today, the share of total income earned by the top 1 percent of US families has more than doubled, from 10 to 20 percent, since the late 1970s. Meanwhile, the income share of the bottom 90 percent of families has plummeted from a peak of 36 percent in the mid-1980s to 23 percent at the end of 2012.
Price hopes to impact the national debate on the issue with his bold move to raise Gravity Payments’ employee salaries to $70,000. His company’s base, Seattle, recently made headlines as the first major US city to approve, and begin implementing, a $15 per hour minimum wage, the second-highest in the world after Australia. Voters in San Francisco have also approved a hike to $15.
Gravity Payments employees certainly appreciate the raise.
“I’m completely blown away right now,” Hayley Vogt, a 24-year-old communications coordinator who currently earns $45,000, told the Times. “Everyone is talking about this $15 minimum wage in Seattle and it’s nice to work someplace where someone is actually doing something about it and not just talking about it.”