Entrepreneur Of The Year, Dan Price Sets $70k A Year New Minimum Wage In His Company. Good Idea Or NIGHTMARE?
Is Dan Price really doing everyone a favor by raising the minimum wage of his employees to $70,000? Well he definitely is getting a lot of press for his decision. In one sentence he says he's a Capitalist and in another he makes a comment that he supports wage equality. As I reviewed his business, it's obvious he's a brilliant business man. I look forward to seeing where he is in the future. At first glance he looks like someone who could win 'Boss Of The Year' award. His current company, Gravity Payments, did $6.5 billion dollars in transactions as a merchant card processor. In an article in the NYTimes it's noted that he has $2.2 million in profits. He won Entrepreneur Of The Year and is named as one to watch in business.
But will his big heart get him into trouble?
First of all, taking 80% of his profits so that he can pay everyone a minimum of $70,000 per year is a big risk for the entire company. But a bigger risk is the notion that wage equality, where everyone starts earning the same wage, will build a strong company. The reality is this- not everyone delivers the same value to the company. While the entry level clerk is valued, honored and important, they are not adding the same value as a high level sales rep or manager. Common sense shows that paying each the same would never build a strong infrastructure, let alone a healthy mindset in the culture. But this really doesn't appear to be what Dan is attempting to do. That would be communism, not capitalism. He states he wants to offer opportunity for all. That I applaud! And I highly endorse. But this idea that everyone should start out at $70,000 I personally think is going to bite him in the behind.
He could have made a great impression by simply raising their pay a % above industry standards and give them all an opportunity to grow their pay, over the next three years, to the $70,000. Everyone in his culture is already working together powerfully. With more than 120 employees, he'd win with a plan like this and his vision would most likely be achieved, for everyone to make more, be happier and enjoy their job AND he'd protect his bottom line. Equal opportunity for all is always profitable. But raising your MINIMUM wage that high is very dangerous.
I love that he lowered his own salary to that of his employees. I'm sure he's enjoyed himself the last few years when his salary was $1 million per year. Once you have a house that's paid for, a car that's taken care of, you're debt free and comfortable, you can easily live comfortably on less. It's a commendable move. And one I support.
But the question I have is did he make a wise decision for the company overall, by making his claim that everyone would be making a minimum of $70,000 in less than 3 years? Only time will tell.
The tax hike per employee from $50k to $70k alone, with 120 people could hit him in the backside. He might have been wiser to increase their pay with things that aren't taxable, rather than making a national declaration that his new minimum wage is now going to be $70,000. But even if he triples his profits in the next 3 years, is it wise to pay your entry workers that level of income?
My personal opinion is a resounding NO. It doesn't help and it will actually hinder some people by breeding entitlement. When you jump from $45,000 to $70,000 per year and you worked hard for that, it's a reward, one well worth working for. When someone just raises your income by $30,000 in 2 years for the same amount of work, now you're not teaching reward, hard work or capitalism, you're actually teaching people that they are entitled to more with less effort.
One KEY FORMULA in the happiness equation that Dan Price seems to be missing is that studies do show people are happier when they make more than $70,000 but they ALSO are happier when they work hard, put in a good days work, strive to do better and be better and are then rewarded. When you simply give a $45,000 wage earner a big wage hike, and you then have to give your $70,000 wage earner a $30,000 pay increase as well ( to prevent jealousy, unfairness and more) you're opening up a can of worms the media doesn't even seem to be talking about!
Equal opportunity for all- no matter what your race, creed, gender or disability. Not equal pay for all OR taking 80% of profits and putting it back into employees paychecks. Honor your team, pay them above what the industry would typically pay, but never at the expense of everyone suffering, because the expectations turn into entitlement and generosity turns into a downfall where the company expenses can't be paid. Keep the company moral high. Give everyone opportunity to rise to the top. Empower them with other non taxable benefits they can earn. But be wary of this 'here's $30,000 more just because I think you deserve it for the same amount of work' mindset. I personally think it will turn into a nightmare.
What are your thoughts on this topic? I'd like to know!
Sandi Krakowski
