Just three months ago, Dan Price was a progressive hero. To much fanfare, Price, CEO of Seattle-based Gravity Payments, announced he was raising the minimum salary for employees of his company to $70,000, and taking a $930,000 pay cut himself to help pay for his new minimum wage. Three months later, the experiment does not go well.
Price has had to rent out his own house to help cover his bills. In addition, the New York Times reports Gravity lost two of its most valuable employees whose departure was “spurred in part by their view that it was unfair to double the pay of some new hires while the longest-serving staff members got small or no raises.”
Most of the company’s profits, $2.2 million last year, were reinvested in the company not to expand or innovate, but to cover the new minimum wage.
Price’s brother and Gravity co-founder, Lucas Price, has also filed a lawsuit against the company that it, thanks to the new higher payroll, finds itself having difficulty paying legal fees for.
At the time of his announcement, Price, 31, was praised for his forward thinking. Time magazine reported “Price’s move was born out of a desire to bring more income equality to his workforce.”
Price told Time, “To me, once you know the right thing to do, and it’s the right thing for everybody involved and it’s going to be beneficial to everyone, it becomes a moral imperative to actually do it.”
According to the Times, the Seattle business community was split on the decision at the time, before Gravity’s current financial problems.
Roger Reynolds, a co-owner of a wealth management company, said his discussion of the pay plan with Mr. Price got heated. “My wife and I got so frustrated with him at a cocktail party, we literally left,” said Mr. Reynolds, who complained that Mr. Price unfairly accused him of measuring his self-worth solely in terms of money and trying to hold somebody else down. Everyone may have equal rights, but not equal talent or motivation, Mr. Reynolds said.
Price’s difficulties haven’t just been from outside the company. Maisey McMaster was on board, a true believer in the new pay scale. But soon after implementation the reality of the situation hit her and her attitude changed.
The Times reports:
Maisey McMaster was also one of the believers. Now 26, she joined the company five years ago and worked her way up to financial manager, putting in long hours that left little time for her husband and extended family. “There’s a special culture,” where people “work hard and play hard,” she said. “I love everyone there.”
She helped calculate whether the firm could afford to gradually raise everyone’s salary to $70,000 over a three-year period, and was initially swept up in the excitement. But the more she thought about it, the more the details gnawed at her.
“He gave raises to people who have the least skills and are the least equipped to do the job, and the ones who were taking on the most didn’t get much of a bump,” she said. To her, a fairer proposal would have been to give smaller increases with the opportunity to earn a future raise with more experience.
A couple of days after the announcement, she decided to talk to Mr. Price.
“He treated me as if I was being selfish and only thinking about myself,” she said. “That really hurt me. I was talking about not only me, but about everyone in my position.”
Already approaching burnout from the relentless pace, she decided to quit.
For the time being the $70,000 minimum wage stands, but for how long, or for how long Gravity Payments can survive, is up in the air.