Remember That Company With the $70K Minimum Wage? 5 Years On, the Results Suggest More Businesses Should Follow Suit
Looks like Gravity Payments CEO Dan Price proved the doubters wrong
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By Jessica Stillman
Remember how five years ago, Dan Price, the CEO of Seattle-based payment processing company Gravity Payments, raised all of his 120 employees' salary to at least $70,000 a year, taking a huge pay cut to make it happen?
A media firestorm resulted, including here in Inc.com, much of it focused on negative blowback from the decision, including executive resignations, sniping from local startups, and a lawsuit from Price's co-founder (also his brother). Rush Limbaugh called Price "a communist." All in all, the coverage painted a messier picture than a simple feel-good story of a generous CEO doing good by his employees.
Then the media moved on. It's been a tumultuous five years, so you probably haven't given the story much thought in the intervening half decade. But one BBC reporter with a long memory recently decided to check back in with Price (hat tip to awesome blog Kottke). How have things shaken out at Gravity Payments?
Putting the American Dream back within reach
In short, the company is doing just fine, thank you, and as Stephanie Hegarty reports, not just by the usual financial metrics:
The headcount has doubled and the value of payments that the company processes has gone from $3.8bn a year to $10.2bn.
But there are other metrics that Price is more proud of.
"Before the $70,000 minimum wage, we were having between zero and two babies born per year amongst the team," he says.
"And since the announcement — and it's been only about four-and-a-half years — we've had more than 40 babies."
There have been other benefits besides this baby boom. "More than 10 percent of the company have been able to buy their own home, in one of the U.S.'s most expensive cities for renters. Before the figure was less than 1 percent," Hegarty adds.
Another way to put that is employees are now actually living secure, middle-class lives and reaching markers of success like owning a home and having kids that were once assumed to be within grasp of most dedicated full-time workers. In short, Gravity Payments put the American Dream back within financial reach for its employees.
Employees responded to this largesse not by slacking off but by working harder. "When money is not at the forefront of your mind when you're doing your job, it allows you to be more passionate about what motivates you," one told Hegarty. Senior staff say they're less stressed than before the pay hike.
Not only are employees more productive, they are also flourishing outside the office, according to Price. Team members have lost huge amounts of weight, been able to cut their commutes, spent more time with their families, and helped loved ones pay off debt.
"We saw, every day, the effects of giving somebody freedom," he says.
Could more companies make more by raising wages?
This is only one story, of course (and as Kottke notes, there are reasons to take Price's word with a grain of salt, given his ex-wife accused him of domestic violence), but numbers don't lie. The business is growing and profits are up. Employees seem to be thriving.
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A $70,000 minimum wage isn't possible or right for every business but, based on this experiment, more companies might want to consider raising salaries for practical, as well as moral, reasons.
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