As demonstrators staged "tax day protests" across the United States demanding higher pay, Gravity Payments dramatically increased its staff's salaries, making headlines around the world. The ISO's Chief Executive Officer, Dan Price, revealed April 14, 2015, in a televised meeting that the company would pay a minimum salary of $70,000 to all employees. The plan, effective immediately, allots incremental raises over a three-year period.
"Starting today, everybody in the company that makes under $50,000 a year is automatically going to make the greater of $50,000 a year or $5,000 more than you're making today," Price said.
In examples provided, a $48,000 salary would be raised to $53,000; $43,000 and below would be increased to $50,000. Price noted that minimum salaries would be raised to $60,000 in December 2016, and $70,000 in December 2017, a number that Price stated he is "really happy about."
Gravity Payments, established in 2004, has a merchant portfolio of approximately 12,000 merchants with $6.5 billion in 2014 transaction volume. The company is headquartered in Seattle, where a minimum wage of $15 an hour became law on April 1. The trend toward a mandatory minimum hourly wage, fueled by nationwide protests and lobbying efforts, is expected to continue in major U.S. markets.
Seattle Mayor Edward B. Murray established the Income Inequality Advisory Committee (IIAC) when he assumed office in January 2013. With Co-Chairs David Rolf, President of SEIU 775MW and Howard Wright, founder and CEO of the Seattle Hospitality Group, the committee aims to address issues related to employee compensation in the Seattle business community.
Murray shared the IIAC's vision and objectives in its inaugural meeting. "We can boost the earnings of low-wage workers in a meaningful way and increase the economic activity of the region that comes with greater spending power," he said, adding that these accomplishments are possible without harming employees or eliminating jobs.
The IIAC reached its goal of raising Seattle's minimum wage; its three year program of scalable increases formed the basis for Gravity Payments' wage increase plan.
Other key initiatives in the IIAC's broad economic agenda include:
Price acknowledged that the plan involves risk but reaffirmed his commitment to bridge the pay scale gap between C-suite executives and rank-and-file workers. He voluntarily cut his $1 million salary to $70,000, which combined with approximately 75 percent of the company's projected profits, will help fund the company-wide pay raise. He plans to keep his new minimum wage until "until our profit goes back up to where it [was] before we made this policy change."
In addition to measuring profit margins, Price and his human resources team will monitor the less tangible but, in their view, equally important employee happiness meter. Price's inspiration for creating a $70,000 baseline salary was based on an article he had recently read concerning emotional well-being.
The article, "High income improves evaluation of life but not emotional well-being," by psychologists Angus Deaton and Daniel Kahneman, shared results of a Gallup survey of 4,500 U.S. residents in 2008 and 2009 and later published in a National Academy of Sciences newsletter. The authors found that pay raises considerably impact emotional health and well-being.
"[W]e confirm the contribution of higher income to improving individuals' life evaluation, even among those who are already well off," the author wrote. However, they also found the effects of income on the emotional dimension of well-being "satiate fully" at an annual income of $75,000. In addition, the authors noted that the principle was proven only in workers earning annual salaries of up to $75,000.
The principle's implementation had a discernible effect on April 14 at Gravity Payments, where the average salary is $48,000. After a few moments of stunned silence, employees erupted into cheers and gave Price a standing ovation.
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