Should $70,000 be the new minimum wage?
Minimum wage is a huge topic — now even more than normal as the presidential election kicks into gear. Pushes to increase the minimum wage in key industries, such as fast food, and cities like Seattle have put a spotlight on the difficulties people face making just $7.25 an hour or even a few bucks more. With the cost of housing, education and food rising around the country, it’s becoming harder and harder for families to make ends meet on what was once considered livable wages.
One Seattle based company wants to do something about it. Dan Price, who started credit card transaction company Gravity Payments in 2004, recently took a serious look at how hard it was for his employees making even $40,000 a year to thrive. After thinking it over, he decided to make a huge move: Over the next three years, every employee’s salary will be raised to at least $70,000. That’s everyone — clerks, receptionists, customer service reps, they will all be making $70,000. This is nearly $20,000 more than the median income in the U.S. which is right arounf $52,250.
So why $70,000? Studies have found that on average $70,000 per year is the salary point at which people stop seeing a significant difference in their quality of life. Although that number changes a little from city to city, across the board it’s around the $70,000 threshold where more money makes less of a difference. And that’s why Price is going to be taking a hit to his own $1 million annual salary, lowering it to $70,000 per year in order to raise his employee’s salaries. He’ll also be using about 80% of the company’s anticipated profits, a bold move.
His employees were stunned. As Phillip, a 29-year-old member of the team, told the New York Times, “My jaw just dropped. This is going to make a difference to everyone around me.”
While Price’s decision to cut his own salary and raise those of his employees is awesome, it’s far from the norm. The gap between the highest and lowest paid in the U.S. is pretty staggering, with a chief executive making about 300 times more than an average worker. And although Price says he doesn’t intend for his decision to be a major political statement — he’s just trying to help his employees and make their lives better — the question is now whether other companies could follow his lead.
Sadly, the answer is probably no. Although it’s realistic for the relatively small Gravity Payments to increase the paychecks of around 70 employees to get them up to the $70,000 threshold, smaller and larger companies would have a much harder time doing so. And even for those companies that would be able to take that kind of hit at the top to more equally share the profits, such as Wal-Mart, there’s just no track record that would indicate a shift towards this kind of policy.
But the example Price is setting is still important, and it’s still amazing that he’s taken this step to ensure his employees have a high quality of life. If he’s able to make this work, it could set a precedent for other companies who want to take care of their employees, much like Ben & Jerry’s with their caps on top level salaries and dedication to paying livable wages. We hope more companies follow Price’s lead, but right now we’re just happy for those surprised and thrilled employees who are about to see a pretty awesome change in their paychecks.