In 2015, the co-founder and CEO of a card payments company in Seattle introduced a minimum salary of $70,000 for all of his 120 staff and personally took a pay cut of $1m. Five years have gone by since then and he’s still on the minimum salary and says it was worth it.
Dan Price was with his friend Valerie, hiking in the Cascade mountains over Seattle when he had an uncomfortable revelation.
At 31, Price was a millionaire. His company, Gravity Payments, which he started as a teenager, had around 2,000 customers and an estimated worth of millions of dollars. Although he was earning $1.1m a year, Valerie brought home to him that a lot of his staff must be struggling and he decided to change that.
Dan read a study by the Nobel prize-winning economists Daniel Kahneman and Angus Deaton, that looked into how much money an American needs to be happy. From then on he promised that he would significantly raise the minimum salary at Gravity.
CEOs in the US earned 20 times more than their average worker in 1965, but by 2015 it had risen to 300 times more (in the UK, the bosses of FTSE 100 companies now earn 117 times the salary of their average worker).
Following some calculations, he arrived at the figure of $70,000. He then realised that he would not only have to slash his own salary, but also would need to mortgage his two houses and give up his stocks and savings.
When he gathered his staff together and gave them the news, Dan had expected more of a celebration, but at first, the announcement was rather anti-climacted, Price says. He had to repeat himself before the scale of what was happening was realised by staff.
A third of those employed at the company would have their salaries doubled immediately.
Two senior Gravity employees ended up resigning in protest, unhappy that the salaries of junior staff had jumped to $70,000 overnight and claimed that the change would make them lazy, and the company uncompetitive.
This hasn’t happened.
The director of sales at Gravity, Rosita Barlow, says that since salaries were raised junior colleagues have been pulling more weight.
Senior staff are under less pressure, have found their workload reduced and can do things like take all of the holiday leave of which they are entitled to without feeling stresseed.
The number of staff at the company has doubled and the value of payments that the company processes have gone from $3.8bn a year to $10.2bn.