The Price of Freedom?

The idea began percolating, said Dan Price, the founder of Gravity Payments, after he read an article on happiness. It showed that, for people who earn less than about $70,000, extra money makes a big difference in their lives.

His idea bubbled into reality on Monday afternoon, when Mr. Price surprised his 120-person staff by announcing that he planned over the next three years to raise the salary of even the lowest-paid clerk, customer service representative and salesman to a minimum of $70,000.

“Is anyone else freaking out right now?” Mr. Price asked after the clapping and whooping died down into a few moments of stunned silence. “I’m kind of freaking out.”

If it’s a publicity stunt, it’s a costly one. Mr. Price, who started the Seattle-based credit-card payment processing firm in 2004 at the age of 19, said he would pay for the wage increases by cutting his own salary from nearly $1 million to $70,000 and using 75 to 80 percent of the company’s anticipated $2.2 million in profit this year.

The average salary at Gravity Payments had been $48,000 a year. Credit Matthew Ryan Williams of The New York Times The paychecks of about 70 employees will grow, with 30 ultimately doubling their salaries, according to Ryan Pirkle, a company spokesman. The average salary at Gravity is $48,000 a year.

Mr. Price’s small, privately owned company is by no means a bellwether, but his unusual proposal does speak to an economic issue that has captured national attention: The disparity between the soaring pay of chief executives and that of their employees.

The United States has one of the world’s largest pay gaps, with chief executives earning nearly 300 times what the average worker makes, according to some economists’ estimates. That is much higher than the 20-to-1 ratio recommended by Gilded Age magnates like J. Pierpont Morgan and the 20th century management visionary Peter Drucker.

“The market rate for me as a C.E.O. compared to a regular person is ridiculous, it’s absurd,” said Mr. Price, who said his main extravagances were snowboarding and picking up the bar bill. He drives a 12-year-old Audi, which he received in a barter for service from the local dealer.

“As much as I’m a capitalist, there is nothing in the market that is making me do it,” he said, referring to paying wages that make it possible for his employees to go after the American dream, buy a house and pay for their children’s education.

Under a financial overhaul passed by Congress in 2010, the Securities and Exchange Commission was supposed to require all publicly held companies to disclose the ratio of C.E.O. pay to the median pay of all other employees, but it has so far failed to put it in effect. Corporate executives have vigorously opposed the idea, complaining it would be cumbersome and costly to implement.

Mr. Price started the company, which processed $6.5 billion in transactions for more than 12,000 businesses last year, in his dorm room at Seattle Pacific University with seed money from his older brother. The idea struck him a few years earlier when he was playing in a rock band at a local coffee shop. The owner started having trouble with the company that was processing credit card payments and felt ground down by the large fees charged.

When Mr. Price looked into it for her, he realized he could do it more cheaply and efficiently with better customer service.

The entrepreneurial spirit was omnipresent where he grew up in rural southwestern Idaho, where his family lived 30 miles from the closest grocery store and he was home-schooled until the age of 12. When one of Mr. Price’s four brothers started a make-your-own baseball card business, 9-year-old Dan went on a local radio station to make a pitch: “Hi. I’m Dan Price. I’d like to tell you about my brother’s business, Personality Plus.”

His father, Ron Price, is a consultant and motivational speaker who has written his own book on business leadership.

Dan Price came close to closing up shop himself in 2008 when the recession sent two of his biggest clients into bankruptcy, eliminating 20 percent of his revenue in the space of two weeks. He said the firm managed to struggle through without layoffs or raising prices. His staff, most of them young, stuck with him.

Mr. Price said he wasn’t seeking to score political points with his plan. From his friends, he heard stories of how tough it was to make ends meet even on salaries that were still well-above the federal minimum of $7.25 an hour.

“They were walking me through the math of making 40 grand a year,” he said, then describing a surprise rent increase or nagging credit card debt.

“I hear that every single week,” he added. “That just eats at me inside.”

Mr. Price said he wanted to do something to address the issue of inequality, although his proposal “made me really nervous” because he wanted to do it without raising prices for his customers or cutting back on service.

Of all the social issues that he felt he was in a position to do something about as a business leader, “that one seemed like a more worthy issue to go after.”

He said he planned to keep his own salary low until the company earned back the profit it had before the new wage scale went into effect.

Hayley Vogt, a 24-year-old communications coordinator at Gravity who earns $45,000, said, “I’m completely blown away right now.” She said she has worried about covering rent increases and a recent emergency room bill.

“Everyone is talking about this $15 minimum wage in Seattle and it’s nice to work someplace where someone is actually doing something about it and not just talking about it,” she said.

The happiness research behind Mr. Price’s announcement on Monday came from Angus Deaton and Daniel Kahneman, a Nobel Prize-winning psychologist. They found that what they called emotional well-being — defined as “the emotional quality of an individual’s everyday experience, the frequency and intensity of experiences of joy, stress, sadness, anger, and affection that make one’s life pleasant or unpleasant” — rises with income, but only to a point. And that point turns out to be about $75,000 a year.

Of course, money above that level brings pleasures — there’s no denying the delights of a Caribbean cruise or a pair of diamond earrings — but no further gains on the emotional well-being scale.

As Mr. Kahneman has explained it, income above the threshold doesn’t buy happiness, but a lack of money can deprive you of it.

Phillip Akhavan, 29, earns $43,000 working on the company’s merchant relations team. “My jaw just dropped,” he said. “This is going to make a difference to everyone around me.”

At that moment, no Princeton researchers were needed to figure out he was feeling very happy.

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2 thoughts on “The Price of Freedom?

  1. Pingback: ageofreasonchronicles

  2. The new American Revolution begins!!! He’s saving our country from imploding, Look out Paul Revere there’ a new rider in town, Dan Price!
    T.Paine

    RESPONSE________________________________________
    let me paint you a picture,
    You’re a sales rep at a firm. You started at $50k. You firm provides jobs from $25k a year for answer the phone up front to $70k for managers to $100k for district VPs. You took the sales job regardless of the high risk, because you believed in yourself and the company.
    You struggle to sell in a weak economy. But you sp end late nights at work developing proposals and fresh approaches to sales. You meet with your manager frequently, and you always ask what you could do to move up and ahead in the company. Your manager gives you some very good advise, but it’s your backbreaking work that finally pays off. Not only have you worked up to the highest sales position after 3 years, but you get a major promotion to a team leadership position. After helping close other rep’s million dollar contracts, you finally get to $70k. Hard work, perseverance, and self sacrifice were the key. You win.
    Then one day the new CEO comes in and changes the pay for all the phone answering people, stock room guys right out of high school, and administrators to $70k.
    Same as your salary. For none of the work. Heck, you could have just coasted in an admin job and been ahead of the game. Sucker!
    Tell us how you would feel. If the answer is “I would be happy for them”, you never worked for a living.

    RESPONSE T PAINE__________________________________________________

    Perhaps you are just caught in the middle of what will hopefully will be a revolution. Maybe this is the shot heard around the world, a heralding that our society needs to come back into balance.

    You just clearly stated your worth as an important part of your companies support group, highly valued and that is all good. You did however seem to degrade others into what sounds like the “menial” and unimportant work done by a different segment of your companies support group. Does that mean you feel they are less important and deserve to be marginal citizens who are basically relegated to struggle for basic necessities the rest of their lives? Believe it or not they just may work as hard as you do. And why are you working so hard to bring in an account? To make more money for your company and be compensated in kind I would imagine. How does your company make money? I would assume by selling to the public. Who is that large slice of the consumer public? Is it the support groups that you think are not as worthy or as hard working as you and don’t deserve a living wage?

    If companies keep lowering wages and being overly greedy with profits at the cost of human dignity and balance there will be only those top 400 families left to buy the food products and services that you are working so hard to sell. What will happen to the others of us? I don’t think you are one of those 400, so what will happen to you when the general population has been bled dry because of low wages and is homeless and hungry as many are now? Who will even make the products if they don’t have a home to live in or food to fuel them for work? $25,000 a year is below the poverty line. I suppose if they choose to have no children, not to get married and live in a box they will do fine. That is the way many good hard working people are living today in our great nation. Is that what you want?

    It is about balance. No one is saying you shouldn’t make a billion dollars if that is what makes you happy, but in all honesty it doesn’t unless you use it to help others. I know I have been there. Try to run a large corporation or a small company without the “menials.” Are you ready to clean the toilets answer the phones save your boss from making huge errors, keep your computer grid working, make sure your mail is posted correctly and you receive yours in a timely manner, change the light bulbs and keep the air conditioning working, keep the files and data bases updated, dump and recycle the trash, all while working on that account. Those people are VALUABLE. As valuable as you. We all are. None of us want a weak economy but more importantly none of us should want an unbalanced economy. That kind of economy does not work for anyone.

    The American Revolution was fought to bring freedom for a better and more dignified quality of life and happiness. I can’t imagine the road of rampant greed by way of the accumulation of unneeded goods, exploitation of some and the segmenting of huge profits to the few was the ultimate vision for that happiness. In fact it sounds like what the battles of the American Revolution were fought to free us from.

    Do not let the success or the good fortune of others on any level dictate your happiness or value. Do what you do because it makes you feel happy, generous and loving toward your fellow human being. If it does not give you this fulfillment no matter how much money you have in 20 years you are going to implode just like this country could with your 5 cars 10 big screen TV’s and 4 McMansions crashing down on you.

    The more others have the more you will have I promise. There is enough sun for everyone. That’s the picture that will bring you greater success. I think that is the way this incredible generation, of which my children are a part of, is starting to steer the country. That certainly is the way that Dan Price seems to be building his future and to my knowledge the top economists are agreeing this is a framework for success.

    This may seem like a bitter pill now but it is just the righting of so much accumulated inequity. I’m sure your income will rise more quickly than those who will most greatly benefit from this program. It will balance out. Consider on your journey possibly supporting this revolutionary step ‘Gravity Payments,’ is taking as good for the economy therefore good for you. Keep working hard and hope more companies take on this business model. If so, there will be a lot more money for people to buy whatever you are selling therefore more will come to you. You sound like an intelligent hard working person that I suspects cares greatly for your fellow human being on a personal level. Perhaps if you will incorporate the betterment of humanity into your ‘career/business,’ plan and it will lessen the sting you feel now. You can then consider their good fortunes to be your success as well and your good fortune will be limitless.

    Liked by 1 person

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