Wages for the lowest paid workers are a hot topic. Fast food workers in several cities are demonstrating for a $15/ hour “livable” minimum wage. The New York Attorney General is investigating “on call” scheduling practices by major retail chains. Many localities continue to raise minimum wages far above the federal rate.
Dan Price, CEO of Seattle’s Gravity, has cracked the debate wide open with a startling decision. The minimum annual salary for everyone in his 120 person company is now $70,000! For some employees, this doubled their salary. Why this amount? Sure Seattle is a high cost of living city, but Price cited research by a Nobel Prize winning psychologist that linked maximum happiness with an annual salary of $75,000.
A young millionaire himself, this millennial CEO couldn’t enjoy his success when he realized that not all of his employees were paid to the level that could maximize their happiness. He decided to take a major leap of faith to invest in all employees; for their happiness, but also to foster deeper levels of engagement and commitment. He slashed his salary to help pay for this radical new comp structure. Unlike the average U.S. CEO who earns 300 times (!) the average wage earner in their company, Price will now earn a modest $70,000.
Misguided and naïve? Enlightened and innovative? How to describe this young, idealistic CEO is largely in the eye of the beholder. Immediate response from his employees is overwhelmingly positive. But what will it be over the next few years? Will the love fest last? Is this sustainable? Price’s experiment will be interesting to watch.
All employers, take note. Pressure is building in the country for major changes to minimum wages and wage equity. Are you ready? It may be time to contemplate not just what your company will have to do in response to legislative change, but what it can do to get ahead of this coming wave.