Dan  Price of Gravity Payments

Dan Price of Gravity Payments

CEO Dan Price of Gravity Payments decided to raise the wages of all his employees to a minimum of $70,000, while reducing his almost-$1 million salary down to that same $70,000. The Left love it, the Right hated it. But we don’t know how it will turn out, so it’s too early to celebrate. And if this little microcosm of what some have called “socialism” fails, will we even know? It’s being done in an economy of capitalism all around it, which could mask any problems.

Mr. Price said, “As much as I’m a capitalist, there is nothing in the market that is making me do it.” But let’s take a look at his motivations and his actions, and it doesn’t sound like he understands the meaning of the terms “capitalism” or “market”. Which is not good news for people, like his employees, who are depending on his economic decisions.

Mentioned links:

Seattle boss raises entire company’s minimum wage to $70,000

$70,000 promise brings flood of new clients and job applicants

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Show transcript

A news story that hit the wires a couple of weeks ago really animated the minimum wage debate. The lowest wages at Seattle-based Gravity Payments were all raised to a minimum of $70,000 a year by its CEO, the delightfully named Dan Price. In order to pay for this, Price said he will cut his nearly $1 million salary to $70,000 and use about 80 percent of the business’ anticipated profit to increase the salary of about 70 employees.

Reaction was predictable, on both sides. On the Left, they loved it and hoped it signaled a trend. On the Right, they decried it at “socialism”. I think both descriptions are premature.

For the Right, while this is some microcosm of socialism – it’s just one company, and it’s not being forced to do it by the government – it’s really not comparable to full socialism. I think socialism is a very bad system, marked by laziness brought on by the “sameness” in wages, and shortages brought on by a government that thinks it can run the economy. This isn’t even a good microcosm, because it’s one company making a decision while resting on a foundation of capitalism; well, as much capitalism as this country still can maintain with all the cronyism and government meddling we do have. But still, the experiment’s failure, if it did fail, would be mitigated or masked by the surrounding capitalist economy. If it works, you can’t really attribute it to this wage policy entirely, or perhaps at all.

Part of the reason is that Gravity Payment been flooded with both new clients and job applicants since Price made that promise. So there has been a burst of activity because of the media attention. And this is what I’d say to the Left. This sounds like a good idea in theory, and in a sense I’d like to see this work. But I’ll tell you what I’ve done. There’s this thing called Google Alerts, where you can have the results from a Google search e-mailed to you periodically. I’ve set up a search for this company, and I will be very interested to see how this experiment goes. This has to work for the long term, not just for a feel-good few months.

This is not being done in a vacuum, detached from the rest of the economy. But you can be sure that, if it seems to work, the Left will ignore that detail and jump right to the misinterpretation. If it works, it will be important to know why it worked. And if it doesn’t, we shouldn’t sweep it under the rug, like all the other socialist experiments on the ash heap of history.

A Facebook friend of mine, Anthony, had this to say about the Gravity Payments news. “He must be a very gifted individual. Normally it takes hundreds of politicians, and thousands of pages of regulatory documents, to help a Business Owner make such a decision.” Indeed Anthony, it’s amazing that this actually happened without some government action telling him to do so! That’s just crazy talk!

OK, snarkiness aside, let’s consider this. Here’s the quote from Dan Price as to some of his motivation. “As much as I’m a capitalist, there is nothing in the market that is making me do it.” First of all, Dan doesn’t seem to realize that he, along with everyone else, is the market. Sometimes the market influences individuals, and sometimes individuals influence the market. That’s what we call…wait for it… market economics! Not understanding this basic concept makes me worried for folks who are relying on his economic decisions for the company.

But in one of the articles linked to in the show notes, it mentions that Dan did this, “[a]fter hearing about a study that claimed income– to a certain level– directly affects one’s emotional well-being”. And let’s not pretend that Mr. Price has been insulated utterly and completely from the minimum wage protests and debate that have been in the news. No, sorry, I don’t believe that. So then, what has happened here? Did Mr. Price make this decision so that his company’s profits would remain flat or go down? No, otherwise he would be dooming his employees to the unemployment line once his funds and line of credit ran out. He’s actually expecting to pay for some of the rise in wages with company profits, so they have to go up, especially if he wants to grow his business and create more jobs. So his own self-interest – that is to say, the success of a company he owns – is what is motivating him to want to make his employees happy. That’s what we call…wait for it… capitalism!

Dan Price claims to be a capitalist, and that the market isn’t making him do this. After considering this, I’m a little dubious about both those claims.

So here’s the ultimate question: Is Dan Price of Gravity Payments at the mountain’s summit, or has he just jumped off of it? Either way, the view, right at this particular moment, is exactly the same. Will he crash and burn, or defy gravity? That’s the question, and it’s one that neither the Left nor the Right can answer right now with any certainty. I’m actually rooting for him, but I’m also fearing for him and his employees should this fail. And I’m hoping that, however it turns out, we won’t go for the pat answer to explain it.

Filed under: CapitalismEconomics & TaxesMinimum WageSocialism