By Stephanie Hegarty Population correspondent
28 February 2020
photo above: In 2015, the boss of a card payments company in Seattle introduced a $70,000 minimum salary for all of his 120 staff – and personally took a pay cut of $1m. Five years later he’s still on the minimum salary, and says the gamble has paid off.
WN: Wow! Isn’t this grand?!
Dan Price was hiking with his friend Valerie in the Cascade mountains that loom majestically over Seattle, when he had an uncomfortable revelation.
As they walked, she told him that her life was in chaos, that her landlord had put her monthly rent up by $200 and she was struggling to pay her bills.
It made Price angry. Valerie, who he had once dated, had served for 11 years in the military, doing two tours in Iraq, and was now working 50 hours a week in two jobs to make ends meet.
“She is somebody for whom service, honour and hard work just defines who she is as a person,” he says.
Even though she was earning around $40,000 a year, in Seattle that wasn’t enough to afford a decent home. He was angry that the world had become such an unequal place. And suddenly it struck him that he was part of the problem.
At 31, Price was a millionaire. His company, Gravity Payments, which he set up in his teens, had about 2,000 customers and an estimated worth of millions of dollars. Though 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.
Raised in deeply Christian, rural Idaho, Dan Price is upbeat and positive, generous in his praise of others and impeccably polite, but he has become a crusader against inequality in the US.
“People are starving or being laid off or being taken advantage of, so that somebody can have a penthouse at the top of a tower in New York with gold chairs.
“We’re glorifying greed all the time as a society, in our culture. And, you know, the Forbes list is the worst example – ‘Bill Gates has passed Jeff Bezos as the richest man.’ Who cares!?”
Before 1995 the poorest half of the population of the United States earned a greater share of national wealth than the richest 1%, he points out. But that year the tables turned – the top 1% earned more than the bottom 50%. And the gap is continuing to widen.
In 1965, CEOs in the US earned 20 times more than the average worker but by 2015 it had risen to 300 times (in the UK, the bosses of FTSE 100 companies now earn 117 times the salary of their average worker).
Breathing in the crisp mountain air as he hiked with Valerie, Price had an idea. He had read a study by the Nobel prize-winning economists Daniel Kahneman and Angus Deaton, looking at how much money an American needs to be happy. He immediately promised Valerie he would significantly raise the minimum salary at Gravity.
After crunching the numbers, he arrived at the figure of $70,000. He realised that he would not only have to slash his salary, but also mortgage his two houses and give up his stocks and savings. He gathered his staff together and gave them the news.
He’d expected scenes of celebration, but at first the announcement floated down upon the room in something of an anti-climax, Price says. He had to repeat himself before the enormity of what was happening landed.
Five years later, Dan laughs about the fact that he missed a key point in the Princeton professors’ research. The amount they estimated people need to be happy was $75,000.
Still, a third of those working at the company would have their salaries doubled immediately.
The right-wing radio pundit, Rush Limbaugh, whom Price had listened to every day in his childhood, called him a communist.
“I hope this company is a case study in MBA programmes on how socialism does not work, because it’s going to fail,” he said.
Two senior Gravity employees also resigned in protest. They weren’t happy that the salaries of junior staff had jumped overnight, and argued that it would make them lazy, and the company uncompetitive.
This hasn’t happened.
Price had hoped that Gravity’s example would lead to far-reaching changes in US business. He’s deeply disappointed and sad that this hasn’t happened.
Some did follow suit, PharmaLogics in Boston raised their minimum salary to $50,000, and Rented.com in Atlanta raised theirs too. He believes that, by means of online lobbying, he also influenced Amazon’s decisions to raise their minimum wage.
But he had hoped for widespread, structural change.
“Boy, was I wrong,” he says. “I’ve really failed in that regard. And it’s changed my perspective on things because I really believed that through the actions that I did and that other people could do, that we could turn the tide on runaway income inequality.”
The change has had a profound effect on Price and his lifestyle.
Before taking a pay cut, Price was the cliché of a young white tech millionaire. He lived in a beautiful house overlooking Seattle’s Puget Sound, he drank champagne in expensive restaurants.
Afterwards, he rented his house out on Airbnb to help stay afloat.
A group of employees became sick of watching him turn up at work in a 12-year-old Audi and secretly clubbed together to buy him a Tesla.
Five years later, Price is still on Gravity’s minimum salary. He says he’s more fulfilled than he ever was when he was earning millions though it’s not all easy.
“There’s tests every day,” he says.
“I’m the same age as Mark Zuckerberg and I have dark moments where I think, ‘I want to be just as rich as Mark Zuckerberg and I want to compete with him to be on the Forbes list. And I want to be on the cover of Time magazine, making lots of money.’ All these greedy things are tempting.”
“It’s not like it’s easy to just turn down. But my life is so much better.”
Please click on: Everyone on 70K