People ask me all the time, “How do you motivate your team?!” I don’t try to motivate them! I try to not de-motivate them!Dan Price, CEO Gravity Payments
I heard this recently on Andrew Yang’s Podcast, Yang Speaks. Dan Price is the CEO of a credit card payment processing company, Gravity Payments. He is famous for having a minimum salary of $70,000/year for employees at his company. The reason he began implementing this policy is very simple. He was finding out from some of his employees and friends that worked for other companies that they were struggling to pay their bills. One employee was working a second job at McDonald’s. A friend was struggling to navigate a $200/month rent increase on a salary that was less than 50,000/year. Price decided that this was unacceptable and began raising pay immediately. You might think that the profit margins of the business would go down instantly. The business’s expenses have to go up to meet increased salaries but the customer base remains the same. Not exactly. The company actually became more profitable in the aftermath of salary increases. What happened?
Well, in summary, Price believes that people’s productivity went up as their financial hardships were relieved and their financial futures more secured. ‘Wait! Travis, are you telling me that when people are less concerned about bills they are less stressed and more creative?!’ I know, shocking. All jokes aside, this seems pretty obvious and that’s what Price points out in the podcast. If people aren’t being paid enough at their full-time job and they have to take a second job just to break even, then what does that mean for their energy and motivation everyday? All your time is going into work and there’s no leisure time, no exercise time, no time to cook your own meals, no time for romance, etc. You would be a fairly one dimensional person whose cup is regularly empty. As a creative person I can tell you it doesn’t work.
Back when I first started teaching workshops I used to call this ‘A Life on Fire’. You’re in deep debt, you’re frustrated with your career, your marriage is starting to fall apart, and your body is showing signs of dysfunction. Your life is on fire. This key thing to recognize here is that when your life is on fire it becomes much harder to be aware of the world around you. It becomes much harder to be creative. Getting out of this downward spiral is purely a personal decision. They longer you let this go on the harder it is to reverse. It’s a momentum thing. It’s easier to get more stressed when you’re already stressed. It’s a difficult ship to turn which is why I encourage people to start failing their way forward ASAP! Start working through the mental inertia of habit change, NOW!
Gravity Payments is headquartered in Seattle, WA. Median sale price of a home in Seattle last month was $760,000. It’s expensive to live there. $70,000 is probably the minimum you need to have a relatively comfortable standard of living. Of course, ‘comfortable’ is subjective and I find that this is the core conversation that people on either side of this issue don’t want to get into. Dan Price found out that people he employed were struggling with their personal finances. Hard working people putting in 50-60 hours a week. People working multiple jobs and still stressed out about bills. In recent years I’ve had conversations with a couple of CEO’s/business owners. The tricky question of what people get paid and what they should get paid, inevitably comes up. Some organizations struggle with what they feel is an employee loyalty issue. Because their wages/salaries aren’t very high, they find themselves dealing with lots of turnover. But, as an employer, if you don’t create conditions where your employee can thrive, is it really reasonable to expect that people will stay? Price was making a 7 figure salary and decided to reduce his salary to $70,000 to help fund the new minimum wage at his company. Employees could still choose to be irresponsible with their money but they can’t say that the company isn’t paying them well. Productivity and customer retention numbers have trended up for Gravity Payments since this move.
So what happens if every person with a job made a lot more money? I don’t really know. People say it would be good for the local economy which I think could be true in some cases but in others I worry about the price of limited housing being bid up and we end up in the same situation we are now, with bigger numbers. On the other side, if we leave people with their current wages, particularly in major hubs like Seattle and San Francisco, I presume you’ll have quite a few service sector workers, teachers, and healthcare workers who increasingly can’t afford to live where they work. Before the pandemic there were already lots of people commuting long hours in the Bay Area of California in order to work jobs in communities they could not afford to live in. Is it a wonder people leave a company when working at that company actually decreases their quality of life?
There are several layers to consider here. According to an article on Time.com from 2019, more than half of all jobs paying more than $35,000 require a college degree. Somewhere north of 40 million Americans carry student loan debt averaging over $35,000. Add to this, median home and rent prices in comparison to median incomes are much larger today than they were in the Post WWII era. Again, I’ve had several conversations with CEO’s/Business owners who come from previous generations (Baby Boom, Gen X) where higher-ed/housing costs relative to income were very different. Much more reasonable. In the last 15 years we’ve had a housing crisis and now a pandemic. Both are totally blowing up Higher Education and both are blowing people’s jobs/income out of the water. I don’t say this in a scolding way, it’s just the truth: We gotta do better and we have to think differently!
If you’re a Business leader you have to recognize the evolving socioeconomic landscape. You don’t have to do precisely what Dan Price did but you do need to think through what helps a person create personal fulfillment/longevity given the conditions. Also, if you are a CEO, does your salary really need to be as high as it is? Are you really that much more valuable than everyone else in the company? As employees we have to be ready for change and uncertainty (this applies to everyone). Challenging your own personal habits and recognizing that every dollar a business spends has to come from somewhere is important. Also, the higher the wages the more competition for the job. Gravity Payments got an influx of over 4,500 resumes when they announced their minimum wage was going up to $70,000/year. Makes sense.
If you are an employee, what are some simple research projects you can do in your own company to understand the economics of the business/industry? If you are an employer, what are some ways you can poll employees to learn about their personal economic situations?