Founder Dan Price takes a pay cut: from $1 million to $70,000.
By Raif Karerat
WASHINGTON, DC: On Monday afternoon, Dan Price, the founder of Gravity Payments, called his staff together for a meeting. There, he surprised his 120-person strong workforce by announcing that he planned over the next three years to raise the minimum salary of even the lowest-paid clerk, customer sales representative, and salesman to $70,000.
According to The New York Times, the idea catalyzed when Price read an article on happiness. The paper demonstrated how much of a difference extra money can make in the lives of people who earn less than $70,000 a year.
“Is anyone else freaking out right now?” Price asked after the clapping and whooping died down into a few moments of stunned silence. “I’m kind of freaking out.”
Price, who started the Seattle-based credit card payment company in 2004 at 19 years old, said he would finance the restructuring by reducing his own salary from nearly $1 million to $70,000 and then using 75 to 80 percent of the company’s anticipated $2.2 million profit this year.
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.
“The market rate for me as a C.E.O. compared to a regular person is ridiculous, it’s absurd,” said Price, who drives a 12-year-old Audi which he received in a barter for service from the local dealer.
Ultimately, the paychecks of about 70 Gravity employees will grow, with 30 of them doubling their salaries, company spokesman Ryan Pirkle told the Times.
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.”
2 Comments
This sounds WONDERFUL! But I do have a question. What happens when a competitor comes in, way undercuts his price because of the high overhead and all those “70K” employees are standing in line collecting unemployment? Last I checked there is no free lunch (unless you’re funded by the government). How does he stop this from happening?
This will be an interesting experiment. If it works I’d guess that lots of people will decide to start similar ventures, creating competition, which will create downward pressure on wages. Let’s check in in 5 years and see how long they can keep up this pay rate.