Does raising workers' minimum to $70K make sense?
Big companies like McDonald's and Walmart have raised their minimum wages recently, but it's nothing like what CEO Dan Price is doing at Gravity Payments. The 30-year-old, who said he wants to confront income inequality in America, has slashed his own salary and raised the minimum salary at his company to $70,000.
But not everyone in corporate America can afford to make such drastic changes so quickly, especially companies with large numbers of minimum wage workers.
"It just doesn't make economic sense for really large companies that have a lot of people like that to give huge raises like this. It can tip them from being profitable to being unprofitable, which is why we're not going to see a huge stampede of companies doing this," labor economist Alec Levenson said.
"It's not about pay, it's about an opportunity and developing people and giving them a chance to like thrive and show what they can do," Price said.
Price admits the salary increases will cut his credit card processing company's profits in half in the near term. But having happier, more productive employees he believes will pay off in the long term.
Price made the announcement at his company's quarterly meeting. The minimum salary at the company will immediately jump to at least $50,000 and rise to $70,000 within three years.
"I realized that people who are making less than that, there is an emotional cost that they have every single day. And you only get to live once, and so those are days that are lost in terms of really getting to live a full life. And so getting them there was really based on that research that Princeton did in 2010," Price said.
That Princeton study concluded that emotional well-being rises as one's income rises, up to about $75,000 dollars a year.
The reaction of his 120-employees went from subdued shock to a standing ovation.
Alyssia O'Neal is a 21-year-old single mother who works in customer service.
"I do pay for daycare out of pocket," O'Neal said.
Overnight, her annual salary jumped from $37,000 to $50,000 dollars.
"It just gives you a little bit more confidence to go about your day and not having to worry about going paycheck to paycheck," O'Neal said.
"Maybe I cried when I called my mom," 29-year-old supervisor Jose Garcia said with a chuckle.
Garcia has $54,000 in student debt. Now those loans will be easier to pay off.
"I think it's life-changing for everybody in various ways," Garcia said.
It's potentially life-changing for Price as well.
"So I'm reducing my salary from a million dollars a year to about $70,000," Price said.
He'd like to see other companies follow his lead, but that's not why he did it.
"I want to be a part of the solution to inequality in this country, and so if corporate America also wants to be a part of that solution, that would make me really happy," Price said.
Word is getting around, and Gravity Payments received more than 500 new resumes on Tuesday.