Seattle CEO Experiences Fallout of $70K Minimum Wage
Life is rough when Economics 101 gets in the way.
A Seattle CEO is learning firsthand the predictable outcomes that accompany minimum wage hikes. Dan Price, who heads Gravity Payments, a credit card processing firm, became an instant celebrity when he announced earlier this year that none of his 120 employees would earn less than $70,000 a year. In fact, he slashed his own salary of $1 million down to $70,000 to level the playing field. It was a kindhearted move, to be sure, but the ensuing months demonstrated the reality that such a minimum wage has far-reaching repercussions. According to former Gravity Financial Manager Maisey McMaster, Price “gave raises to people who have the least skills and are the least equipped to do the job, and the ones who were taking on the most didn’t get much of a bump.” The result? Two prominent-turned-disgruntled employees, including McMaster, called it quits. The other one, Grant Moran, intoned a similar frustration: “Now the people who were just clocking in and out were making the same as me. It shackles high performers to less motivated team members.” On top of that, The New York Times reports, “[A] few customers, dismayed by what they viewed as a political statement, withdrew their business. Others, anticipating a fee increase — despite repeated assurances to the contrary — also left.” And while Gravity Payments won the hearts of other business owners, “those accounts will not start paying off for at least another year,” the Times added. “To handle the flood, [Price] has already had to hire a dozen additional employees — now at a significantly higher cost — and is struggling to figure out whether more are needed without knowing for certain how long the bonanza will last.”
But the drama doesn’t end there. Gravity Payments co-founder Lucas Price, the brother of Dan, is suing the company, which is adding substantial legal costs. Hot Air’s Jazz Shaw put it best: “I’m sure Mr. Price is a very nice man and he clearly cares about people in general. But his move to push his generous nature into his business model is returning precisely the sort of results which the free market predicts.” The lesson here? Good intentions don’t always make for good policy.
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