$70,000. This dollar amount dominated headlines this past week after Dan Price, CEO of credit card processing company Gravity Payments, announced his surprising move to set a $70k minimum wage for his entire workforce.
Moreover, Price also revealed that in order to fund the wage increase, he is slashing his own $1M annual salary down to the $70,000 salary floor.
Watch the video of Price delivering the good news with his staff, and pay close attention to the amount of jaws that drop as he discusses the details of the raise.
Price’s decision received a great amount of praise and, as Price expected, critiques from naysayers. However, he may have just inspired a movement.
Salesforce CEO Mark Benioff announced today that in an effort to ensure “women are treated 100 percent equally at Salesforce in pay, opportunity and advancement,” he will be, “methodically examining the pay of all 16,000 employees at his cloud-based software company to ensure pay equality.”
Why did Price do it? And why should we care?
Price tells the story of how he recently went on a hike with a friend who was struggling to make ends meet. He then recalled reading an article about a study that found, “Emotional well-being also rises with log income, but there is no further progress beyond an annual income of ~$75,000.” He then felt compelled to make a change at Gravity.
Whether or not you think Price’s actions were intended to address US income inequality, or were meant to raise Gravity’s profile through a very expensive publicity stunt, or both, this pay increase comes at a very interesting time:
Historic Highs in US Income Inequality – The Elephant in the Room
Discussing income inequality in the workplace, and even among friends, is considered by most to be taboo. However, addressing this news story comes at an important moment.
A 2014 study reported how US income inequality has grown to its most extreme point since the Great Depression.
“The share of total income earned by the top 1 percent of families was less than 10 percent in the late 1970s but now exceeds 20 percent as of the end of 2012. A large portion of this increase is due to an upsurge in the labor incomes earned by senior company executives and successful entrepreneurs.”
If more employers attempt to correct income inequality on their own, will employees begin to seriously search for more generous companies who prioritize pay equality?
Related: 3 Ways to Combat Employee Turnover
Pay Increases Only Average 3% Annually, Despite Accelerated Recovery
Although the labor market is experiencing strong signs of health—raised quit rates and lower unemployment claims—annual pay raises, on the other hand, were not as strong as expected. Price’s bold move challenges the notion of labor market rates in general, and could hit home with employers and employees who adopted the 3% average raise this year.
Beyond pay increases, companies have upped their employment benefits offerings to attract and retain talent. Our recently published 2015 Workplace Flexibility Study found that 69% of employers are investing in workplace flexibility and wellness programs to attract, recruit, and retain talent.
Will Price’s example prompt even more employers to follow his lead? Will companies feel compelled to compete with the employment package trends being set by the tech industry?
By Tallulah David