Dan Price and His Social Experiment

A couple of months ago, a CEO of his own company decided to cut his pay in order to pay his people a minimum of $70K salary. He actually decided to do something about the inequality and $70K was the point at which people were the happiest because they didn’t have to worry as much about making a living. However, salaries above $70K did not lead to a significantly more happy person.

The results?

An employee was finally able to buy a car. Another can now start saving for down payment on a house. Another one can now rent an apartment instead of relying on charity.

The last one sounds like basic living expenses!

It sounds like there was a real need to boost his people toward a middle class living.

Now that a couple of months have passed, some more results are showing up. These are initial results and are by no means the potential final end result. We are in the initial stages of seeing what will transpire. For now, his company, Gravity Payments, has lost some clients due to fear of supporting a wage structure that they cannot uphold or compete with. But he has also gain a lot of customers such that he needs to hire more people. In addition, he is receiving a lot of resumes due to favorable publicity – not a surprise there.

But, he has also lost his two best employees, his CFO who helped him develop this plan and another technical person. One of the reasons they gave was they didn’t like the idea of more recent employees receiving large raises while the more senior employee received smaller raises. It didn’t seem fair. Walmart employees expressed similar complaints with the recent raise in minimum wage: some of the newer employees received larger raises than older employees. All of this sounds like a form of Schadenfreude. It’s like saying: well, if I got beat up when I was young, then I can beat up my kids. Or, if I had to work 100 hours week when I started working, you can too. Why should the way we used to get paid, especially if it was bad, dictate how you treat people today? Why should that prevent you from improving things? We should rethink that: instead of perpetuating inequity, we should change the game. How about reversing that thinking to “we used to pay people a living wage so let’s go back to that.”

The other reason Dan Price’s employees gave is a more thoughtful one: employees won’t work as hard. Well, they certainly won’t work as hard at finding another job that pays better. But, aside from that, this may be a valid concern: once you reach a certain level of comfort, you won’t work as hard because you have reached the satisfaction level and other things become more important. The fire dies.

But so far the employees are still working hard at delivering customer service. Only time will tell.

So, should companies raise wages to around $70K? To me it sounds like a wonderful idea and I hope this experiment succeeds. It would be nice if we didn’t have poverty.

But here’s the thing

Never mind whether we could, raising everybody’s salary to $70K doesn’t change the mindset that led to the current inequality. If we don’t change our value system and change what capitalism stands for (ie, make it mean something beyond shareholder value), then we will just move back to a system where CEOs, Wall Street and other financiers make 300 times what the average person makes. We need people to start asking, are they really providing 300 times the value?

Until we re-think that, we will always have extreme inequality.