Dan Price, like a growing number of CEOs in recent months, is raising the minimum wage for his employees.
But while the chief executives of companies ranging from Aetna to Gap, Inc. to Wal-Mart are upping their wage floors by a few dollars an hour to help them compete for better talent, this CEO — who founded credit-card processing firm Gravity Payments — has another goal. On Monday, the New York Times reported that to protect employees' emotional well-being, Price is cutting his own salary and raising his employees' wages to at least $70,000 a year.
The decision is an extraordinary one when you look at the numbers. At the Seattle-based company, the average salary has been $48,000 a year among its 120 employees, the Times reported. Now, 70 of those workers will see a raise and 30 will see their salaries roughly double. To pay for those huge increases, the newspaper reported, Price plans to cut his nearly $1 million salary down to $70,000, as well as use roughly three-quarters of this year's profits. The report said Price would keep his salary low until those profits are earned back.
According to the Times, Price's idea came from research by Princeton economists Angus Deaton and Daniel Kahneman, who found, essentially, that money can buy happiness — up to a certain point. The duo's research showed that for salaries below about $75,000 a year, increases in income correlated with greater emotional well-being.
The extremely generous raise is, of course, far easier to pull off in a small company with few employees than in one with many. And Price may have a hard time keeping pay at that rate if the company were to struggle at some point — or potentially, if it grows very quickly. But the goodwill he just engendered is likely to pay itself back not only through hard work, greater loyalty and better talent, but through the greater returns that usually follow in such a culture.