By allowing ads to appear on this site, you support the local businesses who, in turn, support great journalism.
$70k minimum wage: business experiment off track but still in motion
In April, the CEO of a Seattle company with 120 employees announced that he would raise the minimum salary of all employees to $70,000. Three months later, the plan has hit some bumps. - photo by Omar Etman
Four months ago, the CEO of a Seattle credit card-processing firm announced to his employees that he would set a new minimum salary of $70,000. The press erupted with a combination of praise and outrage. Now, faced with the realities of a substantial and sudden pay hike, hes struggling to sustain an initiative hes committed to but that might be too good to be true.

Dan Price, 31, started Gravity Payments from his dorm room in 2004. The company now has 120 employees, most of whom, before this move, made much less than $70,000 a year, according to The Telegraph.

Price came to the decision to increase pay after reading a 2010 study on happiness. Emotional well-being rises with (income), but there is no further progress beyond an annual income of around $75,000, the researchers concluded. The findings, according to Deseret News National, echoed something he'd heard again and again from friends and family members: It's incredibly difficult to live on a low salary.

Price, feeling as if needed to do his part, took action.

In the immediate wake of the announcement, the company received thousands of resumes and Harvard business professors flew out to conduct a case study. As The New York Times described it, Almost overnight, a decision by one small-business man in the northwestern corner of the country became a swashbuckling blow against income inequality.

But the mostly positive initial response, which included a standing ovation from employees during the announcement meeting, quickly morphed to include a mix of frustration and confusion. By the time the honeymoon passed, two of Price's most-valued employees had left the company.

He 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 didnt get much of a bump, Maisey McMaster, one of these two employees, told the Times.

The other employee seconded her complaints. Now the people who were just clocking in and out were making the same as me, he said. It shackles high performers to less motivated team members."

Much of the money for the increased salaries came from Price's own million-dollar pay package, which he slashed to $70,000, according to The Washington Times. Despite his best efforts (and hero status), money is still tight.

In addition to internal tensions, some customers were so dismayed by what they viewed as a political statement that they withdrew their business, the Times reported. Anticipating an increase to fees, others also left.

At the same time, dozens of new clients signed on, encouraged by Price's generosity and boldness. To handle the influx, he hired a dozen additional employees an expense that now comes at a much higher cost.

Price admits that his plan is flawed and critics are often right, but hes not giving up. Theres no perfect way to do this and no way to handle complex workplace issues that doesnt have any downsides or trade-offs, he said to the Times. I came up with the best solution I could. And Im working as hard as Ive ever worked to try to make it work.
Sign up for our e-newsletters