Saturday, August 8, 2015

Give 'Gravity Payments' CEO Dan Price Kudos - Not Brickbats - Even If His Efforts Crashed

“Income inequality has been racing in the wrong direction,” the Seattle CEO  said, adding:

 “I want to fight for the idea that if someone is intelligent, hard-working and does a good job, then they are entitled to live a middle-class lifestyle.”

For those fighting for higher wages and an end to income inequality there is perhaps no better symbol then Dan Price- CEO for Seattle credit card processing firm, Gravity Payments.   Three months ago, Price, 31, got  ABC TV news coverage after he announced he was setting a new minimum salary of $70,000 at his company.

He intended to accomplish this by slashing his own million-dollar annual pay package . On watching the segment at the time, both wifey and I applauded this unusual guy, not just obsessed with feathering his own nest and amassing wealth off his employee's back using the usual capitalist scheme of expropriation of labor.

Incredibly, Price at the time wasn’t thinking about the current political kerfuffle over low wages (especially the value of raising the minimum  wage) or the growing gap between rich and poor, He was just thinking of the 120 people who worked for him and how at least in one company he night improve the lot of his workers.

The idea gestated and emerged into manifestation after a friend shared her worries about paying both her rent and student loans on a $40,000 salary. He realized a lot of his own employees earned that or less. At once, he grasped that the wage stagnation that has dogged this nation since the 1970s was insupportable and had to be addressed. If he could do so, why not?  And after he did act, then almost overnight a decision by one man in the northwestern corner of the country became a powerful blow against income inequality.

Needless to say, the move drew attention from around the world — including from some outspoken skeptics and conservatives like 'El Swinebo'  Limbaugh, who (as usual) smelled "a socialist agenda". God forbid any CEO or boss do one damned thing to benefit his workers, lest he be seen as the reincarnation of Karl Marx! That is how mind-fucked our nation has become since Reaganism took hold, as well as the surge of PR via elimination of the 'Fairness Doctrine' (which allows dirt bags like Limbaugh to bloviate at will without a counter check to millions.)

 Never mind. In an era where economic equity is scarce and minimum wage earners outnumber wealthy CEOs 1,000 to 1,  most people were enthusiastic beyond proportion to the small local effort. Price chose $70,000 as the eventual salary floor, and noted that he was influenced by research showing that this annual income could make an enormous difference in someone’s emotional well-being by easing nagging financial stress.

Others took note. Talk show hosts lined up to interview Price while job seekers by the thousands sent in résumés, all desperate for a chance at a better life. He was being hailed as a “thought leade.” and Harvard business professors actually flew out to Seattle to conduct a case study. Even third graders  in CA wrote him 'thank-you' notes- and he flew out to meet a class of groupies -a spot featured again on ABC.

What could possible go wrong?  How could a guy trying to do right get the flying middle finger of fate?  Well, it can happen, especially in the US of A! How does that old saying go: 'No good deed goes unpunished?'

Sadly,  few of the cheering outsiders realized  how much turmoil all the hoopla was causing at the company itself. To begin with, Gravity was simply unprepared for the onslaught of emails, Facebook posts and phone calls. The attention was thrilling, but it was also exhausting and distracting.  Again, in a land and era in which economic equity is as rare as diamonds on sand bars, this is a natural response.  People desperate for even a scintilla of relief will grasp at anything.

The most incredible aspect of it all? Some customers, dismayed by what they viewed as a political statement, withdrew their business.  Process that! They construed Price's gesture as a freaking political statement, no doubt in synch with liberalism-socialism,  regarded like the bubonic plague in a nation saturated in a foolish, myopic conservatism.

One client is was consumed by worry about how to deal with Seattle’s new minimum wage, which rose to $11 an hour in April and is scheduled to reach $15 an hour for small businesses within five years. In a nation where the race to the bottom is accepted, any aberration is intolerable.

Others anticipated a fee increase — despite Price's repeated assurances to the contrary — so also left. The losses were compensated for by the entry of dozens of new clients, inspired by Mr. Price’s announcement. Sadly. those accounts won't  start paying off for at least another year. To handle the flood, Price had to hire a dozen additional employees, at a significantly higher cost. Now he's struggling to figure out whether more are needed without knowing for certain how long the bonanza will last.
In addition, two of Price’s most valued employees quit. They were motivated in part by their view that it was unfair to double the pay of some new hires while the longest-serving staff members got small or no raises. Adding insult to injury. friends and associates in Seattle’s close-knit entrepreneurial network were also piqued that Mr. Price’s action made them look stingy in front of their own employees.

"If Dan Price was boosting his people's pay, why not you?"

The worst blow of all came less than two weeks after the announcement, when Price’s older brother and Gravity co-founder, Lucas Price, citing longstanding differences, filed a lawsuit  threatening the company’s very existence. With legal bills quickly mounting and most of his own paycheck and last year’s $2.2 million in profits plowed into the salary increases, Dan Price said, “We don’t have a margin of error to pay those legal fees.”
How will Dan Price's experiment to address income inequality pan out? It's too early to say. Three months before Price's  announcement, the firm had been adding 200 clients a month. In June, 350 signed up but the new business won’t start paying off for 12 to 18 months. In the meantime, Price is contending with the lawsuit brought by his brother (who owns about 30 percent of their company)

What is the moral of the story? Probably that single CEO efforts to address income inequality are always destined to fall short. Nick Hanauer, a Seattle venture capitalist and an early promoter of the city’s $15 minimum wage law,  admitted Price’s plan is not easily replicated. At the same time he observed that no one would ever have guessed higher minimum wage laws would be catching fire in cities around the country.  It is those laws that may be the wage earner's salvation.

But for those laws to succeed, we also need new narratives to counter the employer and conservative nonsense that "jobs will be lost" if pay is increased to living wage levels.  The basis for negating the naysayers is aggregate demand, which depends on consumption:  the ability of people to purchase goods and services. The greater aggregate demand, the greater productive output and the more jobs. If people, lacking sufficient pay, can't purchase those goods and services, , then they collect in warehouses and jobs must be lost because there's inadequate work to go around.

Simple and elemental - yet most conservatives and employers don't get it. Price did,  but his plan was too localized and limited to bear adequate fruit. That must await the $15 minimum wage now set to kick in for a number of cities.

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