A Noble Socio-Financial Experiment is Now on the Ropes in Seattle

Remember the CEO who established an extraordinary new minimum salary at his upstart Seattle credit card processing company of $70,000 per person? Well, it seems as though the noble effort is not panning out as planned.

It turns out that 31-year-old Dan Price, the man in charge of Gravity Payments, has found himself in the midst of tough times as he feels a variety of both direct and indirect consequences from his admittedly-substantial gesture to combat income inequality within his own company.

Among the many challenges facing the young entrepreneur in the wake of his decision to arbitrarily raise wages includes managing the reactions of management and supervisory employees, as well as those staff at any level who see themselves as among the hardest workers at the company. I have spoken at length about the numerous ripple effects – not good, mind you – that occur within a company when a significant raise in pay is doled out to entry-level workers. Normally, the context is the mandatory minimum wage, not a CEO deciding on his own to give outlandish minimum salaries to the lowest-paid people on his totem pole, but, either way, senior management is left to functionally manage the internal fallout that invariably results. For example, as a practical matter, what happens to the wages of those who are high performers or managers? What does a company do with managers making, say, 30 percent more than those who receive a contrived doubling of their pay? Do those managers now also see a doubling of their salaries, to keep the scale intact?

For a variety of reasons, wages cannot be raised as a contrivance, without regard to sound, underlying economics. It can’t work in a nation, in a city, or even in a single company. Socialism is unworkable, in the long run, at any and every level.

The information contained here is for general information purposes only. The Financial Writer blog and Bob Yetman disclaim responsibility for any liability or loss incurred as a consequence of the use or application, either directly or indirectly, of any information presented herein. Nothing contained in this article, or any other article featured at this blog, should be construed as a solicitation or recommendation to engage in any financial transaction. You should seek the advice of a qualified professional before making any changes to your personal financial profile.

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