Dan Price raises minimum wage at his company to $70,000 a year

[maxparrish]

Ford, Bilby, Ravensky, Ksen, etc,

It seems you are so fixated on attacking market beliefs that you have wasted a great deal of effort in attacking strawmen. For the most part no-one is arguing that this is "an economic heresy" or that wages must be "rigorously hierarchical". Nor is anyone arguing that "salary structures" can't be a "matter of choice". Most recognize that it is Price's right to pay what he likes, whether or not he (or others) is characterize as charity or as dubious form of "investment".

But we have been pointing out that there are ordinary workplace and business consequences to Price's actions, and that there are certainly more intelligent means available if he wishes to reduce workplace compensation inequity. His "structure as a matter of choice" has effects that other "structures as a matter of choice" may not have, even if they share the same goals.

None the less, here are the likely results:

1) Current employees paid far above market wage will not seek employment elsewhere, or increased work or responsibility UNLESS it is a job above 70,000 a year. If a 35,000 a year mail clerk has an opportunity to take a $50,000 lead worker/supervisor role why should he IF both positions now earn 70K?

2) Jobs like 'mail clerk' or 'receptionist' will promote an employee attitude of being a lifetimer career at entry level jobs (at least for those 30 or so) - no point in increasing skills and education.

3) While employees cling to their entry level jobs, managers will interview applicants with a broader range of skills and business talents they would love to hire as 70K gophers...BUT for the current 'lifetimer' occupying and clinging to that seat. Hence increased pressure to get rid of the "mail clerk" and "gopher" who can't or won't advance (and won't leave).

4) Because of wage compression, their will be an expectation of some wages increases for everyone above 70K.

5) It is unlikely that Price can 'make it up' by his team working harder (especially if former wages below 70k are now guaranteed by fiat). If they were working at full capacity, he will have to hire new workers, expand space, and purchase capital with more increased wages. But without profits, expanding to meet these new demands will be difficult.

6) A company that can't make a profit is vulnerable to new competition (with lower cost labor), difficulty in obtaining loans, and drastically reduced flexibility in slowed or declining markets (or market share). It is far easier to give pay increases, and far more difficult to cut wages. 'Overpaying' will be a disaster if the owner has to slash wages to market rates to stay afloat.

I have worked in corporate, small business, and government environments. This is not "market heresy" it is the cautionary elements of human traits that exist in all workplaces and organizations. And I have worked in lavishly 'overpaid' workplaces, highly compressed wage scales, vastly overpaid low level employees, and environments that foster 'job clingers'. And I have seen the results. Never good.

Had Price been more thoughtful he could have given his workers a flat percentage of profits, modestly increased lower wages, or provided pay for performance which could have given the opportunity for 'low wage' employees to excel. But I can't think of anything more dunder-headed than a arcane idea than a flat "minimum wage".

 

[Ford]

I agree someone is missing the context. But we disagree on who that is.

Yeah, but he's got a PhD in physics, so he's really smart...just ask him!

 

[barbos]

I agree someone is missing the context. But we disagree on who that is.

Yeah, but he's got a PhD in physics, so he's really smart...just ask him!

Not as smart as you are, highly successful businessman.

 

[laughing dog]

I agree someone is missing the context. But we disagree on who that is.

It's you

More proof that there is no necessary connection between being well-educated and being right.

 

[WAB]

It's you

More proof that there is no necessary connection between being well-educated and being right.

Wasn't it Mark Twain who said something like: Intelligence is what gets a man through life without an education; an education is what gets a man through life without intelligence?

- The above is not directed at you, barbos.

From my observation, there are autodidacts who seem far more intelligent than certain highly educated people. Dickens was one example. There are many more.

I've read posts by highly-educated people at FRDB and here who can't compose a coherent sentence, and I'm not referring to those whose native language is not English, or those who have visual acuity problems, or even those who are too lazy to try and spiffy up their posts and scatter their words pell-mell with abandon. I mean people who just don't seem to be able to do it.

And I'm not referring to grammar issues, or spelling errors, or typos. Everyone makes mistakes.

 

[barbos]

It's you

More proof that there is no necessary connection between being well-educated and being right.

it's still you

 

[barbos]

More proof that there is no necessary connection between being well-educated and being right.

Wasn't it Mark Twain who said something like: Intelligence is what gets a man through life without an education; an education is what gets a man through life without intelligence?

- The above is not directed at you, barbos.

From my observation, there are autodidacts who seem far more intelligent than certain highly educated people. Dickens was one example. There are many more.

I've read posts by highly-educated people at FRDB and here who can't compose a coherent sentence, and I'm not referring to those whose native language is not English, or those who have visual acuity problems, or even those who are too lazy to try and spiffy up their posts and scatter their words pell-mell with abandon. I mean people who just don't seem to be able to do it.

And I'm not referring to grammar issues, or spelling errors, or typos. Everyone makes mistakes.

And some are composing "coherent" sentences but forget to read before starting their composition which kinda makes them incoherent in the end.

 

[WAB]

I never said I forgot to read, I said I jumped in without sufficient information. You have to get your info from a number of sources and then try to make an average, since each source has some sort of bias, usually. I read a bit, then began to post in the thread, but there were a few things I overlooked because I'm not perfect. The things I overlooked were things that Price had said himself. Regrettable, but it happens. And I don't believe I've been incoherent in this thread. Actually, I know I haven't.

 

[DBT]

The higher pay rates are not coming directly out of company profits, Dan Price willingly lowered his own personal income in order to increase the pay rates of his staff, hence it should have no effect on how the business performs in terms of company income and running costs.

He's the proprietor of the business. His salary is equivalent to company profits.

That's not how you run a business, you don't take the total profit margin as personal income because it leaves you with nothing for emergencies, maintenance, unexpected costs, improvements, investments, etc. There are firms that are struggling, but that is another issue.

 

[Bomb#20]

What are you talking about? When the hell have I ever made a claim about how much revenue a worker is generating?

All over the place as a misattribution to others and LTOV.

Hey, all I can do is work with what you give me. When you guys make claims that implicitly treat the contribution of capital as zero, I take you at your word. Case in point...

..and again.

No, I dispute whether such quantites are knowable or meaningful in a typical modern firm, hence I dispute claims about wages being determined by the worker's contribution. No, I don't mean "collectively," I mean can't be disaggregated (which I think is what you mean).

Good. That is the correct analysis.

No, I don't think capitalism groupies "share" with me an opinion I don't have. So long as we don't think the proportion of profits generated by labour can be disaggregated from those generated by capital, Price is doing "something more like paying workers according to the revenue they generate than simply paying as little as the labour market allows," as I said.

No, Price is doing something more like paying workers according to the revenue they and the capital generate. When you label it "the revenue workers generate" even though you know the contribution from workers and from the capital can't be disaggregated, are you speaking Humpty Dumpty language? Or are you just propagandizing against return on investment?

(Incidentally, I have no idea what "capitalism groupies" you heard claiming wage levels in profitable firms are determined by profitability. In my experience people who approve of capitalism generally seem to think wage levels are determined primarily by labor market conditions. But never mind that for now -- first let's see if we can get your logic to make sense.)

Then our experiences differ.

I saw your recent exchange with Loren. You might be overlooking the distinction between the wage level a particular firm pays at a particular time and the equilibrium wage level the labor market tends to move toward over time. Of course if some business is more profitable than average then it will tend to accumulate capital and also draw in new investment, so it will grow, which will tend to push up the demand curve for the type of labor it uses without pushing up the supply curve, so the equilibrium wage for that type of labor will rise, and the labor market is likely to change to reflect that.

Doesn't matter. Even if "people who approve of capitalism generally" think wages are mostly determined by how little employers can get away with paying, I doubt they think that's one of capitalism's positive features. So the objections are no less strange.

Ah. Why would people who approve of capitalism think determining wages by how little you can get away with paying is a negative? If a worker is offered two jobs at a 70K salary, one of them with two weeks of vacation each year and frequent overtime, the other with a month's vacation each year and no more than 8 hours work a day, so he chooses to take a job from employer #2 and hangs employer #1 out to dry, do you think that's one of capitalism's negative features? Do you think the law or the culture should be set up in such a way that workers are pressured to provide more labor to the employer than "how little workers can get away with working"?

One of the chief differences between people who approve of capitalism and people who disapprove of it is that people who approve of capitalism tend to judge employees and employers be the same moral standards, whereas people who disapprove of it generally have a double standard and regard the same behavior as acceptable or shameful depending on whether the person engaging in the behavior is in their ingroup or outgroup.

 

[Canard DuJour]

All over the place as a misattribution to others and LTOV.

Hey, all I can do is work with what you give me. When you guys make claims that implicitly treat the contribution of capital as zero, I take you at your word. Case in point...

..and again.

No, I dispute whether such quantites are knowable or meaningful in a typical modern firm, hence I dispute claims about wages being determined by the worker's contribution. No, I don't mean "collectively," I mean can't be disaggregated (which I think is what you mean).

Good. That is the correct analysis.

No, I don't think capitalism groupies "share" with me an opinion I don't have. So long as we don't think the proportion of profits generated by labour can be disaggregated from those generated by capital, Price is doing "something more like paying workers according to the revenue they generate than simply paying as little as the labour market allows," as I said.

No, Price is doing something more like paying workers according to the revenue they and the capital generate. When you label it "the revenue workers generate" even though you know the contribution from workers and from the capital can't be disaggregated, are you speaking Humpty Dumpty language?

Not at all. If they can't be disaggregated, the bolded bit is redundant and potentially misleading. Anything else remains a projection of yours.

Or are you just propagandizing against return on investment?

No, I'm pointing out an inconsistency by people who propagandise for it.

I saw your recent exchange with Loren. You might be overlooking the distinction between the wage level a particular firm pays at a particular time and the equilibrium wage level the labor market tends to move toward over time.

I believe I addressed it : The market as a whole might act like that, but then the supply-side argument about wage levels and demand for labour doesn't hold.

Of course if some business is more profitable than average then it will tend to accumulate capital and also draw in new investment, so it will grow, which will tend to push up the demand curve for the type of labor it uses without pushing up the supply curve, so the equilibrium wage for that type of labor will rise, and the labor market is likely to change to reflect that.

Not without additional demand for the product of labour.

Doesn't matter. Even if "people who approve of capitalism generally" think wages are mostly determined by how little employers can get away with paying, I doubt they think that's one of capitalism's positive features. So the objections are no less strange.

Ah. Why would people who approve of capitalism think determining wages by how little you can get away with paying is a negative?

I'm not sure they do, but the people they need to sell it to do.

If a worker is offered two jobs at a 70K salary, one of them with two weeks of vacation each year and frequent overtime, the other with a month's vacation each year and no more than 8 hours work a day, so he chooses to take a job from employer #2 and hangs employer #1 out to dry, do you think that's one of capitalism's negative features?

Certainly, though it's by far the lesser evil given the human costs and employer/employee ratios.

Do you think the law or the culture should be set up in such a way that workers are pressured to provide more labor to the employer than "how little workers can get away with working"?

No, see above.

One of the chief differences between people who approve of capitalism and people who disapprove of it is that people who approve of capitalism tend to judge employees and employers be the same moral standards, whereas people who disapprove of it generally have a double standard and regard the same behavior as acceptable or shameful depending on whether the person engaging in the behavior is in their ingroup or outgroup.

Not really - see above.

 

[Jason Harvestdancer]

The problem with that is that they really don't have much of a choice. It is work or starve for them.

Unless, of course, the issue is someone being made to join a union that he doesn't want to join in order to hold the job. Then all of the sudden there are plenty of choices out there.

 

[NobleSavage]

Has anyone mentioned that it will now be very, very, hard to get a job like clerk at Gravity Payments?

 

[DBT]

Heard an interview with Dan Price on ABC radio this afternoon. He sounded very concerned with the degree of disparity between the incomes of those at the top, up toward the million dollar bracket and beyond, and everyone below 70 thousand. He said 60K is the basically the bottom line, below which it becomes a struggle to make ends meet....and he wants his employees to focus on their jobs and not have to worry about the bills.

He came across as a decent human being.

 

[Bomb#20]

No, Price is doing something more like paying workers according to the revenue they and the capital generate. When you label it "the revenue workers generate" even though you know the contribution from workers and from the capital can't be disaggregated, are you speaking Humpty Dumpty language?

Not at all. If they can't be disaggregated, the bolded bit is redundant and potentially misleading.

I'm mystified as to why you would believe such a thing. The bolded bit makes clear that they haven't been disaggregated; leaving it out would make it appear that they have been, which would be definitely misleading. Can you explain your reasoning?

I saw your recent exchange with Loren. You might be overlooking the distinction between the wage level a particular firm pays at a particular time and the equilibrium wage level the labor market tends to move toward over time.

I believe I addressed it : The market as a whole might act like that, but then the supply-side argument about wage levels and demand for labour doesn't hold.

Not sure which supply-side argument you're referring to; but then it would hardly surprise me to find a supply-side argument not holding. I don't think the "capitalism groupies" I've seen you talking to are relying on supply-siders' theories; I'm certainly not. As far as I can see, what I've said is consistent with Keynes.

Of course if some business is more profitable than average then it will tend to accumulate capital and also draw in new investment, so it will grow, which will tend to push up the demand curve for the type of labor it uses without pushing up the supply curve, so the equilibrium wage for that type of labor will rise, and the labor market is likely to change to reflect that.

Not without additional demand for the product of labour.

What's your basis for that? If there's no additional demand but capital is flowing in, then prices will fall, which will increase the quantity sold and thereby increase the labor consumed, even when the demand curve stays the same. Of course, this will cause profitability to regress toward the mean, which is what's to be expected when there's above normal profitability.

(Oh, and that's "demand for the product of labor and capital". )

Ah. Why would people who approve of capitalism think determining wages by how little you can get away with paying is a negative?

I'm not sure they do, but the people they need to sell it to do.

So when an unbeliever argues with theists, he should accept all the theists' superstitions because the people he needs to sell atheism to accept them?

If a worker is offered two jobs at a 70K salary, one of them with two weeks of vacation each year and frequent overtime, the other with a month's vacation each year and no more than 8 hours work a day, so he chooses to take a job from employer #2 and hangs employer #1 out to dry, do you think that's one of capitalism's negative features?

Certainly

Good lord, why? Do you long for the era of 12-hour workdays with Sundays and Christmas off? Or perhaps for the era of loyal retainers putting their feudal lord's interests ahead of their own? What the heck is negative about a worker being able to minimize the amount of trouble and inconvenience he has to go to to achieve a given standard of living?

 

[barbos]

decent != right.
$70K minimum salary is well above US GDP, so it is by definition unsustainable. (I know kids/retired don't work but you get the idea) So my point is, Price should have stayed in college for a little longer and learned some basic math.

 

[DBT]

decent != right.
$70K minimum salary is well above US GDP, so it is by definition unsustainable. (I know kids/retired don't work but you get the idea) So my point is, Price should have stayed in college for a little longer and learned some basic math.

He didn't consider it to be unsustainable within his business, he said he gets far more in return in terms of productivity. He also said his company gets hundreds of applicants for each advertized job vacancy .

 

[barbos]

decent != right.
$70K minimum salary is well above US GDP, so it is by definition unsustainable. (I know kids/retired don't work but you get the idea) So my point is, Price should have stayed in college for a little longer and learned some basic math.

He didn't consider it to be unsustainable within his business,

Within his business? Does he/you understand how ridiculous that sounds?
And he does not say 70K should be a minimum within his business, he says it's absolute minimum.

he said he gets far more in return in terms of productivity.

I seriously doubt that.

He also said his company gets hundreds of applicants for each advertized job vacancy .

Wow, what a surprising turn of events, just wow!

 

[DBT]

Withing his business? Does he/you understand how ridiculous that sounds?
And he does not say 70K should be a minimum withing his business, he says it's absolute minimum.

I'm talking about what was said in the interview on ABC radio...where he said he considers $60k to be low, hence he is willing to pay his staff at least $70k....that being the minimum, which I've already said.

I seriously doubt that.

Doubt whatever you like. That is what he said, so, as he is the one who is willing to pay that rate, I suppose he should know what value in productivity he gets in return.

Wow, what a surprising turn of events, just wow!

Presumably this was the case before this development, which was only announced last week.

 

[barbos]

I'm talking about what was said in the interview on ABC radio...where he said he considers $60k to be low, hence he is willing to pay his staff at least $70k....that being the minimum, which I've already said.

And I am talking about what I said. His "within my business" logic is ridiculous and it is not even his original logic. His original logic is 70K is a minimum salary to be happy so be it. No within "my business" at all.

I seriously doubt that.

Doubt whatever you like. That is what he said, so, as he is the one who is willing to pay that rate, I suppose he should know what value in productivity he gets in return.

And he can say whatever he likes.

Wow, what a surprising turn of events, just wow!

Presumably this was the case before this development, which was only announced last week.

Yeah and he raised it even more, such a shrewd businessman....