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Remember the CEO Who Announced a Minimum Salary of $70,000 Back in 2015?
Still not broke
In 2015, Dan Price announced the minimum wage at Gravity Inc would be $70,000. He made this decision after an eye-opening conversation with a friend that was making $50,000 a year. Dan got mad, especially at himself. He had employees that he valued as partners who were making less than that.
Why $70,000?
Price remembered a study declaring people feel significantly more miserable when they earn less than $70,000 a year. At Gravity Inc, a new employee earned around $35,000 a year. So Price decided to find a way to pay staff members a minimum annual salary of $70,000.
The decision took two years to implement. Once it was done, 30 workers had doubled their income, and another 40 employees received significant pay raises. No one was fired, and no manager’s wage was reduced. The exception was Price. His salary dropped from $1.1 million to $70,000.
The new policy drew a lot of criticism from inside and outside the company. Price was accused of giving free gifts and harming the work ethic. Conservative journalist Rush Limbaugh said, “I hope this company is a case study in MBA programs on how socialism does not work because it’s gonna fail.”
Business only got better
It’s safe to say the naysayers got it all wrong. The company’s customer base doubled, the cash turnover cleared increased three times, and the number of employees increased by 70%.
While this is amazing for any business, a different set of numbers showed this bold decision’s real impact. 70% of employees paid off their debt, 10% are now homeowners in one of the most expensive cities in the U.S., Seattle. Also, the number of employees having babies increased by 400%.
How the employees saved the company
In 2020, Covid-19 slashed in half the company’s revenue. In April 2020, Price told the 200 employees that the company would run out of money in four months if no action was taken. Gravity was against firing people or increasing fees, so things were tough. Time was passing, and they were running out of options.
Then an employee suggested every employee write down the pay cut he/she was willing to absorb for the following months. They gave it a try. 98% of employees agreed to a pay cut. 10 people were willing to work for free, and a few dozens offered to take a 50% cut in pay.
After a few months of reduced pay, employees are now back to earning their original wages. According to Gravity’s site, the average salary in 2015 was 72,000. In 2021, PayScale estimates the average salary is $84,000.
