The CEO Who Took a $1,000,000 Pay Cut to Set a $70K Minimum Wage
What happened when Dan Price took care of his employees
I’ve been a little obsessed with learning about Dan Price and what happened when he made $70,000 per year the minimum wage at his company.
Before reading further, it’s important to know that Dan Price isn’t a billionaire. His company, Gravity, processes credit card payments and isn’t especially large or wildly profitable.
It was a stretch to set a minimum wage that doubled the salaries of many of his employees. He refused to raise prices on customers or provide less service.
He cut his own salary from $1.1 million to 70K. He sold all his stocks, mortgaged both his homes, and put the money into Gravity.
He kept the same vehicle for 12 years (an Audi, but still). If his company fails, he’ll lose everything.
Crazy, right? What on earth compelled Price to do this?
Productivity Soared and Revenues Increased
Price launched Gravity before the Great Recession. The recession traumatized him as a business owner, and he kept salaries low to minimize costs. One day, an employee chewed him out for paying him such a low salary.
Around the same time, a friend with a $40K per year job confided her anxiety about affording the most recent rent increase.
None of that sat right with Price. He dwelled on those conversations and then decided to make his company’s minimum wage $70K per year.
The move stirred tons of publicity, some strong criticism, and a few predictions of doom for the company.
The company didn’t fail. Productivity soared. Revenues increased. A wave of new customers came to Gravity. The company’s already sterling customer retention rate got even better.
Price and his employees credit the new minimum wage for their increased productivity and improved customer service. Not because they responded to the incentive, but because they were able to focus more on their work and less on stressing about their bills.
And when the employees felt cared for, they cared a lot more about their employer. Price’s staff got fed up with him driving a 12-year-old Audi and went in together on a new Tesla for him.
Then the COVID-19 pandemic hit. A company that processes credit card payments for food, beverage, and retail businesses isn’t built to weather a pandemic. Gravity lost more than 50% of its business overnight.
Amazingly, 98% of Price’s employees volunteered to cut their own pay. Some offered to take no pay. Not because they were threatened with layoffs but because Price shared how much cash the company was losing.
Price settled on reducing salaries by half for those earning more than 100K and 30% for the rest. When the economy picked back up, Price restored their salaries and began paying them back their lost wages.
Caring for Employees Is Good Business
I love this story for so many reasons.
First, it’s amazing that one of Price’s employees felt comfortable enough to chew him out over his salary.
Maybe he just didn’t care anymore, but I think it’s more likely that Price created the kind of environment in which employees felt comfortable bringing issues to the boss’s attention. That’s huge for any organization’s health.
If people in the organization don’t feel comfortable speaking up, then a lot of problems will fester until they become major issues.
Second, because Price stepped up to take care of his employees, they stepped up to take care of him.
They performed so well in their jobs that Gravity now processes about three times as many transactions than before the raises. They bought their boss a Tesla. Then they volunteered to take pay cuts during the pandemic.
The boss’s commitment to his employees led them to become deeply committed to him. Together, they created a culture of being concerned for the common good. That culture didn’t just improve morale and boost productivity; it also built community and resilience.
What Billionaires, Corporations, and Politicians Don’t Get
Dear billionaires, corporations, and politicians:
Workers at Amazon’s Bessemer, Alabama warehouse wouldn’t be trying to unionize if they didn’t need to unionize.
Jessica Wildfire writes in “The Five Most Overrated Personalities on the Planet,” we elevate billionaires to practical sainthood and forget that they wouldn’t be billionaires without their legions of employees and plenty of less-than-laudatory behavior.
The iPhone exists in spite of Steve Jobs, not because of him, yet he’s often lauded as the genius who changed the world forever thanks to his inventions.
Elon Musk doesn’t build Teslas and rockets in his garage all by himself, but you’d think he’s the only reason Tesla and Space-X have been successful(ish).
Even if a business can’t afford to raise salaries, they can find other ways to support their employees: paid time off, flexible hours, or just having their backs.
My boss can’t give me a raise, alas, but she has stepped up for me in other ways and I’ll never forget it. I would lay down in traffic for her.
The Walton family, Jeff Bezos, Elon Musk, and a few thousand other billionaires and multinational corporations could learn a lot from Dan Price.
Most employers, sadly, care much more about shareholder dividends than about the employees who make those dividends possible. Political leaders and elected officials need to help shame them into doing better and regulate them then they (inevitably) refuse.
Eric Sentell holds a PhD in Composition & Rhetoric. He teaches writing and coordinates General Education at a public university. He writes entertaining articles that help people think, write, and feel better.