As I See It: The Gospel According To Dan Price
November 9, 2015 Victor Rozek
There is a Biblical parable in the gospel according to Matthew that touches upon labor relations. As the story goes, a vineyard owner sends his foreman out to hire laborers at daybreak. They agree upon a wage–one denarius in this instance–and off they go to toil in the soil. (“Toiling” is the biblically preferred term for work.) But the foreman goes out several more times throughout the day and hires additional men, telling them simply that they will be paid “whatever is right.” Apparently, they needed work more than clarity about wages, so off they went to join the daybreak crew without a specific promise of compensation.
When the time came to pay his workers, the vineyard owner directed the foreman to start in reverse order and pay the last group hired first. To their delight, the group that only worked an hour or two got the same wage promised to the poor saps that worked throughout the heat of the day. In fact, everybody, regardless of what time they were hired, received a full day’s wage.
Well, as you can imagine, the early group felt slighted. They had worked longer and wanted to be compensated accordingly. So they did what disgruntled workers do, they complained to management. But the owner reminded them that they had agreed to the wage he originally offered and, besides, it was none of their business what he chose to do with his money. “Or is it,” he asked, “that you are envious because I am generous?”
Move the clock ahead a couple of thousand years and anger, envy, and resentment were just some of the sentiments unleashed upon Dan Price because of his secular act of generosity. It was an uproar of near-biblical proportions rife with sound and fury signifying fear of equity.
Price is the 31-year-old CEO of a modest Seattle-based payment processing company called Gravity Payments. One day Price was reading an article that claimed that a salary of about $70,000 was optimal for happiness and personal satisfaction. Think of it as one year’s worth of denarii, adjusted for inflation.
The article, with the lumbering title of High Income Improves the Evaluation of Life but not Emotional Well-Being, admits that concepts such as “happiness” and “well-being” are, by nature, subjective. However, surveys conducted by the Gallup Organization uncovered an intriguing result. What you think about your life–how satisfied you are with your compensation, education, prospects, living conditions, long-term security, and so forth–rises steadily with income. That probably doesn’t come as a galloping surprise. Emotional well-being, on the other hand, depends much more on the quality of one’s health and relationships. It also rises with income, but only to a degree: “there is no further progress beyond an annual income of $75,000,” the survey found. Which explains why the very rich are just as screwed up as the rest of us.
Price understood that while high income may not buy happiness, low income exacerbates problems that money could otherwise solve. The average salary in his company was $48,000, well below the threshold for optimal emotional well-being. At 70 grand, employees could not only accumulate toys and provide for their physical needs, but would bump up against the highest level of emotional well-being that money, in and of itself, could offer. So he decided to make $70,000 his company’s minimum wage. (Makes Seattle’s $15 an hour minimum wage look positively miserly.)
To put this in perspective, CNBC reports that the average American took in $44,569.20 last year, according to data released by the Social Security Administration. And although it marks an increase of 3.5 percent from 2013, it’s a far cry from $70,000.
But then Price did something truly extraordinary: He didn’t just use company money to fund the raises, he took a $930,000 pay cut bringing his pay down to the new company minimum. “As much as I’m a capitalist, there is nothing in the market that is making me do it,” Price told The New York Times. “The market rate for me as a CEO compared to a regular person is ridiculous, it’s absurd.”
And that, perhaps more than anything else, set off the howling of his critics. He’ll ruin the company, they said. He’s a socialist, they said. He’ll just give himself huge bonuses, they said. It’s just a PR stunt, they said. He’ll automate or outsource all lower-level functions, they said.
Two of the company’s best employees reportedly resigned. Like the workers who toiled in the vineyard through the heat of the day, they thought that by elevating the lowest of boats, the value of their yacht was being diminished. Others, whose salary already topped $70,000 resented that their coworkers were better off and they weren’t.
The company lost some clients because they felt Price was engaging in social engineering or making a political statement with which they disagreed. But they also gained a number of clients and, as you can imagine, a slew of job applicants.
Beyond the obvious desire for a windfall, the middle class has compelling economic reasons for chasing higher baseline wages. Based on the work of economists Emmanuel Saez and Thomas Piketty, when you adjust for inflation of consumables and the skyrocketing cost of education and health care, real wages for the bottom 90 percent have not appreciably risen since trickle-down economics reared its greedy head in the 1980s. In fact they have not risen at all.
Whether in the long term Price’s decision turns out to be good or bad for business is open to discussion, but early results are encouraging. Six months into the grand experiment, revenues and profits are double their previous rate. But whether Price is a working-class hero or dangerous socialist is not as empirical as it is ideological. More interesting than the inflated baseline wage, or even the CEO’s voluntary pay cut, are the reactions of the people who took issue with it.
What is it about human nature that has some of us begrudging others their good fortune? On the one hand, when it comes to wealth, we don’t want to be left behind. On the other, we want a little more than our neighbors. If there are winners must there also be losers? The traditional economic model suggests that there must, but while that model is responsible for generating unprecedented wealth, it is also responsible for pushing the planet to near ecological collapse. The admonition to “live simply so others may simply live” implies an equitable sharing of resources such as Dan Price demonstrated by taking less and giving more. Was it fair? The answer to that question says more about the person reacting than the person giving.
Or, as the Bible suggests, perhaps we are envious because Price is far more generous than we ever would be.
For those opposed to the gospel according to Price, there is a simple way to game the system. The parable of the vineyard concludes that “The last will be first, and the first will be last.” But even as a kid when I first heard the parable, I knew that wasn’t the lesson people would remember. If you have a problem with the compensation structure at the vineyard, don’t show up for work until the end of the day.