[quote=“Charlotte2002, post:100, topic:29556”][quote=“CPA_Niner, post:91, topic:29556”]Here’s a update on how things are going at Gravity. Interesting read.
After reading this I can say, wow. As far as our country has come on social issues, we have gone the opposite direction with regards to economic issues. People accusing a private business owner of being a communist because he instituted a minimum salary that would put his employees above the median income for the location???
The corporate overload mentality runs deep. How dare a business owner not pay his employees a pittance so we tax payers can subsidize his bloated salary by paying for his employees food and rent.
I find it reassuring that I nor anyone else will have to subsidize Gravity Payments because the owner demonstrates the proper responsibility to pay his employees enough to live a solid life.[/quote]This sums up my thoughts well.
Blows my mind that people were basically cheering for him to fail because he wanted to boost his company’s minimum wage.
When did the federal government do such a thing?[/quote]
Perhaps I should have said “…would be very troublesome if…” when I referred to this company’s concept. Thanks for pointing that out. However, the federal government has historically implemented laws that tamper with free market forces in setting prices in the labor market such as minimum wage laws. All I am saying is that all the analysis of this company’s decision to do this can be reduced to how a free market will judge the company’s productivity. Nothing more, nothing less. I would only be concerned if this concept was attempted to be used on the labor market as a whole. Voluntary use of whatever this concept is actually is alright by me. If it is an economically viable concept, it will be employed by other firms in the marketplace.
Is there a definition of “economically viable”? Not questioning you but I think that is the problem with the whole thing. Shareholders will not allow it. Greed will not allow it. Fear will rarely allow it. I view minimum wage as necessary.
Is there a definition of “economically viable”? Not questioning you but I think that is the problem with the whole thing. Shareholders will not allow it. Greed will not allow it. Fear will rarely allow it. I view minimum wage as necessary.
[/quote]
Yes. Essentially that the firm can generate enough returns to a) pay all of their costs (including debt service) and b) warrant the shareholders continuing to invest in the firm (by not withdrawing their money.) For a public firm that normally means that the firm has to generate returns to the shareholders at least as high as other firms that take on similar risk. And this is not the shareholders being “evil” or “greedy” so much as the shareholders saying “Gee, if I leave the $100 I have invested in Gravity today I can earn 2%, but if I put it in Apple I can earn 8%.” That is just normal human behavior - the type of decision we all make every day with virtually every purchase we make - which one will make me happier? Plus, this mechanism also tends to allocate capital to the firms that are most efficient at using that capital. That is, they do it with the least waste, which is generally a good thing.
Of course since Gravity is a privately held firm, there may well only be two shareholders, the CEO and the guy with whom he started it. They may get utility from paying people a lot (and from the publicity that goes with it) and may not require any returns to their equity investment - who knows? But as long as they are the only two shareholders and they agree to that, there is no problem at all with their doing it.
The real problem here is that the guy appears essentially to have rewarded his least-productive workers and has really hacked off his really key people, who are now leaving. My guess is that he didn’t really think through the really perverse incentives he was creating within the firm, and it may cost him dearly. He will likely find it really hard to attract top-tier people to the upper level jobs that make or break a place like Gravity.
Also, I find it funny that wikipedia says Gravity “claims” to provide unlimited paid time off. Kind of doubt that is really true - otherwise why would anybody bother to show up to work, ever?
clt says this is interesting, but not in the best interest of his company.[/quote]if he can afford it, why isn’t it? Employees that are paid well are generally happier and far more loyal to the company. that’s worth a lot.[/quote]
clt says the role of a business is to increase shareholder wealth.[/quote]That’s the reason the wealth gap is growing.If the shareholders actually re-invested their wealth back into growing the economy, it wouldn’t be a problem, but trickle down economics is a fantasy. Instead, the rich are getting richer and the middle class is getting squeezed.[/quote]
There is an interesting book, not directly on this subject, but it is related. Talks about points spreads and the stock market. Anyway, the gist is in the 70s there was a shift in how publicly traded companies were viewed, the whole change from serving customers to serving shareholders. If I can remember the book I will post it.
Just to play devil’s advocate, why should companies invest in their companies instead of taken care of their shareholders if there is little to no demand or signs of growth potential?[/quote]
Very simply because the shareholder can shut down the firm whenever the want to. They own it and can end it very quickly if they want to. Of course, usually what they will do is simply fire the management team because that is easier to do than shut down the entire firm. And since the 1970’s CEO and other top manager turnover has become vastly more frequent than before.
No, they are not. If this make Gravity a more efficient (i.e. profitable) firm, other companies will adopt it. That will make the firms more valuable, and the CEOs will be paid more than they are now. If (as I admit I think will happen) Gravity goes under, the CEO’s of the other firms will simply say “gee, that was a stupid idea”, and life will just go on.
You seem to not grasp the concept that salaries within a company are not zero-sum games. Just because employees are paid more does not mean the CEO has to be paid less. The whole goal of a company is to grow the entire pie, which is what happens in most companies over time.
The point wasn’t to shrink his salary, it was to pay a reasonable wage to his employees. You’re looking at this from a jaded angle, much like those who want to see it fail.
But to the extent that it may cause more reasonable wage apportionment within companies - 2002 is right. And the beauty of it is the market is responsible. Socially conscious firms are rushing to sign up with Gravity.
I don’t think gravity will win or lose because the lowest paid person is now at 70k. I think the current lowest level employee simply loses when they can’t cut it with new expectations and they simply hire less people.
If you get paid 70k you won’t stay long if you are only worth 35k. It’s a commendable move but I bet this guy isn’t taking a loss on employees out of the goodness of his heart.
I am not following this story closely, but it looks like a triumph of the heart over brains. There is nothing wrong with wanting everyone to make $70,000 so they can have a happy life, but you cannot force them to work and study to develop the skills that the market values at that level. Some people cannot get there, but most people just will not put in the effort. The market is much, much bigger than this company, and if the CEO is willing to pay somebody $70k to answer the phones that is fine, but that is way above the true value for that job. To do this he is going to either have less money to pay for quality talent elsewhere, and this is going to kill the company in the long run; or he is going to have less profit or retained earnings and that is going to keep the company from growing, going public, or weathering a storm–probably killing them in the long run. Paying people way more than the market says you need to is the same as paying your suppliers twice what they are asking for your raw materials. It is no way to run a business. And that storm–his brother’s lawsuit looks like it could be the one.
[quote=“Nugget, post:110, topic:29556”]I am not following this story closely, but it looks like a triumph of the heart over brains. There is nothing wrong with wanting everyone to make $70,000 so they can have a happy life, but you cannot force them to work and study to develop the skills that the market values at that level. Some people cannot get there, but most people just will not put in the effort. The market is much, much bigger than this company, and if the CEO is willing to pay somebody $70k to answer the phones that is fine, but that is way above the true value for that job. To do this he is going to either have less money to pay for quality talent elsewhere, and this is going to kill the company in the long run; or he is going to have less profit or retained earnings and that is going to keep the company from growing, going public, or weathering a storm–probably killing them in the long run. Paying people way more than the market says you need to is the same as paying your suppliers twice what they are asking for your raw materials. It is no way to run a business. And that storm–his brother’s lawsuit looks like it could be the one.[/quote]Or he could just be paying himself less.
I wonder if the companies that moved their business to Gravity because they approve of his move will do the same for their own employees?
Personally as it has been stated already I don’t view it as wise move to pay a wage that far exceeds the skill level needed for the job. As one of the employees who left stated, it would be better to provide gradual raises and incentives. If the company falls on lean times, you will have to cut staff or reduce payroll costs, suddenly that $70K secretary may have to look for a new job. Then what happens, the employee who is accustomed to living off $70K may now struggle to pay their bills, especially if they realize their skill set is not going to get them another $70K job.
I think it will be several years before we can say if it is a success or failure.
He is paying himself less, therefore financing this social experiment out of his own pocket. I wouldn’t do it, but I sure support his right to. The problem is that his salary is finite, and once exhausted he will not be able to hire any more of the most-expensive admins in the world, so he may not be able to staff his growth. But, if this truly grows the top line of the company maybe it will all work out. CPA_Niner is probably right, we will have to wait a while to see. Oh, and I am not pulling against his success, I just wouldn’t put my money behind him.
[quote=“CPA_Niner, post:112, topic:29556”]I wonder if the companies that moved their business to Gravity because they approve of his move will do the same for their own employees?
Personally as it has been stated already I don’t view it as wise move to pay a wage that far exceeds the skill level needed for the job. As one of the employees who left stated, it would be better to provide gradual raises and incentives. If the company falls on lean times, you will have to cut staff or reduce payroll costs, suddenly that $70K secretary may have to look for a new job. Then what happens, the employee who is accustomed to living off $70K may now struggle to pay their bills, especially if they realize their skill set is not going to get them another $70K job. [/quote]Are you really arguing that we shouldn’t pay people more because they may get laid off in the future and won’t make as much in a different job?
Also if the employee gets used to making that much and can’t live off a lower salary they are an idiot. They know this is the only company I can make that much with.
[quote=“J Felt, post:114, topic:29556”][quote=“CPA_Niner, post:112, topic:29556”]I wonder if the companies that moved their business to Gravity because they approve of his move will do the same for their own employees?
Personally as it has been stated already I don’t view it as wise move to pay a wage that far exceeds the skill level needed for the job. As one of the employees who left stated, it would be better to provide gradual raises and incentives. If the company falls on lean times, you will have to cut staff or reduce payroll costs, suddenly that $70K secretary may have to look for a new job. Then what happens, the employee who is accustomed to living off $70K may now struggle to pay their bills, especially if they realize their skill set is not going to get them another $70K job. [/quote]Are you really arguing that we shouldn’t pay people more because they may get laid off in the future and won’t make as much in a different job?[/quote]
I think it is fair to consider what the market pays for their skillset and if you are paying them above that market price enable them to build and expand their skillset. I have seen it in Gaston County with Freightliner. The union negotiated very good hourly rates for the workers, which was awesome, but did not inform their members that based on their skillset they would not be able to obtain that rate in other companies. The company laid people off and over half of those laid off ended up in foreclosure with their homes because while they found more work, their rate was no where near what Freightliner was paying for their skills. The fault IMO is on both sides - the workers for not realizing the situation they were in and the company for not adequately assisting their work force. On top of that if the rate you are paying is so inflated that it significantly increases the chances that someone will be laid off then you need to revisit if paying the inflated rate is actually in the best long term interest of your employee base and the growth of the company.
My biggest disagreement with Gravity was the blanket increase. If he had tied the significant increase to performance it would have made far more sense, pushed the company forward and attracted more top talent.
It’s actually pretty easy to downsize if you get stuck in a lower salary. No one wants to do it, which is why people end up in foreclosure when housing markets aren’t collapsing like they did a few years ago. But it is certainly possible as long as you are willing to adjust your lifestyle. I don’t find that to be a credible reason for keeping wages lower in one company just because comparable companies are lower. Otherwise, you are just setting up yet another factor pushing wages lower and lower (among the many other downward pressures on wages, like foreign workers, rules against collective bargaining, stockholder demands, etc.).
NWA, if you are saying some financial education provided by the employer, then I agree that’s a good idea. But that’s probably good in any case, plenty of people stuck in low wage jobs go into deep debt too, even if it’s not a recent shift.
[quote=“J Felt, post:114, topic:29556”][quote=“CPA_Niner, post:112, topic:29556”]I wonder if the companies that moved their business to Gravity because they approve of his move will do the same for their own employees?
Personally as it has been stated already I don’t view it as wise move to pay a wage that far exceeds the skill level needed for the job. As one of the employees who left stated, it would be better to provide gradual raises and incentives. If the company falls on lean times, you will have to cut staff or reduce payroll costs, suddenly that $70K secretary may have to look for a new job. Then what happens, the employee who is accustomed to living off $70K may now struggle to pay their bills, especially if they realize their skill set is not going to get them another $70K job. [/quote]Are you really arguing that we shouldn’t pay people more because they may get laid off in the future and won’t make as much in a different job?[/quote]
[quote=“ninerID, post:109, topic:29556”]I don’t think gravity will win or lose because the lowest paid person is now at 70k. I think the current lowest level employee simply loses when they can’t cut it with new expectations and they simply hire less people.
If you get paid 70k you won’t stay long if you are only worth 35k. It’s a commendable move but I bet this guy isn’t taking a loss on employees out of the goodness of his heart.[/quote]
Why new expectations? He felt they were under paid for what they were currently doing.
I’d venture to guess the opposite is more true. You won’t stay long if you make 35k but are worth 70k.