In 2015, Dan Price, the CEO of the Seattle-based credit card processing company Gravity Payments, told his employees that he was taking a million-dollar pay cut in order to raise the minimum wage at the company to $70,000. Five years later, he says that the policy has been a success—and the company is now in the process of adopting the same minimum wage at its second location in Boise, Idaho.
The story behind the policy, which received a lot of publicity at the time, goes like this: Price originally decided to make the change after a hike with his friend, Valerie, who was struggling to pay her bills in Seattle, despite working 50-hour weeks and earning $40,000 a year, well over minimum wage. “She was explaining to me how a $200 rent increase was just throwing her entire life into chaos,” he says. After the hike, he kept thinking about the problem. “I couldn’t stand anymore to be leading a company that was having a third of its employees be in a worse situation than my friend Valerie, when these people were very hardworking, very motivated, and doing all the right things that they were supposed to. To not be able to make ends meet was just very heartbreaking.”
Dan Price, CEO of Gravity Payments
When you’re being paid a living wage, then you feel valued as an employee and you feel like, wow, this company respects my intellect and my ability.”
The shift to a $70,000 minimum wage followed earlier increases in pay. In 2011, after the company had recovered from the last financial crisis, it started giving employees much larger raises that it had in the past—by the end of 2012, salaries increased by an average of 26%. Price expected that the company’s profit margin would drop as payroll increased. But profits went up. Because people were better able to take care of their financial needs, he now believes that they were also better able to focus on work. The increase to $70,000 magnified this effect.
“What we find is, if we make sure to partner with [employees] so that they have everything that they need, then they have increased capability, they’re not distracted trying to figure out how to make ends meet,” he says. “We need people to solve problems and act quickly and decisively and take care of our customers. So it really increased the license of those employees. Because when you’re being paid a living wage, then you feel valued as an employee and you feel like, wow, this company respects my intellect and my ability, and they want me to make the decisions and not just pass the buck.”
When the company opened a second office in Boise, Price decided to implement the same policy, ramping up to a $70,000 minimum wage by 2024 even though Boise’s cost of living is lower than Seattle’s. The policy is the winning entry for corporate social responsibility in Fast Company’s 2o2o World Changing Ideas Awards. “I just struggled to understand how we could keep our integrity, with everything that it meant to so many people, if we couldn’t find a way to do it,” he says. In Boise, the company acquired another company called ChargeIt Pro, where more than half of the employees made less than $30,000 a year. Many expected to be laid off. But Price kept them on staff, and committed to the steep raises necessary. “To me, there was just no other option because we knew what it meant to those employees,” he says. “We knew what it would mean to be able to, you know, raise their family in Idaho and have enough to do that.”
The initial change wasn’t completely smooth. Some higher-paid employees complained, arguing that they’d had to work harder to earn the same amount. A couple of people quit. Price’s brother, who was cofounder of the company and who served on the board at the time, complained that he hadn’t been consulted about the decision. But Price says that most of the changes have been positive.
The company’s business has tripled. Employee turnover has dropped. Personal 401(k) contributions have doubled, some employees have been able to buy their first homes, and more than 70% of employees with debt have been able to pay it down. Some employees say that they’ve been able to afford buying healthier food or moving closer to the office.
A handful of other companies have followed Gravity’s example, like PharmaLogics Recruiting, which raised its minimum wage to $50,000 with a potential $20,000 bonus, and then saw employee turnover decline and profit margins go up. But Price also thinks that larger-scale change is necessary, from access to healthcare, education, housing, and food security to a potential universal basic income policy like Andrew Yang’s $1,000-a-month freedom dividend. “We’ve proven that [a higher pay structure] can work and can thrive, by tripling our business,” he says. “But unfortunately, we’ve also proven that individual voluntary actions like that will not solve the systemic issues we’re facing.”