How a Minimum Salary of $70,000 Enabled Gravity to Endure

To understand the corporate culture that enabled Gravity Payments to survive the pandemic, one has to go back five-and-a-half years.

Back in 2015, Price was a successful CEO who earned a seven-figure sum. One day, when he went for a hike with a good friend, who earned less than $50,000 working at a different company, his anger flared up.

“She was smart, very talented, and worked more than 50 hours a week,” said Price, “but when she learnt that her rent was about to go up by $200 a month, she couldn’t figure out how she was going to pay it. I was so upset. Here I am, earning an income of over a million dollars a year, realizing that, at Gravity, I work with people who I really value as partners, and they were making less than her.”

Price recalled a study conducted by Angus Deaton and Daniel Kahneman in 2010. The study found that people do not feel happier as their wages rise above $75,000 a year. However, they are significantly more miserable when they earn less than that amount. At Gravity, new employees earned $35,000 a year. In a defining moment, Price decided that he will find a way to pay all his employees a minimum salary of $70,000 a year.

This took two years to implement.

Once it was completed, the salaries of 30 workers doubled, and those of additional 40 were increased significantly. No employee was fired, and no manager’s wage (except that of Price) was reduced. More than half of the funding of the new wage program came from the reduction in Price’s own wage, from $1.1 million to $70,000, and the rest came from the company’s profits.

While most employees were naturally thrilled, the move also drew quite a bit of criticism, both from inside and outside the company. A few workers, who earned a handsome wage before the change, accused Price of injustice, claiming that he was giving free gifts to new and junior workers, and that the work ethic would be harmed. Fox News pilloried him and 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.”

“The naysayers were wrong,” he tells me now, five-and-a-half years after the announcement, which made national news. “I could not have imagined such a great success. The number of employees at Gravity increased by 70 per cent. The company’s customer base doubled, and the cash turnover cleared almost tripled. The employees are more committed and prouder to belong to the company.”

Read More at Toronto Star

Read the rest at Toronto Star