I am cackling over this one. The New York Times begrudgingly admitted that raising pay arbitrarily to $15 an hour stinks.
The set-up is Dan Price, 31, CEO of a start-up in Seattle -- Gravity Payments -- decided to raise everyone's pay to $15 an hour. Rush Limbaugh denounced it.
From Rush Limbaugh on April 15, 2015:
He read that people's happiness increases dramatically for people when they are earning at least $70,000 a year. Now, I hope that this company in future years -- (interruption) what are you shaking your head at in there? What, you don't think it's gonna work? (interruption) Well, I know, no, he doesn't know the Thanksgiving story. He doesn't know, he obviously doesn't. He is a good liberal, and he's read that people are happy at 70 grand. What he doesn't understand is, happiness does not equal productive. Happiness equals comfort. "Seventy grand, well, I can stop working hard," is what it means.
Anyway, he's not tying this to anything other than employment. He's not tying it to performance. He's not tying it to sales. This is pure, unadulterated socialism, which has never worked. That's why I hope this company is a case study in MBA programs on how socialism does not work, because it's gonna fail. My guess is that just like when Solyndra went south, there will not be a story on Gravity Payments succumbing to gravity and going under.
Now, somebody sent me a note on this story, said, "I was reading some of the comments under this story at Facebook, and I was stunned at the vast majority of comments on Facebook who think this guy is just great and has such a big heart, and thank God there's a nice CEO left in America."
And I'm saying, "Why are people surprised? Why are you surprised that that would be a reaction in a country that's moving toward socialism? It makes all the sense in the world that people commenting on Facebook would think this is great and want to get in on it." The surprising thing to me -- I wish it were true -- would be if a whole bunch of commenters started posting reasons why this is doomed, why it can't possibly work. And remember, it's a startup. They haven't made any profit yet. It's all projected.
He's chosen $70,000 as an arbitrary salary because he read that's where people are happy. And he's gonna find out -- (laughing) -- it isn't gonna take long because once everybody figures out they're all making the same, no matter what they do, the slackers are gonna surface. Human nature. William Bradford found out during the early Pilgrim days in this country. The slackers, the first thing they do is slack off when they find out that everybody's being paid the same. And then if the guy sets up an incentive program where some people start to make more, that's the beginning of his troubles, because he has set this up as everybody's gonna be the same.Liberals denounced Rush.
On Friday, the New York Times reported that the pay raise backfired. Two people who busted their hump for Dan Price quit because they got small raises while
From the New York Times:
But of course, what Rush said would happen did. Slackers liked it hard workers didn't. And now this lawsuit threatens the company's future.Two of Mr. Price’s most valued employees quit, spurred in part by their view that it was unfair to double the pay of some new hires while the longest-serving staff members got small or no raises. Some friends and associates in Seattle’s close-knit entrepreneurial network were also piqued that Mr. Price’s action made them look stingy in front of their own employees.Then potentially the worst blow of all: Less than two weeks after the announcement, Mr. Price’s older brother and Gravity co-founder, Lucas Price, citing longstanding differences, filed a lawsuit that potentially threatened the company’s very existence. With legal bills quickly mounting and most of his own paycheck and last year’s $2.2 million in profits plowed into the salary increases, Dan Price said, “We don’t have a margin of error to pay those legal fees.”
Actually, I doubt the company was profitable at all. This was a headline grabbing stunt, like when Angie's List said it wasn't going to build a new headquarters in Indianapolis unless the state repealed its Religious Freedom Act. The state revoked it. The headquarters still isn't being built because the company has been bleeding money for years.
You want to talk about income equality, how about the less-than-minimum-wage a newspaper carrier gets (they are contract employees) compared to the publisher's salary. We won't even talk about how the New York Times essentially is a tax write-off for Carlos Slim, the third richest man in the world.