Dan Price, CEO of Seattle’s Gravity Payments (a payment processing company) gave up a million-dollar salary to try an outrageous experiment. He cut his salary to $70,000 and increased every employee’s salary to exactly the same level.
He told CNN News he paid his first employee $24,000 and no health benefits. That troubled him so as the company became successful enough to pay higher salaries, he wanted to reward his employees. He chose $70,000 because of a 2010 Princeton study that pegged the happiness turning point at $75,000. Up to that level, every additional dollar increased happiness. Beyond that, more money has no impact on happiness.
Price looked at the company’s financial position and decided he could pay everyone $70,000, starting at $50,000 and working up to the full amount by $70,000. That is a big jump from the company’s current average of $48,000. He figured that would allow his employees could focus on their work rather than on money worries.
The gamble brought a flood of new business as well as interest in working for the company. At the time he spoke with CNN, he had two openings and had received over 3,500 applicants.
Price made the announcement in April 2015 and has received all kinds of media attention for it. He told CBS News he made the decision because, “I want to be part of the solution to inequality in this country, and so if corporate America also wants to be a part of that solution, that would make me really happy.”
A salary of $70,000 does not guarantee the recipients will live within their means or be happy. However, it sets an atmosphere of equality that is rare in the corporate world. Price’s experiment is worth watching.