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Title: The Threat of Gravity Payments [The Great Bloviator himself, Rush Limbaugh, ruptured a vessel railing]
Source:
Huffington Post
URL Source: http://www.huffingtonpost.com/steve ... ravity-payments_b_7106524.html
Published: Apr 21, 2015
Author: Steven Conn
Post Date: 2015-04-24 02:42:13 by A Pole
Keywords: None
Views: 7239
Comments: 44
I won't pretend that I understand what the digital company Gravity Payments actually does (in fact, I don't understand what most digital companies do) but I want to congratulate CEO Dan Price for providing us all with a useful economics lesson. You've undoubtedly heard that Price recently decided to cut his own salary in order to help finance a radical experiment in employee pay: everyone who works for Gravity Payments, based in Seattle, will now make $70,000/year. He delivered the news to all 120 Gravity employees on April 13. Actually, the economics lesson didn't come from Mr. Price directly. Rather, it has come from the angry, near hysterical reactions that have greeted this $70,000 piece of news. As reported in the New York Times, Sandi Krakowski, identified as "an author and Facebook marketing expert," whatever that might mean, lamented on Twitter: "His mind-set will hurt everyone." Meanwhile, Mika Brzezinski told Mr. Price on MSNBC's "Morning Joe" show that people probably think "you're a terrible manager." And The Great Bloviator himself, Rush Limbaugh, ruptured a vessel railing against Mr. Price's move as "pure, unadulterated socialism, which," the Bloviator quickly reminded his listeners "has never worked." Never mind that Mr. Price was acting on his own as the head of a private sector company, not carrying out some government dictate. So what, exactly, is so bad about Price's salary strategy that it has made some people so upset? Paying $70,000 across the board may or may not be good for Gravity Payment's business; that's beside the point. By implementing an egalitarian salary structure at his company Mr. Price has committed an economic heresy, and like all heretics he is being denounced by the keepers of the true faith. The orthodoxy about what workers earn is simple: it must be rigorously hierarchical; those at the top must earn more than those at the bottom; and most importantly those hierarchical wages reflect what workers genuinely deserve because they are set by the magical, impersonal and infallible forces of the labor market. So the fact that American CEOs now make 475 times what the average workers in those companies earn simply represents the market at work -- unavoidable, nothing you can do about it, like any other natural law at work. And if you don't like them apples, I suggest you become a CEO too. The heresy that Dan Price has committed, therefore, is to suggest that salary structures might actually be matters of choice, that they reflect a company's priorities and not just a set of immovable economic imperatives. And once you start pulling the curtain back from the way corporations work, who knows what Oz-like things you might discover. Like this little bit of logic bait 'n switch sitting at the center of the salary orthodoxy. We must pay astronomically high salaries to executives because they are worth it, and because Jaime Dimon would quit on the spot if his salary were reduced from $20 million/year to, say, $15 million. Big money buys big talent. As Diana Furchtgott-Roth of the right-leaning Manhattan Institute summed it up, in the labor market "you get what you pay for." But only, apparently, in the executive suites. "Over-paying" workers in the bottom tier "may make them lazy" as some of Mr. Price's critics have charged. Here's how Patrick Rogers, Associate Professor of "strategic marketing" (as opposed to what? "unstrategic marketing" -- who invents these faux subjects??!!) at North Carolina A&T's business school put it: "The sad thing is that Mr. Price probably thinks happy workers are productive workers." Silly Dan Price! Doesn't he get it?? Economic necessity demands that we make CEO's happy while simultaneously making cubicle workers miserable, because that's the only way to improve their productivity. The beatings will continue until morale improves! Or until those doing the beatings take a break for some well-deserved spa treatments. Viewing workers in this way is not economic reasoning, of course; it amounts to Calvinist moralizing. In fact, most economic policies are shaped by a set of moral values more than by a set of natural facts. For at least a generation we have celebrated the rich while vilifying the poor, and we have shaped our economic policies to reflect and reinforce those attitudes. This is what Dan Price has risked exposing and why so many of the orthodox are rooting for Gravity Payments to fail. After all, if the company does well, it will be a bit harder to ignore that charlatan behind the curtain everywhere else.
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#5. To: TooConservative (#4)
(Edited)
You socialist types are so gullible. Aha, so you are saying that his employees should reject this treacherous socialist offer and listen to Rush so he turns them into capitalist zombies. But yes, I would bet that Rush's masters are frantically collecting money to buy this CEO out so bad example is eradicated.
Why do you hate freedom?
No. The orthodoxy about what workers earn is simple: Workers are paid what they're worth. No more. No less.
Actually you pay workers less then they are worth. If you paid them what they are worth there would be no profit. If they want what they are worth they have to start their own business.
Certainly he has some managers working for him who were making $75-85K per year. Even assuming they stay at that level, how do they feel about their secretaries making close to that? Here they shell out $150,000 and six years of college to get their MBA and their GED secretary makes almost as much as they do? You can say it doesn't matter. But it does and it will. This will be a company to follow in the news.
You hire them with the expectation of making a profit. Therefore, profit is part of the calculation. "If they want what they are worth they have to start their own business." If they want what they are worth they have to find a company which will pay that amount. If they want what they THINK they are worth they have to start their own business. Then they will find their true worth.
I'm saying that we'll probably see Price and his brother sell this company within a year. You should also realize that Price, formerly paid $1M in salary for some years, is now cash-rich enough and holds other investments that he no longer needs the cash salary and is positioned to grow the company, possibly with a sale in mind. As with the praise for phony Warren Buffet demanding that Congress raise his taxes (which he doesn't pay anyway because he structured his business that way decades ago), this is a suspicious story and more will almost certainly surface later about the full nature of this story. Keep in mind, this supposed increase will happen over 3 years, not all at once. They said that by the end of the year, all employees will be making $50K.
I wonder if selling his company and firing all his employees will make similar, fawning headlines?
Certainly possible. Something about this story and the fawning coverage makes me think it's totally phony, like the Buffet hypocrisy spectacle which received the same adoring coverage.
Will the new buyer continue to pay these salaries? (rhetorical question)
"If they want what they are worth they have to start their own business." If they want what they are worth they have to find a company which will pay that amount. If they want what they THINK they are worth they have to start their own business. Then they will find their true worth. We're in agreement. We just say it differently.
No obligation to. Or would they quickly be folded into a larger payments processor who would do all the work and just shut down their jobs. A company like this that relies on electronic transactions and telephone service can have its entire operation shifted to a new location with new employees in a week or two. The company's biggest value is its existing client list.
Bottom line: If I worked there I'd be dusting off and updating my résumé. Things are not going to end well. Plus, I have a psycho for a CEO.
Oh, the irony. You record me (as a private citizen) in public without my permission and I'll beat you into a coma. And doctors will have to surgically remove your cellphone from your ass. So there.
Being in public puts aside a lot of personal privacy from recording by .gov or other people.
In the Seattle area $70K is not a lot of money. I'm sure some unemployed probably make close to that tapping various state and federal programs. For the Seattle area $120K gets you close to lower middle class. It was a 'business' decision. If the company sells public stocks, this could become a problem. This is the other end of the spectrum and akin to 'dumping' a good or service on the market. The other end being crony price fixing. What should be mentioned is if what Gravity does with regards to salary, are there other companies which compare or better when offering compensation packages in addition to salary. Like employee company stock options, 401K, health savings programs, life insurance and health care. I know a lot of these companies offer loads of benefits which amount to real money, but for some reason some employees don't take advantage of them. Some think a 2% before taxes deduction from salary is 'wasting money' when they get a tax break and also benefits which keeps more money in their pockets. Also Gravity has 120 employees. I wonder if some were making more than $70K per year before the salary change. If so, I guess they are gone and Price will hire folks well below their skill in market value. Paying $70,000 across the board may or may not be good for Gravity Payment's business; that's beside the point. Well when you are running a business that IS the point. Bad companies go fail and their employees hit the unemployment line. The orthodoxy about what workers earn is simple: it must be rigorously hierarchical; those at the top must earn more than those at the bottom; and most importantly those hierarchical wages reflect what workers genuinely deserve because they are set by the magical, impersonal and infallible forces of the labor market. So the fact that American CEOs now make 475 times what the average workers in those companies earn simply represents the market at work -- unavoidable, nothing you can do about it, like any other natural law at work. And if you don't like them apples, I suggest you become a CEO too. If the above is so then why didn't Price provide an equitable salary scale for employees who have invested more (education is money/time spent, lots) in their skill/knowledge set. That is my objection. The janitor is happy with $70K a year, but the digital design gal who does the bulk of the work with editing duties has a masters degree and a huge student loan debt. She would make $140K in another company and now makes what the janitor makes. This business will not last long. The talented will find better paying jobs and Price will be left with doing the work himself or telling the janitor to get behind a graphics workstation. Bad business. Big money buys big talent. As Diana Furchtgott-Roth of the right-leaning Manhattan Institute summed it up, in the labor market "you get what you pay for." That's very true...You get what you pay for. Price will have janitors doing what someone with a masters degree was doing before. Plus the janitorial staff are probably on a sub-contract and making more than $70K a year in that area! And once you start pulling the curtain back from the way corporations work, who knows what Oz-like things you might discover. He will discover his competition getting the better skilled employees and watch his business fail. That is economics 101. If Price wanted to show CEOs siphon too much profit for personal financial gain, he should have cut his salary by 75% and put it in stock options for his employees, a gold health care plan, and other compensation packages. But he should know these types of benefits actually help ALL employees and are before taxes compensation. Silly Dan Price! Doesn't he get it?? Economic necessity demands that we make CEO's happy while simultaneously making cubicle workers miserable, because that's the only way to improve their productivity. The beatings will continue until morale improves! Or until those doing the beatings take a break for some well-deserved spa treatments. Silly? Perhaps yes, or no. Time and the market will tell. Given he owns a company with 120 employees, I think he can MAKE it happen with his own money. Which is bad for business. In effect IMO his company will lose some clients, if he actually has any left now. Why doesn't he just pay these people out of the goodness of his heart for doing nothing? Yet Price is probably a genius. By providing the 'egalatarian' salary he will no doubt be a sweetheart for local, state and federal government contracts. So in effect Gravity will be on the government dole. Viewing workers in this way is not economic reasoning, of course; it amounts to Calvinist moralizing. In fact, most economic policies are shaped by a set of moral values more than by a set of natural facts. LOL how did Calvin get into this communist article? You mean the moral values of if you work hard, strive to improve and accomplish things you should be rewarded in the workforce? As opposed to if you occupy a cubicle and show up for work on time you should get exactly the same pay as others who worked hard to get there? The author of this article just doesn't get it. It is like they lived in a communist country or former communist country. This is what Dan Price has risked exposing and why so many of the orthodox are rooting for Gravity Payments to fail. After all, if the company does well, it will be a bit harder to ignore that charlatan behind the curtain everywhere else. What Dan Price has risked is not just his company but the employees he THINKS he is helping. 120 employees is not a 'big risk.' If I was an employee of Gravity I would thank him but go elsewhere. Having Gravity on a resume will only hurt the future prospects of the employees who actually worked for a living.
"The Lord shall preserve you from all evil; He shall preserve your soul.” (Psalm 121:7)
Rush is correct.
"The Lord shall preserve you from all evil; He shall preserve your soul.” (Psalm 121:7)
Varney is correct.
"The Lord shall preserve you from all evil; He shall preserve your soul.” (Psalm 121:7)
Good catch. He is a synical capitalist:)
"The Lord shall preserve you from all evil; He shall preserve your soul.” (Psalm 121:7)
Everything Rush opined on was correct, economically. Plus Rush got it right with soon to be disgruntled employees who will ask for an immediate raise.
"The Lord shall preserve you from all evil; He shall preserve your soul.” (Psalm 121:7)
The market will eradicate this business...unless the government bails it out with a contract.
"The Lord shall preserve you from all evil; He shall preserve your soul.” (Psalm 121:7)
The market competition usually takes care of this. If we have a truly competitive market where there is demand for a good or service, (not a false intrusion of government on the market value of things) cost, salary and the transfer of price to the customer takes care of itself. Such an environment promotes growth, further investment and in some cases new inventions. There is always some pioneer out there who wants to be the first at a new something... Poorly managed/run businesses fail in such an environment as do businesses which produce substandard products. The government has a part in safety, health and food standards and should keep to that instead of trying to make corporations produce products the consumer does not want.
"The Lord shall preserve you from all evil; He shall preserve your soul.” (Psalm 121:7)
Well I tried to find the clip of when George Costanza's secretary got a raise higher than his salary. But try this one...what if George Costanza assistant to the GM was making more than Derek Jeter?
"The Lord shall preserve you from all evil; He shall preserve your soul.” (Psalm 121:7)
Which means Price has been running a sweatshop for years now as even $50K in the Seattle area is most likely below what someone keen enough to figure out gov't bennies makes unemployed.
"The Lord shall preserve you from all evil; He shall preserve your soul.” (Psalm 121:7)
(rhetorical question) Not if they want to make a profit. From the info TC provided about a gradual increase in salary with the employees all making $50K by year's end...I conclude this guy has been running a sweatshop by Seattle cost of living standards. If someone is making $30-40K a year in the Seattle area they can't afford to live in that area and probably have a long commute or live in a very small apartment somewhere not in an area they would like to live. So Price perhaps made his millions paying employees below the cost of living in the area. What is not mentioned, at least in this article, is what employee benefits did he include before, now and in the future? $70K a year with benefits is a nice salary for someone who lives in the suburbs in some parts of Texas, Florida and some other states. Not Seattle.
"The Lord shall preserve you from all evil; He shall preserve your soul.” (Psalm 121:7)
Yes, having Gravity on a resume will most likely be negative. I would opt for the functional resume:)
"The Lord shall preserve you from all evil; He shall preserve your soul.” (Psalm 121:7)
I saw one of those salary scale websites and Price was paying phone solicitors and their managers in the $30-$40K range. They listed 8 positions like that. So it does sound like he'd been running a sweatshop, given a fairly high cost of living in that region.
You can't pay telemarketers a flat salary. More than likely there's an added commission or a stairstep bonus. Plus benefits. Plus (maybe) stock options for the managers. Now, once they're paid $70K per year, who knows how much of those added goodies are taken away. ------------------------------------------------ In support of that, here's a story on the Seattle $15. minimum wage law: While attending an event at a SeaTac hotel last week, I met two women who receive the $15/hour minimum wage. SeaTac has implemented the new law on Jan. 1. I met the women while they were working. One was a waitress and the other was cleaning the hallway. “Are you happy with the $15 wage?” I asked the full-time cleaning lady. “It sounds good, but it’s not good,” the woman said. “Why?” I asked. “I lost my 401k, health insurance, paid holiday, and vacation,” she responded. “No more free food,” she added. The hotel used to feed her. Now, she has to bring her own food. Also, no overtime, she said. She used to work extra hours and received overtime pay. What else? I asked. “I have to pay for parking,” she said. I then asked the part-time waitress, who was part of the catering staff. “Yes, I’ve got $15 an hour, but all my tips are now much less,” she said. Before the new wage law was implemented, her hourly wage was $7. But her tips added to more than $15 an hour. Yes, she used to receive free food and parking. Now, she has to bring her own food and pay for parking. (http://www.nwasianweekly.com/2014/05/blog-seatac-tells-us-15-minimum-wage/)
n (sample size) = 2 That's real convincing Mensa Boy.
Then convince me otherwise with a statistically significant sample. I can be swayed.
Someone should splain to that gasbag that it's not social or any other "ism" if it is your company and you are doing it because you want to do it. So the fact that American CEOs now make 475 times what the average workers in those companies earn simply represents the market at work - And just exactly what is wrong with that? Are the employees slaves that can't quit and seek work elsewhere? Are any of them homeless and starving? ALL the employees have in most companies is their own labor each day,for which they get paid. CEO's,on the other hand live and die on the market value of company stock,and they own plenty of it or they wouldn't be the CEO. The more risk you take and the more extensive your educational and work experience is,the more you are worth to the company,and the more you get paid.
Why is democracy held in such high esteem when it’s the enemy of the minority and makes all rights relative to the dictates of the majority? (Ron Paul,2012)
That's what defines them.
Why is democracy held in such high esteem when it’s the enemy of the minority and makes all rights relative to the dictates of the majority? (Ron Paul,2012)
Maybe even someplace called "India",where the workers will earn considerably less than 70K per year.
Why is democracy held in such high esteem when it’s the enemy of the minority and makes all rights relative to the dictates of the majority? (Ron Paul,2012)
Bingo, the regime will be tripping over themselves feeding him money under the table to keep the company going.
“Political correctness is a doctrine, fostered by a delusional, illogical minority, and rapidly promoted by mainstream media, which holds forth the proposition that it is entirely possible to pick up a turd by the clean end.”
If she's good she can make $60K a year in an average market, in some better markets she could make $100K+.
“Political correctness is a doctrine, fostered by a delusional, illogical minority, and rapidly promoted by mainstream media, which holds forth the proposition that it is entirely possible to pick up a turd by the clean end.”
Assuming her customers tip.
And if they don't then it's the managers job to see that they aren't allowed in the building ever again. Some places have went to a mandatory % tip already put in the check to help protect their employees. But it's also up to the manager to protect the customer by ensuring the girl deserves the tip cause she did her part, if she's not then she should be replaced. And if the customer doesn't like the mandatory tipping then they are free to go darken another restaurants door. If it's a smaller ticket I usually tip 30% if she did her part, now if it's a really large ticket I may cut back the % some but I ensure she is adequately compensated for her efforts. I also take into consideration how long we were there, especially during rush hours.
“Political correctness is a doctrine, fostered by a delusional, illogical minority, and rapidly promoted by mainstream media, which holds forth the proposition that it is entirely possible to pick up a turd by the clean end.”
I see. Create a disincentive for the waitress to give that extra little bit of service that means a lot for a restaurant. Plus, your method guarantees that all tips are reported as income to the IRS. Plus, the manager is now watching them like a hawk to "protect the customers". I bet you're a real hit with the staff, Herr Grubenmeister.
The only place I have seen this practice in action is when I travel to bigger cities (Leftard Ghettos). I'm not saying it's right or wrong I'm just saying that it happens. The restaurant managers first duty is to see that the customers and his employees are kept happy. If that happens then the place will do a good business and stay open for a very long time. If he decides to place one before the other then the establishment will go out of business in short order.
“Political correctness is a doctrine, fostered by a delusional, illogical minority, and rapidly promoted by mainstream media, which holds forth the proposition that it is entirely possible to pick up a turd by the clean end.”
The only times I've seen this practice in action is for large groups at a restaurant. But then again, the waitress is working her ass off so a mandatory tip is not an issue. Other than those instances, my feeling is that if a tip is mandatory there's no incentive to work a little harder to please the customer.
So you're fine if he gives his employees a one-time raise to $70,000 after he took a high CEO salary for years to build his own net worth and is now planning to sell the company and is using these raises as a tax avoidance strategy?
#6. To: A Pole (#5)
#7. To: A Pole (#0)
"The orthodoxy about what workers earn is simple: it must be rigorously hierarchical; those at the top must earn more than those at the bottom;"
#8. To: misterwhite (#7)
No. The orthodoxy about what workers earn is simple: Workers are paid what they're worth. No more. No less.
#9. To: TooConservative (#4)
#10. To: A K A Stone (#8)
"If you paid them what they are worth there would be no profit."
#11. To: A Pole (#5)
Aha, so you are saying that his employees should reject this treacherous socialist offer and listen to Rush so he turns them into capitalist zombies.
#12. To: TooConservative (#2)
"I think this is a stunt for Price who will be selling his company in short order."
#13. To: misterwhite (#12)
I wonder if selling his company and firing all his employees will make similar, fawning headlines?
#14. To: TooConservative (#11)
"possibly with a sale in mind."
#15. To: misterwhite (#10)
"If you paid them what they are worth there would be no profit." You hire them with the expectation of making a profit. Therefore, profit is part of the calculation.
#16. To: misterwhite (#14)
Will the new buyer continue to pay these salaries?
#17. To: TooConservative (#16)
#18. To: misterwhite, TooConservative (#17)
Plus, I have a psycho for a CEO.
"People are on a public beach and free to record."
“Truth is treason in the empire of lies.” - Ron Paul
Americans who have no experience with, or knowledge of, tyranny believe that only terrorists will experience the unchecked power of the state. They will believe this until it happens to them, or their children, or their friends.
Paul Craig Roberts
#19. To: Deckard (#18)
(Edited)
#20. To: A Pole, TooConservative, liberator, CZ82, GarySpFc, sneakypete (#0)
#21. To: A Pole (#1)
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.
#22. To: A Pole (#1)
Stuart Varney says, "Terrific idea. You know, I think you're an extremely generous person. You make a million dollars a year so you're gonna take a pay cut down to $70,000 a year, and you're taking some money from your profits, and you're gonna chuck it all into the big pot so that everybody makes $70,000 minimum. You're gonna take some of that profit and turn it back into salaries, not growth of the business, and you think you're gonna get a good return on your investment?"
#23. To: TooConservative (#2)
I think this is a stunt for Price who will be selling his company in short order. He's making the grunts happy while reducing his own tax liability by taking a small salary for a year or two prior to the sale so he can use income averaging in subsequent years.
#24. To: A Pole (#3)
Maybe yes, maybe not. Either way I like it. Especially that Hush Bimbo is having fits.
#25. To: A Pole (#5)
But yes, I would bet that Rush's masters are frantically collecting money to buy this CEO out so bad example is eradicated.
#26. To: A K A Stone (#8)
Actually you pay workers less then they are worth. If you paid them what they are worth there would be no profit.
#27. To: misterwhite, TooConservative, liberator, CZ82, A K A Stone (#9)
Certainly he has some managers working for him who were making $75-85K per year. Even assuming they stay at that level, how do they feel about their secretaries making close to that?
#28. To: TooConservative (#11)
They said that by the end of the year, all employees will be making $50K.
#29. To: misterwhite, TooConservative (#14)
Will the new buyer continue to pay these salaries?
#30. To: misterwhite (#17)
Bottom line: If I worked there I'd be dusting off and updating my résumé.
#31. To: redleghunter (#28)
Which means Price has been running a sweatshop for years now as even $50K in the Seattle area is most likely below what someone keen enough to figure out gov't bennies makes unemployed.
#32. To: TooConservative (#31)
"and Price was paying phone solicitors and their managers in the $30-$40K range."
#33. To: misterwhite (#32)
#34. To: Fred Mertz (#33)
"That's real convincing Mensa Boy.'
#35. To: A Pole (#0)
And The Great Bloviator himself, Rush Limbaugh, ruptured a vessel railing against Mr. Price's move as "pure, unadulterated socialism, which," the Bloviator quickly reminded his listeners "has never worked."
#36. To: TooConservative, A Pole (#4)
You socialist types are so gullible.
#37. To: TooConservative (#16)
A company like this that relies on electronic transactions and telephone service can have its entire operation shifted to a new location with new employees in a week or two.
#38. To: redleghunter (#20)
Yet Price is probably a genius. By providing the 'egalatarian' salary he will no doubt be a sweetheart for local, state and federal government contracts. So in effect Gravity will be on the government dole.
#39. To: misterwhite (#32)
But her tips added to more than $15 an hour.
#40. To: CZ82 (#39)
"If she's good she can make $60K a year in an average market, in some better markets she could make $100K+."
#41. To: misterwhite (#40)
Assuming her customers tip.
#42. To: CZ82 (#41)
"Some places have went to a mandatory % tip already put in the check to help protect their employees."
#43. To: misterwhite (#42)
"Some places have went to a mandatory % tip already put in the check to help protect their employees."
#44. To: CZ82 (#43)
"The only place I have seen this practice in action is when I travel to bigger cities ..."
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