The CEO of a Seattle start-up is making waves around the world after announcing this week he is taking a significant pay cut to boost the salaries of his 120 workers.
Dan Price of Gravity Payments, a credit card payments company, told his team Monday that the lowest paid staff person in the company will now be paid $70,000. To lead by example and make the plan possible, he is slashing his own pay from $1 million to $70,000 and dipping into 75 to 80 per cent of the company’s annual profits.
According to ABC News, over a three-year timeline, 70 of the company’s 120 employees will have their salaries raised to the new minimum. Currently, the company’s employees earn an average wage of $48,000.
For 30 employees, this could make a considerable difference in their lives as it will mean a doubling of their pay.
“My jaw just dropped,” 29-year-old Phillip Akhavan, who earns $43,000 as a company merchant relations team member, told The New York Times. “This is going to make a difference to everyone around me.”
Price’s big idea came after reading a 2010 Princeton University study on the correlation between happiness and income. The $70,000 minimum wage figure was based on the study’s findings that people became happier when they are making about $75,000 per year, but the positive effect on the level of happiness begins to fall when they make more than this amount.
“Low income exacerbates the emotional pain associated with such misfortunes as divorce, ill health, and being alone,” reads the study. “We conclude that high income buys life satisfaction but not happiness, and that low income is associated both with low life evaluation and low emotional well-being.”
The 30-year-old says he already has an incredibly luxurious life on yachts and private planes, thanks to his friends who are super-rich. The changes to his wage will also require him to scale back to an extent, but he is willing to do it.
“I’m a big believer in less: The more you have, sometimes the more complicated your life gets,” he told ABC.
Price founded Gravity Payments in 2004 using seed money from his brother when he was a 19-year-old student at Seattle Pacific University.
The company’s own minimum wage is substantially higher than Seattle’s recently enacted city-wide minimum wage of $15.00 – the highest minimum wage in any American jurisdiction. The city’s minimum wage policy will be phased in over the next few years.