In April, Dan Price, the CEO of Seattle-based Gravity Payments, made international headlines by guaranteeing his 120 employees a salary of $70,000 a year. Price's inspiration for this move: a study by economist/Nobel laureate Daniel Kahneman, which found people were demonstrably less happy if they earned less than $75,000.
Here's what could happen if you try this out at your company.
1. A pay cut
The plan, phased in over three years, gave raises to 70 workers. To offset more than half the $1.8-million cost, Price immediately cut his own salary from $1.1-million to $70,000, though he does plan to eventually restore his original salary.
2. A media frenzy
Gravity invited the New York Times and NBC to cover the big announcement: the story was immediately picked up by dozens of other media outlets. As Slate reports, the story got 500-million interactions on social media and became NBC's most-shared video in network history.
Previously, many new hires at Gravity made $35,000 a year. After that figure doubled, Gravity was predictably swamped with applicants - 4,500 in the first week alone.
4. Some blowback
Price was promptly pilloried as a socialist by the likes of Fox News and Rush Limbaugh.
5. Potentially serious blowback
The new wage policy proved less damaging to Gravity's bottom line than the lawsuit levelled against Price by his brother, Lucas. According to Slate, Lucas claimed Dan had previously paid himself, "excessive compensation," and asked the court to order Dan to buy Lucas' 30 percent share of Gravity "at fair value" or dissolve the firm (Dan says Lucas has refused his offer to buy him out for $4- to $5-million). Gravity also lost some customers, presumably due to fears of price hikes/service cutbacks.
6. Cashing in - at least in the short term
After six months, Gravity's reported revenue was growing at double the previous rate. Profits also doubled. Their customer retention rate rose from 91 to 95 percent in the second quarter.
7. Breaking new ground
Only time will reveal the business sense of Price's $70K minimum-wage policy. But as he tells Slate, it's more of a moral imperative than a business strategy. "I want the scorecard we have as business leaders to be not about money, but about purpose, impact, and service," he says. "I want those to be the things that we judge ourselves on."
Looks like it's not going too badly: according to The Huffington Post: Price just landed a book deal with Viking.