MONEY Income equality

Why This CEO Pays Every Employee $70,000 a Year

Dan Price
Dan Price

Dan Price's decision to dramatically increase wages at his company sparked a lot of controversy. Here's why he did it.

Growing up in rural Idaho, Gravity Payments CEO Dan Price remembers learning that one’s values are most sacred.

“My dad would ask me a question…He’d say, ‘How much money is your integrity worth?’ His point was there’s no amount of money that he would be willing to sell his integrity for. And that was ingrained in me at a very, very young age.”

Fast forward to today, the 30-year-old CEO is staying true to those principles. Just last week he announced he’d be taking a $930,000 pay cut to help afford raising the minimum wage at his Seattle-based credit card processing company to $70,000. This means that out of the 120 employees, 70 will be getting raises and 30 will see their incomes double.

For Price, this will also mean reducing his $1 million annual salary to $70,000. “I may have to sell my house, to be honest,” he told me.

I spoke with Price on my daily podcast, So Money, about how he arrived at choosing $70,000 as the company’s starting salary and how he’ll be measuring the success of this bold decision. While Price’s move was born out of a desire to bring more income equality to his workforce, he’ll be looking to his customers to learn if, in fact, he made the best decision.

Farnoosh Torabi: You were inspired to raise the minimum wage because of a well-known Princeton study that found that emotional well-being rises with income—but only to an extent, which is around $75,000 dollars. Was it just the study that was the game changer for you? The numbers also had to make sense for the business, right?

Dan Price: To me, once you know the right thing to do, and it’s the right thing for everybody involved and it’s going to be beneficial to everyone, it becomes a moral imperative to actually do it. In the past, as much as I would have wanted to do something like this, it wasn’t practical, it wasn’t the right timing. And so, with that Princeton study, one of the other aspects that really hit home with me was, “The dollars that you’re making underneath that amount are causing harm to your well-being.” And that, to me, is powerful stuff. And we only get to live this life once. And I want everybody that I’m partnered with at Gravity to really live the fullest, best life that they can. And so, that was a big part of it. And to be honest with you, all of those studies and stuff, you can throw them out the window. If you just talk to people around Seattle, or really anywhere, and you see how it’s impacting them, that’s the top thing for me.

The day I decided to do this, I was on a hike with a friend who had her rent hiked up a little bit. And she’s incredibly smart, very hard-working, and her employer does a great job taking care of her, but market rates being what they are, and living expenses being what they are, it was creating a very difficult, stressful situation for her.

[Editor’s note: The cost of living in Seattle is 24% above the national average, according to PayScale, mainly due to the high price of housing. Home prices are 51% above the national average.]

FT: You said from the beginning that this is really just an experiment for now. How will you be measuring its success?

DP: First and foremost will be our client satisfaction. That’s what we’ve always built the whole company on. In my mind, I am a butler, I’m a servant for our clients, which are amazing independent businesses all over the country, and we help them accept credit cards for less and give them great service. And so, if our clients are more satisfied, that’s going to be, for me, the most important bellwether.

We never really had trouble attracting talent because we’re very purpose-oriented. We never really had trouble retaining talent because the most important thing we provide our team isn’t money, but an opportunity—an opportunity to serve, an opportunity to grow. But I do think that there was some level of distraction, and there must be when you’re living paycheck to paycheck. And so, I honestly believe that removing that distraction will significantly increase our ability to take care of our clients.

Every day, MONEY contributing editor Farnoosh Torabi interviews entrepreneurs, authors, and financial luminaries about their money philosophies, successes, failures and habits for her podcast, So Money—which is a “New and Noteworthy” podcast on iTunes.

More from Farnoosh Torabi:
How to Raise Kids Who Aren’t Obsessed With “Stuff”
Self-Help Guru Tim Ferriss Confesses His Biggest Financial Mistake
How I Conquered My Fear of Going Broke

TIME

How to Ace the Most Important Part of Your Job Interview

Handshake illustration
Anna Parini

You're a perfect fit for the job. But that doesn't mean you're definitely going to get it

We’ve all been there. You aced the job interview and your credentials are a perfect fit for the position. Now comes the hard part – the ‘beer test’ or the personality test, a casual chat over drinks or dinner meant to determine how well you will fit with an organization on a personal level. Since your resume can’t really capture what kind of person you are, both you and the interviewer are walking into an unknown situation with unpredictable results.

But despite the dangers of the process, it’s possible to pass the test with flying colors if you recognize the priorities of your potential employer and the questions they are really trying to answer:

What else are you good at other than work?

This may seem irrelevant to the job but it’s not. While serving on the board of a mid-sized radio group, I was tasked with identifying and hiring a new Chief Operating Officer. The leading candidate was a long-time consultant for media companies who checked all the technical boxes for the job. However, learning about her passion for composing music in her spare time and sailing gave me a sense of a well-rounded person who could not only manage the firm’s logistical operations but also liaison with the quirky radio personalities that were our bread and butter.

She got the job and was extremely successful at securing popular new radio hosts for us, many of whom enjoyed discussing her music with her more than audience ratings. She also organized a sailing outing for the firm, which was a hit with the employees. Revealing your outside interests can help your interviewer see the three-dimensional person you are and (maybe) tap into some of your hidden talents.

Are you socially adept?

There are two aspects to this. Some very smart and capable people are bad at social interaction. In some professions, such as medical research or back-office accounting, that might not matter. But in other jobs, such as in marketing, sales, or even general management, social skills are extremely important and can determine your ability to do your job. How well you engage with your interviewer during a beer test will show him or her how good you are at interpersonal communication.

In addition, your future employer may be trying to gauge if you know how to socialize with a work colleague, which is not necessarily the same as with your friends. When spending time with a colleague, you need to be aware of personal boundaries that would be dangerous to breach. You may not, for example, want to discuss the subject of dating, which a colleague might consider intrusive and which could cause problems in the work environment later. It also opens up the company to lawsuits.

Being friends with your co-workers without being too friendly isn’t easy but essential, especially in smaller organizations where socializing is inevitable. Too much closeness can lead to awkwardness, misunderstandings, and office gossip. When confronted with this type of challenge, your best bet is to show your acumen by using it – chat engagingly but casually, avoid sensitive topics, and show your interviewer that you know how to have a good time within boundaries.

Are you Dr. Jekyll or Mr. Hyde?

In vino veritas as the saying goes. In wine (or beer) there is truth. This is probably the single most important reason for employers to want to meet a candidate socially. We all put on our best face during official interviews, but from an employer’s standpoint that can be a problem. After all, no one wants to hire the polished Dr. Jekyll and wind up with the wild Mr. Hyde instead – especially in the age of social media where that picture of you dancing on a table with your shirt off can go viral.

A social outing tends to entice people to let their guard down. That’s totally fine, as long as you don’t let it too far down and maintain the same decorum you would with anyone you respect. Another vital thing to remember is that just because it’s called a beer test doesn’t mean that you have to overload on the beer. Whenever you’re around co-workers, it’s always best to moderate your drinking, and this is something a smart interviewer will watch for.

And if you’re a party animal who just can’t help himself, and manage to offend your potential employer with your behavior, then you may be better off working at a different company or in another profession.

Why do you really want the job?

When interviewing analyst candidates during my investment banking days, I would routinely receive canned answers to this question, but what I was really looking for was that spark of honesty that gave me confidence the candidate was truly motivated to work at the firm and would go that extra mile for his or her job.

In a beer test, the logic is that without the pressure of being in an interview room, a candidate will feel more comfortable giving a heartfelt answer to the question. If you’re in this position, keep in mind that there isn’t one ‘right’ answer. In some cases, the fact that you want to use the job as a stepping stone to some other career in the distant future is perfectly acceptable – as long as it’s clear to the employer that you’ve really thought about it and have a convincing motivation to excel at the job.

The problem arises when you really don’t have a compelling reason for wanting the job except for being unemployed at the time. If all you want is a paycheck and the job you’re interviewing for requires deep commitment, then the job may not be right for you. That’s a reason to take a step back, be honest with yourself as well as your future employer, and decide if you have a better reason for taking that job.

Great employees flourish in great jobs, but only if the two are compatible. The beer test is designed to determine this very intangible.

Sanjay Sanghoee is a business commentator. He has worked at investment banks Lazard Freres and Dresdner Kleinwort Wasserstein, at hedge fund Ramius Capital, and has an MBA from Columbia Business School.

MONEY salary

How to Get the Raise You Deserve

Two-thirds of people asking for a raise get at least some of the money they request. MONEY's Donna Rosato has tips on how to ask for more pay.

MONEY Jobs

March Jobs Report Disappoints

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Getty Images

A government report shows that the labor market struggled. What does that mean for your salary?

After months of impressive gains, employers slowed down hiring last month.

Employers added 126,000 jobs in March, while employment gains for January and February were revised down. Over the past three months, businesses have increased their payrolls by 197,000 workers a month. The unemployment rate held steady at 5.5%.

Hourly earnings, however, were a positive, rising 0.3% last month. Workers have seen a raise of 2.1% over the past 12 months, though, which is barely keeping pace with inflation.

Federal Reserve Chair Janet Yellen promised in a press conference last month that “we will be looking at wage growth,” adding that “we have not seen wage growth pick up.” A lack of sustained, accelerated wage growth is one reason the Fed has kept short-term interest rates near zero since the recession.

There have been other disappointments in the economy. As the dollar has strengthened against the euro, American exports have become less competitive in the global market place at the same time that economic weakness in Europe, China and Japan have reduced demand for U.S. goods. U.S. companies are starting to take it on the chin. According to S&P Capital IQ, large corporations are expected to see a 3.1% quarterly earnings decline in the first three months of 2015, the first drop since 2009.

Meanwhile U.S. productivity, measured by the growth of services and goods produced per hour worked, declined 2.2% in the last quarter of 2014.

“Wage growth will ultimately be constrained by productivity as employers cannot let paychecks increase faster than hourly output growth for years on end,” says Jack Ablin, chief investment officer for BMO Private Bank. “While job growth is the most important barometer of economic success, healthy wages play an important supporting role. Until productivity picks up, wage gains will likely be constrained.”

James Paulsen, chief investment strategist at Wells Capital Management, points out that productivity has only grown 0.8% annually in the last five years, compared to a post-war norm of 2.4%.

What’s holding productivity back? “The problem has been a lack of investment spending,” says Paulsen. Since the recession, the private sector “has been noticeably reserved with capital spending plans. Moreover, as a percent of GDP, real public sector investment spending has been declining steadily since 2010, falling recently to a 65-year low.”

Corporations aren’t going to invest unless there’s a demand for its products, which has been muted as U.S. consumers have spent the past half decade or so dealing with debt. Government spending has been limited due to sequestration.

Whether or not the Federal Reserve will tighten monetary policy by raising interest rates before the end of the year, while key employment indicators lag, remains to be seen.

TIME Innovation

Five Best Ideas of the Day: April 2

The Aspen Institute is an educational and policy studies organization based in Washington, D.C.

1. McDonald’s is raising wages for 90,000 employees. That’s a good start, and a strong message to other fast food outlets.

By Shan Li and Tiffany Hsu in the Los Angeles Times

2. “It must be right:” The human instinct to trust the authority of machines can be dangerous when life is on the line.

By Bob Wachter in Backchannel

3. As college acceptance letters roll in, women should ask about sexual assault prevention on campus.

By Veena Trehan at Nation of Change

4. When corporate values clash with policy in conservative states, big business has a powerful veto tool.

By Eric Garland in Medium

5. Amazon’s Dash button isn’t a hoax. It’s a step toward a true “Internet of Things.”

By Nathan Olivarez-Giles in the Wall Street Journal

The Aspen Institute is an educational and policy studies organization based in Washington, D.C.

TIME Ideas hosts the world's leading voices, providing commentary and expertise on the most compelling events in news, society, and culture. We welcome outside contributions. To submit a piece, email ideas@time.com.

MONEY Economy

Why This Fed Meeting Could Be a Game Changer

dollar sitting on fan of Euros
Dado Ruvic—Reuters

On Wednesday, the Fed may hint at raising interest rates for the first time in almost a decade. These three major issues will affect their decision.

Employment is up and economic growth is stronger, but that hasn’t made Janet Yellen’s job any easier. The Federal Reserve chair now has to decide how she’ll shift monetary policy out of crisis mode—the Fed has kept short-term interest rates near zero since 2008—and into something more like normal. All without breaking anything in the process.

That problem is the backdrop to the Federal Reserve’s Open Market Committee meeting on Tuesday and Wednesday. If early predictions are correct, the big news from the meeting may be that Yellen removes her pledge to be “patient” about possible interest rate hikes. If so, based on what Yellen has said about how she’ll signal a coming policy shift, the Fed could start raising its benchmark interest rate as early as June. That would ripple through the economy as lenders raise their own interest rates on loans.

But even before the Fed actually raises rates, any hint that it could raise rates will itself have an effect on markets, as investors and businesses try to get ahead of the trend.

In making this decision, the Fed faces three tough questions:

  • We have stronger economy—but is it strong enough to withstand higher rates? By many measures, the U.S. economy is doing quite well. Job growth has topped 200,000 per month for 13 straight months, and the unemployment rate has now fallen to 5.5%—four and a half points lower than at the height of the financial crisis. Yellen has previously promised to keep interest rates low until unemployment improved. Will she finally decide her job is done?
  • Does the rallying dollar change the game?. While a strong economy might make Yellen more comfortable about raising rates, an increasingly valuable dollar might push her in the opposite direction. America’s (relative) prosperity combined with Europe’s stagnation—and now looser money from the European Central Bank—has caused the euro to crash in value against the greenback. The EU’s currency recently fell to a 12-year low versus the dollar, making U.S. exports more expensive and potentially hampering future growth. Will the Fed decide to keep interest rates low for longer in the hopes of keeping the dollar competitive with the euro, or will the desire to normalize monetary policy win out?
  • Where’s the inflation? The reason to raise rates is to prevent a hot economy from igniting higher inflation. It might seem silly to worry about inflation when the dollar is the strongest it’s been in years and wage growth is all but nonexistent. That’s what economists like Paul Krugman and Lawrence Summers are arguing. On the other hand, lower unemployment suggests wages could rise in the near future, eventually pushing up prices. Although there is very little inflation right now, so-called inflation “hawks,” including some Federal Reserve regional bank presidents and members of the Fed’s rate-setting committee, think the central bank should act early to nip it in the bud.

We’ll know more about how the Fed is answering these questions on Wednesday, when the Fed announces it rate decision. Until then, “patience.”

MONEY Employment

Why It’s Time to Start Looking for Another Job

3 major economic indicators show why this might be the best time in a long time to start searching for other work.

Economists are pretty good at accounting for the unemployed and underemployed, but there’s one group that’s gone largely ignored during the economic recovery: people who have a job they don’t like, but are afraid to quit.

That’s probably because having a bad job was, at least until recently, seen as a pretty lucky problem to have. When times are tough and employment is scarce, any work is good work. But now the economy has sufficiently improved to the point where employees should stop feeling trapped in their current position and seriously consider making the change they’ve been longing for. Here’s why:

Hiring is way, way, up

Friday’s jobs report showed 295,000 jobs were filled in the month of February. That’s the 13th month in a row with more than 200,000 hirings, and the economy has added nearly 11.5 million jobs in the past five years.

Screen Shot 2015-03-06 at 9.22.13 AM

That’s a lot of jobs you could have instead of the one you’re stuck in.

Open positions are way up as well

Not only has hiring increased, but the number of positions has surged to a 14-year high. There were 5 million job openings at the end of last year, the most since 2001, and the ratio of unemployed job seekers to openings was 1.7, the lowest number since 2007.

Screen Shot 2015-03-06 at 6.27.18 AM

 

Employees are feeling more confident about quitting

A lot of smart people, including Federal Reserve Chair Janet Yellen, think one of the best indicators of economic progress is whether people have enough faith in the labor market to quit their current jobs. That statistic, known as the quit rate, has been rising and is now closing in on pre-recession levels.

Screen Shot 2015-03-06 at 6.23.43 AM

If you’re feeling like it’s time to leave for greener pastures, you’ll have a growing amount of company.

Read next:

How to Catch the Eye of a Recruiter in Just 7 Minutes

500,000 Walmart Workers Are Getting a Raise. Here’s How You Can Get One, Too

MONEY Jobs

Employers Add 295,000 Jobs as Economy Keeps Rolling

Amid signs of turmoil overseas, the U.S. economy keeps chugging along.

The U.S. economy gained 295,000 jobs in February, the 12th consecutive month employers added more than 200,000 to their payrolls. Meanwhile the unemployment rate dropped to 5.5%.

This is yet another sign of an improving — or what economists would call a “tightening” — labor market.

The rate at which workers are quitting their jobs has risen near levels not seen since before the 2007-2009 recession, implying that workers are feeling more secure that better opportunities lie ahead.

The number of unemployed workers who’ve been out of work 27 weeks or longer, while still high, is 31.1%, compared with 36.8% a year ago. Average hourly earnings grew by 0.1% last month, after rising 0.5% in January. Wages are up 2% over this time 12 months ago. That’s being be read by many analysts as a relatively sluggish number.

That last bit is important. While the labor market has been improving for more than a year, wage growth has disappointed. That in turn has kept a lid on inflation, which is one of the main reasons why interest rates have been next to nothing since the Great Recession and why the Fed, even now, will be “patient” in raising the cost of borrowing.

Even so “labor tightness is showing up in several high-profile labor disputes,” notes BMO chief investment officer Jack Ablin.

Recent anecdotal evidence points to workers having more power in their dealings with management — take striking port and refinery workers and pay raises for Wal-Mart and TJ Maxx employees. And the economy is still plugging along: an index that gauges non-manufacturing business rose a bit last month despite the headwinds from West Coast port strikes. “It was a miracle that the ISM non-manufacturing index managed to tick up for the second month in a row,” says Gluskin Sheff chief economist David Rosenberg.

Americans are feeling more confident about their finances, too. In the first three months of this year, the Wells Fargo/ Gallup Investor and Retirement Optimism Index jumped to its highest level since 2007. (Thank cheap gas prices.)

Wells Fargo Securities senior economist Sam Bullard believes the economy will continue to add workers this year at a clip of 224,000 per month.

“If realized, this strength in hiring would be enough to continue to pressure the unemployment rate lower and should result in a higher pace of wage growth–all supportive to a Fed tightening move in the coming months,” Bullard says.

TIME Business

These Are the 25 Best Places to Be an Intern in 2015

Based on an analysis by job review site Glassdoor

Glassdoor, a website that allows employees to post anonymous office reviews, has released its 2015 list of the best places to intern in the U.S. Facebook leads the ranking, which is based on the highest-rated reviews of each company. Tech dominates the list more than any other sector, with 12 companies represented.

The round-up is a promotion for the site’s new Glassdoor Students, a job search resource specifically tailored to college students.

GD-Highest-Rated-Companies-for-Internships-2015

 

LIST: 5 of the Best Companies for Working Moms

LIST: Best Places to Live 2014

Read next: The 25 Absolute Best Workplaces in the World

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