
Gravity Payments: Seattle company with a minimum salary of $70K - pseudolus
https://www.nytimes.com/2019/03/30/opinion/sunday/dan-price-minimum-wage.html
======
dajuandaonly
This is almost 100% true. My friend was interviewed and was offered the job.
In spite of all the articles that said everyone gets paid $70K, he was offered
$65K. He tried negotiating his salary but they would not budge. If I'm not
mistaken, they cited that his position was a special case. Regardless, my
point is that the minimum salary is not $70k.

~~~
whamlastxmas
I find this a little hard to believe as you described. A company whose main
reputation based on a $70k minimum is going to throw that away over a measly
$5k a year?

Was your friend a contractor? Did he require a work visa? Was he based in the
US and working at their office? Was he actually being directly employed by
them or through an intermediary?

~~~
n_ary
That reputation is probably exactly what someone in the chain relied on to
make a few exceptions... because skepticism will drown out these exceptions
quickly...

Just a random thought. I don’t know the company or the parent in anyway so I
am neither supporting nor dismissing anything.

~~~
megy
This is rubbish, even one report can ruin a reputation.

------
zaroth
It’s an old story. And a good one! I’m glad TFA acknowledges the huge PR
benefits that accrued for doing this. It’s amazing actually we’re still here
talking about it.

In certain businesses, there’s actually a lot to be said for only being
willing to hire a person who can provide at least $70k of value.

It’s also a bit of a misnomer to laud the owner of a company and 100% of its
equity for taking a salary cut.

All that said I think that greed and what I’ll call “celebrity” drives the
income disparity between the median and the 90th percentile workers’ salaries
at a given company far too high.

As an aside, this sentence was so tongue-in-cheek it was jarring;

> _Jody Hall, a good liberal who worries about income inequality, owns a
> nearby cafe, Cupcake Royale. She chooses Gravity to process her payments,
> admires what Price has done and offers her own employees health care._

~~~
hnuser355
I’m not sure of numbers but I’d imagine a 70k salary would mean higher than
purely salary costs (depending on company industry etc) after other expenses

~~~
brianwawok
What? Are you including a large private office in costs?

Obviously there is a cost past salary but it’s not over 100%

~~~
mgkimsal
correct.

in the US, there will be an extra ~10% above that for FICA/unemployment. The
company will probably shell out another ~$12k for health insurance (I'm
speaking averages here - I know some companies are very generous, and others
aren't). Factor in some x% salary matching in to a 401k - say another 5%, and
perhaps some other perks. Let's say there's another ~$20k on top of the $70k -
that $70k employee may cost the company $95k.

If you then want to apportion office/equipment costs, you can do that too, but
that $70k employee is not costing $140k (unless, perhaps, they're being very
generous with some shares and there's a cost associated with that, and perhaps
tuition reimbursement, company car and some other perks on top of what was
mentioned above... maybe). Those sorts of things aren't generally given to
someone in the US making $70k.

~~~
brianwawok
I know how the works. I own a business. The 130% above salary number doesn’t
math out.

~~~
mgkimsal
sure - wasn't trying to correct you, just to add on in the same vein as you
were posting, that's all.

------
aphextron
It’s incredible to me how simple it is to attract and retain dedicated,
talented employees: pay them. You can see this clear as day when you walk into
an In-n-out vs. a Mcdonalds, Chick-fil-a vs. KFC, or Target vs. Walmart. The
employees are almost universally happier, friendlier, more efficient, and
willing to go the extra mile to help you out. It’s not about some sense of
moral righteousness, it’s just good business sense.

~~~
cletus
While I generally agree with the sentiment there is no such thing as a labour
shortage, only a pay shortage, money is not a panacea.

For one, people's expectations change. I couldn't count the number of times
I've seen a Bay Area software engineer 4 years out of college genuinely
believe they're justified in complaining about their lot in life because they
can't afford a 5 bedroom house in Palo Alto, all the while being driven around
and being fed for free by workers making $20 an hour who have to try and live
in the same area.

Look at the obvious internal strife at places like Google over efforts like
Maven and Dragonfly. If it was just money motivating them, would you see that?
Would you see people who leave over it?

~~~
netsharc
It's the "Keeping up with the Joneses" problem, but nowadays the Joneses are
flashing their material wealth on Instagram (and they don't tell you if it's
real or faked).

E.g. this guy has pictures from yachts, but he's not enjoying it, he's
working: [https://melmagazine.com/en-us/story/the-lonely-life-of-a-
yac...](https://melmagazine.com/en-us/story/the-lonely-life-of-a-yacht-
influencer)

~~~
Dylan16807
"I want a house." isn't exactly yacht envy. It's a standard expectation in
most of the country. Having a high-paying job in an extremely high cost of
living area makes the economics weird. You're not rich until you can save up a
bunch of that money and escape.

------
lexpar
I worked a bit to integrate Gravity payments at a SAAS company I worked for a
few years ago.

Aside from the technical aspects, I was struck by how much "Dan Price!" there
was in everything I read. Here we have some more.

I think this whole 70k a year thing has been very clever. The guy is getting
millions of dollars of publicity for giving about half the company a modest
raise...

Not criticizing the guy - he seems kind. And whatever the personal gain he
gets from this, he's acting as a "rising tide" here.

~~~
goshx
I don’t think the move and the Jesus look are an accident. Read this piece by
Esquire: [https://www.esquire.com/lifestyle/a46922/dan-price-the-
proph...](https://www.esquire.com/lifestyle/a46922/dan-price-the-prophet-
motive-esq-2016/)

He being portrayed as Jesus on multiple magazines is nauseating, to say the
least.

~~~
1024core
Are you sure it's not an accident? ;-)

[https://hips.hearstapps.com/esq.h-cdn.co/assets/16/31/147016...](https://hips.hearstapps.com/esq.h-cdn.co/assets/16/31/1470166078-esq-
september-2016-dan-price-01.jpg)

------
ianai
“For a while, it wasn’t clear that the gamble was going to pay off.

But eventually it did: Business has surged, and profits are higher than ever.
Gravity last year processed $10.2 billion in payments, more than double the
$3.8 billion in 2014, before the announcement. It has grown to 200 employees,
all nonunion.”

Impossible to know whether this would work in different market conditions, but
it’s a good sign. One rationalization could be workers being more productive
because they are paid more. I know this clashes with some economic models, but
there’s definitely a marginal argument for getting more for paying more.

~~~
kingludite
In custmer service the scale is infinite.

------
remote_phone
The Netflix model is the one that I would take if I ever ran a company. Pay
every employee top of the market but fire quickly and decisively if they don’t
meet very high expectations. Every employee that survives at Netflix is very,
very happy and motivated. Their engineering team universally is happy and
extremely productive and I think it makes a lot of sense.

~~~
inertiatic
>Their engineering team universally is happy and extremely productive and I
think it makes a lot of sense.

Who's word would you take for it?

Anonymous reviews on Glassdoor don't seem to agree with that.

~~~
remote_phone
I prefer listening to the opinions of the half dozens Netflix engineers and
finance employees that I know personally rather than anonymous reviews.

~~~
drchickensalad
The opinions of 6 people, with known relationships instead of being randomly
sampled, out of the population of Netflix developers, is incredibly
statistically insignificant.

~~~
hermitdev
Opinions of people I know and consider to be friends are of far more
importance to me than that of anonymous randos on the internet.

I recently turned down a job offer at a company based upon friend's feedback
and went to a lower paying job that had a lot of negative reviews on glass
door. So far, at a month in, I havent seen anything backing the negative
reviews. I'm happy at this point, and my commute is the best I've ever had.
15-20 minutes door to door.

~~~
megy
Great, that is enough for you. That is meaningless to anyone else, who does
not know you.

------
mabbo
“The payment of five dollars a day for an eight-hour day was one of the finest
cost-cutting moves we ever made, and the six-dollar-a-day wage is cheaper than
the five. How far this will go we do not know.” - Henry Ford

(Context: before they were making $2.34/day)

[0] [https://www.saturdayeveningpost.com/2014/01/ford-doubles-
min...](https://www.saturdayeveningpost.com/2014/01/ford-doubles-minimum-
wage/)

~~~
mikeash
Great article. I especially loved this bit:

> Ford employees would be “demoralized by this sudden affluence,”

I am always amazed at the ability of people to rationalize fucking over others
as somehow good for them.

~~~
dx87
It's like how GitLab justifies paying people less in lower cost of living
areas by saying that they don't want unhappy employees to feel like they
should keep working there just for the money.

~~~
willio58
Eh that reasoning is weird but the location based income just makes sense to
me. Do we really expect everyone to make silicon-valley salaries when they
don’t live in such ridiculously expensive areas?

~~~
mikeash
I expect salary to be the same for same-skilled remote workers no matter where
they live. I would expect that to result in most remote workers not living in
Silicon Valley.

~~~
joshuamorton
Why would you expect that?

It would certainly be nice if I was paid based on value generated (it would
mean a big raise even in SV), but that's not normally how economies work.

~~~
mikeash
Equivalent products have equivalent prices, barring transportation expenses.
With remote employees, transportation is irrelevant.

~~~
joshuamorton
Only within the same market.

The same apartment in Manhattan will cost more than in Houston. The same mixed
drink costs more at a fancy restaurant as at a dive bar.

Demand is as relative to price as supply is. There is a lower demand for
developers in Topeka, and so the cost of developers is lower as a result.

~~~
mikeash
There’s no “in Topeka” for remote developers, though.

If you could materialize a drink from a distant bar in your kitchen, and the
drink from the dive bar was identical to the one from the fancy restaurant,
would you pay more for the one from the fancy restaurant?

Consider a real-world example. You go to the grocery store and buy some
strawberries. Some of the boxes are from a place where they’re cheaper to
grow, and some are from a place where they’re more expensive to grow. Would
you pay more for the latter? This sort of intermingling is common, and every
time I’ve seen it, the prices are the same. The store doesn’t even consider
them to be separate products. They have the same bar code and ring up
identically.

Barring difficulties with international borders or time zones, there is only
one market for remote workers. It doesn’t make the slightest bit of difference
if the remote employee is in Topeka or Manhattan. Why pay more for the latter?

~~~
joshuamorton
But remote developers aren't the only kind of developers, and people do pay
more for strawberries grown locally.

The remote developer market is a piece of the developer market, and the
developer market pays more for developers in SF than in Topeka, same as remote
strawberries cost less (often because cost of labor is lower).

As a remote dev, you're competing with other remote devs who can out price
you. If I can offer someone else 10k less for the same product, why wouldn't
I?

~~~
mikeash
People who want local strawberries pay more for them. People who just want
strawberries and don’t care where they came from won’t pay more.

We’re specifically talking about remote workers here. The fact that some
companies pay more for non-remote people doesn’t really come into it. If
you’re hiring remotely, it makes no sense to pay more for an equivalent
employee who lives in a more expensive area.

~~~
joshuamorton
Price discrimination often makes sense.

If you have two offers, otherwise equal, and one pays more, will you refuse it
because that offer is less than what you would have been paid in another
location?

If you're a remote dev with skill x, unless you want to take less money,
you're going to compete with the many more remote devs with skill x in other
more expensive locations. So you accept less money because you can afford to,
and that's better than no offer at all (because it went to a different
person).

~~~
mikeash
As long as skilled, unemployed remote workers exist in cheap areas, I’d expect
the salary to be lower than that of non-remote workers in expensive areas, and
I’d expect remote workers in expensive areas to be unable to compete. Once you
run out of remote workers in cheap areas, I’d expect salaries to rise enough
to start attracting the ones in more expensive areas. But salaries would
naturally rise for _all_ of them, because they’re all ultimately in the same
market.

------
xtiansimon
I've looked for the reference, but I can't find it--An important point in
earlier coverage was Price's reasoning for setting the bar at $70k/year. It's
not just that this is a decent salary or a good salary. The idea, if my memory
serves me, was there is a threashold. Below that level, every additional
dollar adds significantly to your quality of life. It's the difference between
having health care, and child care, and not just one or the other.

~~~
hopler
There was a popular sociology paper (since debunked) that picked that $70k/yr
number.

It's obvious on its face that a single number for all demographics in the
country (or world?) is an absurd claim.

~~~
xtiansimon
What's interesting is the idea of an income threashold where each additional
dollar meets a previously unmet need, and somewhere above that line,
additional dollars have a different impact.

------
goodJobWalrus
I remember reading about these guys years ago. I'm so glad that it worked out
for them, and they still maintain high salaries.

------
dang
A bunch from 2015:

[https://news.ycombinator.com/item?id=9371854](https://news.ycombinator.com/item?id=9371854)

[https://news.ycombinator.com/item?id=9375978](https://news.ycombinator.com/item?id=9375978)

[https://news.ycombinator.com/item?id=10450541](https://news.ycombinator.com/item?id=10450541)

[https://news.ycombinator.com/item?id=10452546](https://news.ycombinator.com/item?id=10452546)

------
konschubert
If I am am ever in a position to do the same, I may want to try it.

If you want excellent people, you have to start by paying above-market
anyways. No matter the role.

And by having a flat salary, you take out a big contributor of stress and
distraction.

Of course, the question is what you do with those employees who's market rate
is above the flat salary rate? Not sure how I would solve that, but I am sure
there are better ways than going back to negotiating every salary
independently.

~~~
mruts
I would want to be compensated in kind. If they have enough money to double
the least valuable employees from 35k to 70k, I would also demand double.

I don’t think there are bad incentives from increasing mean of the pay
distribution. But similar to the problems with minimum wage, this 70k wage
minimum significantly compresses the distribution instead of just changing the
mean.

This creates very bad long-term incentives for the company and employees.

~~~
mikeash
I always want more money, but I don’t see why I’d expect it here. If the
company cut my pay in order to pay the janitors $70,000 I might be perturbed,
but as long as my pay remains steady, what do I care if people lower down the
pay scale make more?

Tech workers are paid incredibly well. Maybe that’s because we create so much
value, but our ability to do so is partly due to luck and circumstance.
Certainly, the poor sucker emptying the trash cans for minimum wage puts in
more effort each day than I ever do, and the company needs them in order to
operate just as much as they need me.

~~~
leetcrew
the company really doesn't need the janitor as much as it needs software devs.
the janitor is only worth employing because they free other workers to spend
their time on more valuable tasks. if, for some reason, janitors weren't
cheaper than devs, you would see a lot more devs emptying trash cans.

~~~
mikeash
Literally all employees are only worth employing because they free other
people to do other things. Devs don’t directly contribute to any fundamental
human need. We’re valuable because our work can facilitate those who do take
care of those needs.

The relative need is entirely down to supply and demand. And while I greatly
appreciate being part of a group with limited supply and great demand, I don’t
see why this means I should object to other people getting more.

~~~
leetcrew
> Literally all employees are only worth employing because they free other
> people to do other things.

this is true but it glosses over an important distinction between skilled and
unskilled labor. skilled positions in engineering and sales (just for example)
require specific skills and probably some baseline aptitude that can't be
quickly acquired. that is, you can't just assign your engineers some sales
duties if it becomes too expensive to hire sales people, and most sales people
can't just pick up engineering tasks if it's too expensive to hire more
engineers.

in contrast, most able-bodied adults can learn to sweep, mop, etc. in a couple
weeks. maybe extend it to a couple months if they need to use heavier
equipment to clean a large space. this inherently puts a ceiling on the value
of janitorial work. if janitor pay gets too close to pay for a skilled role,
it's just not worth hiring the janitor anymore.

you can see this dynamic play out in restaurants and convenience stores. most
businesses like these don't hire janitors, because they would have to pay them
as much or more than they pay the waitstaff, cooks, or cashiers. instead, the
normal employees are usually tasked with cleaning the workspace at the end of
their shifts.

to be clear, I am not contesting your greater point. the fact that some people
don't perform extremely valuable work doesn't mean it's okay to treat them
like dirt; it doesn't make them less valuable _as people_. but the claim that
a software company needs a janitor as much as it needs an engineer just isn't
true.

~~~
wonderwonder
Assuming that everything you said is true (and it is), why should the
engineers care? They are still getting the same salary they had before and
likely still have a much higher top tier than everyone else. If they are able
to put their ego aside, they would see they were not negatively affected at
all. If I was an engineer getting a fair market wage at 70k, and then the
janitor gets a raise to an above fair market wage of 70k as well, it does not
affect anything in my life. I am not going to quit and go work across the
street as an engineer still making 70k just to ensure the janitor there knows
I am more valuable.

~~~
vidarh
It does underline how for some people it's not about the absolute amount the
earn, but about where it places them in the pecking order. Raise up the
janitor and they're relatively speaking closer to the floor.

------
RickJWagner
This is a great feel-good story. I do disagree with this, though:

"For a while, it wasn’t clear that the gamble was going to pay off. But
eventually it did...."

I think the final page isn't yet written. NYT seems to be declaring the whole
thing a success, but they are picking the timeframe for deciding when things
are final. Let's give it 10 or 20 years, see where they are at.

I won't be unhappy if it's the same, but I will be surprised.

~~~
projektfu
I remember the naysayers of the time said that the existing $70,000 employees,
and even some of those who were paid less than $70,000, would feel jealous
that the lowest paid employee now was making the same as them. These people
would presumably cause a fuss and then leave, and Gravity would lose their
good employees and the institutional knowledge. One journalist managed to find
someone to anonymously say that.

They said customers would know that the employees were "overpaid" and switch
to another processor, although why this would work without those processors
also being cheaper I never understood.

In this sense, the experiment is a success. At this point, it seems there will
need to be a sudden change in the market to put them out of business, such as
a very efficient provider with better customer service.

Nonetheless, most of what we pay in payments processing goes to parties like
card issuers for their rewards programs and to the networks for their
oligopoly rents. This means that the cost of the processor is relatively
small. If they are making the kind of revenue that allowed this change in the
first place, they will probably be able to keep making it until there is a
real change in our processing system. That change would probably be
regulation.

------
forinti
Why do people have to equate any deviation from average with socialism? This
is just a company trying out a different pay scale.

~~~
sarcasmOrTears
Due to ignorance and propaganda, uninformed people think that socialism is
universal healthcare, higher pay, etc They don't know the meaning of the word
nor how this ideology works.

~~~
0815test
> universal healthcare, higher pay, etc.

This is what's technically known as "socialism with Scandinavian
characteristics".

~~~
merpnderp
Socialism as it is technically understood is state ownership of the means of
production and all parts of the economy. The state controls how the economy is
traded and who gets what.

Scandinavian countries are social democracies which very strongly embrace
capitalism, and have strong social safety nets through taxation.

~~~
alehul
I've never formally learned Political Science so I could be off-base here, but
doesn't it go like this?

Socialism: the workers own the means of production

Communism: the state owns the means of production*

*Granted, what I was taught in history is that socialism is viewed as a halfway point where communism is the ultimate goal, and that communism should involve ownership by the workers rather than the state— pretty much always, however, the state ends up with ownership (otherwise it's hard to maintain order in a by-intrinsic-nature oppressive society).

If I'm wrong, please feel free to critique and offer some readings? :)

~~~
hopler
Start by looking up the words in one of the many free online dictionaries.

Both mean state control of the economy. One of them means paying people what
the state thinks they need and requiring them to work how the state thinks
they can, as opposed to other strategies like competitive market forces.

------
fallingfrog
The gdp of the United States is 19.39 trillion dollars; the number of full
time workers is 128.57 million. Divide the first number by the second and you
get $150,812 per worker- plenty to give everyone 70k per year. This is back of
the envelope math and obviously is not very precise but still, there’s plenty
of money to go around, and a lot of room for the minimum wage to go up.

~~~
briandear
Is labor cost the only input for GDP? That calculation assumes everyone is
equal, when everyone is not. An aerospace engineer is far more valuable and
rare than a guy that washes cars. A doctor is more valuable than a burger
cook. Tim Cook is more valuable than a security guard at a mall.

~~~
fallingfrog
You’re confusing productivity with leverage. A person who harvests cabbage
arguably already produces 70k worth of value every year- they just don’t have
any leverage to claim any of that value for themselves since they are easily
replaced. It has nothing to do with how much value they produce. By the same
token there are only so many technical jobs in any economy, and if the supply
of those jobs increases beyond the demand you’ll just see a lot of extra
credentials and other filters placed to eliminate the excess.

Edit: and of course the extreme, canonical example of this phenomenon is
people who have no jobs but hold lots of stocks, which allows them to extract
tremendous economic rents from their leverage as the owners of the land,
machinery and organizations required to make the economy run, but without
personally contributing any value at all.

~~~
tg3
Hmm, I'm not sure I agree with the specific example given here. How can you
say that a cabbage harvester produces $70k in value per year when they are
paid much less than that, and every part of the supply chain for cabbage
almost certainly enjoys tiny margins (cabbage farms, cabbage distributors, and
grocery stores are not known as high margin businesses as far as I am aware).

You might argue that the excess value being produced by the cabbage harvester
is being accrued by the consumer - that they are enjoying significant value
from the cabbage that they aren't paying for. But I doubt that too - I'm
almost certain that if the price of cabbage were to, say, double, that cabbage
sales would plummet.

I'm not saying that jobs are not always compensated with their true value.
You're right that frequently people extract much more or much less value than
they produce. But I think that your example is not one of these, and I'm
curious if there is research about how many* jobs actually fit this
description.

~~~
fallingfrog
If all the stockbrokers of the world or the people writing vision statements
or selling timeshares or what have you went on strike, would anyone notice?

If all the food harvesters of the world went on strike, how long would the
human race last?

Whose job is more essential?

------
maxaf
Limbaugh is right about one thing: ongoing capitalism is predicated on labor’s
willingness to operate within a framework designed to efficiently capture
surplus value created by employees, and concentrate it at the top of a
company’s hierarchy. In that particular sense Gravity is no longer an example
of successful capitalist enterprise. Funny thing is, taxonomy matters not a
little bit for those who are served by Gravity’s model: the owners, employees,
and customers. If it works for them without harming anyone else, it’s not for
us to judge.

~~~
jacknews
Going further, the employees should actually get paid some share of the
profits that they generate, not just a fixed salary.

~~~
mruts
That’s how bonuses work. A good rule of thumb in finance is that you “deserve”
5% of the money you generate. You make 5m, you get 250k.

~~~
sethammons
Do you mean as base salary or as a bonus? Lots of tech companies report
earnings per employee, and the I'm used to hearing that number be in the
couple hundred thousand range. Apple is at $400k earnings per employee. That
would mean Apple should be paying $20k as yearly salary or as a bonus on
average at your 5% rule. Sounds like bonus territory.

~~~
mruts
Well, ideally, your base salary is pretty low and your bonus is big. This is
the model used in finance because the returns are very unpredictable and the
standard deviation between the worst and best employees is very large. Bonuses
also provide good incentives to employees.

But to answer your question, total comp should be around 5% of the money you
book for the firm. So salary + bonus.

------
caprese
"A small Seattle company shows that capitalism can have a heart."

and then everyone forgets it exists, and someone 5 years later does something
completely different like form a "B-Corporation" to prove the exact same thing

~~~
hopler
B corps are older than Gravity's thing

~~~
caprese
and charitable/purpose driven foundations which own companies are older than B
corps

> capitalism can have a heart

yet people are still trying to prove this instead of using established
solutions. I would say this is mostly ignorance along side a sales pitch
instead of merely being discontent with what is available

------
kingludite
Producing half a million boxes of cookies with 6 people had me wonder if
people truly care so deeply that the cookies cost 99 cents. I made 35 euro in
a 5 hour shift.

I don't see a reason the company would go down if they paid the 6 employees
1000 or 2000 per day. I don't know about you but if I want the cookies I don't
give a flying fuck if they cost either 99 cents or 1 euro. Does this behavior
change when one earns more than 35 euro per day? I think it only changes when
one buys more than 10 000 boxes of cookies. Then that 1 cent would be woah 100
euro - unacceptibal!

I think the minimum wage should be designed by dedicated government committee
based on the price of the product and the amount of customers served.

I currently work a minimum wage job cleaning trains. I serve some crazy number
of customers (I guestimate 100 k daily) who pay 50-100 euro for a ticket. If
they paid 5 cent extra the cleaners could earn 1000 euro per day. Sounds like
a joke but people are already paying this for cleaning the real question is
why they aren't getting what they paid for.

Its all culture, it has nothing to do with what things cost nor what they are
worth. Its just like this idea that people doing brutal physical labor should
also work 8 hours and work that job till they are 80 - as if that is even
possible.

I really think we need a committee who with a serious face have to sign off on
each job. Give them nice bonuses that they have to pay back if their estimates
didn't work.

~~~
chrissnell
Businesses will pay an employee what that employee can get if they walk across
the street and take a job. There are altruistic employers that pay more but
this would never fly at a public company or government agency where the
business owners are you and me.

~~~
hopler
Government commonly pays people far more than competitive, usually in the form
of extra paid hours for nonwork, at the office or in pensions.

