I hope some academics are doing a study on this, as it's an almost prefect real-world example of efficiency wages.[1] I wouldn't be surprised if they see large increases in productivity amongst downmarket employees, as they now have an extremely strong incentive to kick ass at their job (any other job they could get would pay significantly less).
That being said, I also sympathize with the workers who were making $70k. If I were making $70k and a junior developer making $30k before (all hypothetical) got a raise to $70k I would absolutely be pissed off that I am now apparently considered equally valuable to them.
Probably a better way to handle this with total buy-in from all employees would have been to give an $Xk raise, where $Xk is the amount required to bring the lowest paid employee up to $70k. This would have preserved proportional productivity values while giving everyone an awesome reward (and introducing efficiency wages). Of course, it probably also would have been much more expensive.
Tangent: a salary of $50k seems absurdly low for a web developer in Seattle. That guy should be looking for a new job immediately.
> That being said, I also sympathize with the workers who were making $70k. If I were making $70k and a junior developer making $30k before (all hypothetical) got a raise to $70k I would absolutely be pissed off that I am now apparently considered equally valuable to them.
I am baffled by this mindset. You had something that you were happy with, but now it's suddenly not good enough, because someone that you consider your inferior has it too and it's messing with your sense of superiority. This isn't even throwing a tantrum because the neighbor kid got a better toy--this is throwing a tantrum because the neighbor kid got the same toy.
I just lack the part of my imagination that makes me care what anybody else makes. So far as I am concerned, it's simply not important.
I'd love to talk to somebody overpaid by three orders of magnitude but only to find out how it happened, in a "The Man Who Would Be King" sort of way. The world is far too arbitrary and random for anything like that to have too much meaning.
Indeed, someone in the office next to me in a dying company went on to harvest quite a bit of stock options - I spoke with her husband years after. She was definitely worth it, but it's still like the opposite of a tree falling on you.
The second rule is that what I make is important, but only to me and no you can't find out. Consistency has its limits.
I've always wondered how pro athletes in their weird economy deal with this issue. With salary caps, max contracts and scarcity there are all sorts of constraints that change from year to year, and a superstar on a max contract signed a few years ago can be making less than a merely good player who just signed a contract. (One of the rare cases where one's actually voiced displeasure: http://www.sportingnews.com/nba/story/2015-07-14/john-wall-m... )
> Roger Reynolds, a co-owner of a wealth management company, said his discussion of the pay plan with Mr. Price got heated. “My wife and I got so frustrated with him at a cocktail party, we literally left,” said Mr. Reynolds, who complained that Mr. Price unfairly accused him of measuring his self-worth solely in terms of money and trying to hold somebody else down. Everyone may have equal rights, but not equal talent or motivation, Mr. Reynolds said. “I think he’s trying to bring in some political and aspirational beliefs into the compensation structure of the workplace.”
Curious. The status quo is inherently political. There is already a heavy political stance built into the structures of the workplace.
Ironic that a wealth management advisor, who essentially peddles mutual funds and pats clients on the head in exchange for 2% of their wealth is concerned about paying for talent.
My grandfather owned a bar years ago. He paid the bartenders a good wage, way more than what he was required to by law. He did it because it kept good people around and reduced pilferage.
I think this is half the problem for the backlash:
"“What’s their incentive to hustle if you pay them so much?” Ms. Brajcich said they asked."
It relies on the assumption that the only motivation people would have to work, is that they will be homeless if they don't. I think the idea that you can work towards something bigger than you is a foreign concept to the majority of people.
If you are being overpaid (in some sense), you might work harder than before because you have more to lose if you get fired. Any alternative job would most likely come with lower pay.
Jealousy is quite common. You see plenty of instances of this, people can't wait to measure their self-worth relative to others and would happily affect the lives of others in a negative way simply because it makes them feel better about themselves. After all if you determine your status by the pay you receive and the stuff you can buy then it's better for you if your colleagues earn less than you and your self-worth will suffer if your colleagues earn the same.
I had this at one job, I was a developer and earnt considerably more (though market rate) than the office manager.
She had a vendetta against me from day one with constant jibes about pay and such as prior to me starting she'd earnt the most out of the staff there.
It progressed into her making a landgrab (decided that I had to clear all days off and holidays through her etc) which I countered by speaking to my boss (and the company owner) who then told her that I was nothing to do with her and she should get back to managing the job of an office manager.
If I were not so thick skinned it would have been a deeply unpleasant experience.
Seems there are some fundamental but overlooked assumptions running through these comment threads, the stance that companies "should" pay higher salaries to workers who create more value for the company being one. The assumption is that the company, or its management, is like a parent that must treat each of its children equally. Why should this be the case? Who says a company should be a full-fledged meritocracy? If you work for me and I wish to pay your colleague more money than you, even though you produce more, why shouldn't I? I may have good reason to. Your colleague, I may think, simply needs the money more. Of course I understand you might choose to leave. I may even feel that would be best for you, that you have more to offer the world than you'll be able to give it in your current role. At any rate, you're free to make your life choices, including where you work. I'm free to make my life choices, including how I run my company. CEOs are not moms or dads.
A second assumption is that companies "should" reward people who have invested in educating themselves and cultivating valuable skills. You're in danger if you think like this. Companies pay good money for such knowledge and skills usually because they need to, not because they "should". That is why most will ask you to tell them your salary expectations when you apply, rather than tell you up front what they are willing to pay you. By letting you speak first, they may find you're willing to accept a less-than-market rate.
I think you might be misinterpreting the meaning of "should" in these discussions. Nobody's claiming that a CEO is ethically obligated to adhere to a certain remuneration strategy or that employees with certain skills legally should be paid a certain wage... people are just giving their opinion on what they believe is sensible or stupid. Sort of like "you probably shouldn't eat that entire box of cookies."
I guess it's OK for you not to treat your employees fairly but it's also OK for the society at large to shun you for that. You should not forget that you being able to have a company is a social contract too.
Interesting. He would have done well to have read The Hard Thing about Hard Things by Ben Horowitz, which conveys nicely that much of being a CEO is realizing that when you think you're talking to person X (about their salary, etc), you're also sending messages to everyone else in the company. You have to keep everyone in mind, all the time.
It seems (based on the Horowitz reference, pardon me if I am wrong) you're implying that Mr Price was wrong to make the change based on losing two key employees (and probably more that didn't up and quit). Maybe at the time he didn't anticipate that some would feel slighted but he also didn't know really what the change mean to the lives of other of his employees.
An interesting question would be "if you could go back in time would you do it all over again?" (PR and ego would probably indicate "yes" but we would never know the real truth).
Am I crazy for thinking it seems naive to not anticipate that current employees may not take kindly to people who earn half as much as them getting bumped up to their salaries?
I know what you're saying, but I've never understood this logic personally. How does someone else earning more money hurt you? It's not like a person doing better than you is taking your money.
No, not at all. I think it would have made more sense to give each employee a raise based on a percentage of their income. That way, everyone gets a pay raise, and you can give more money to the lower earners without offending employees because it is an equal percentage increase.
Am I crazy to think nobody should actually care? By that, I mean the cost of caring about it is probably much higher than the cost of not caring about it.
I wonder if on the grave marker of humanity it will not read "THEY CARED TOO MUCH ABOUT SOCIAL SIGNALLING". The Universe is far too personal (and, curiously impersonal at the same time ) to care about whether other people are "winning". They'll get theirs, you'll get yours.
Something I hadn't seen discussed with much clarity is what happened to the employees who were already making 70k+? If I was working there making that much, would I see a similar percent increase? If not, then I'd be pretty angry about the situation and would probably leave as well.
I think part of it is that what you get paid is mostly based on your experience and skill set, as well as what you bring to the company. Let's compare a customer service rep and a web developer. They're both important parts of the company, but one has a highly specialized skill set that takes a while to develop, while the other person answers the phones. The developer has taken the time to invest in themselves professionally so that they could be a higher earner. The customer service rep needs about a week of training. To put them on the same pay grade seems unfair and illogical.
Some of the comments on the NYT piece touch on this -- that higher-earning, hard-working employees were off-put when their "just-barely-cruising-along" employees were receiving the equivalent of a promotion.
This reminds me of a few months ago when gas price was down to a mere $2.00 . It was wonderful for the public, but all I heard on TV is how bad it was for the economy.
We shouldn't let this be the norm, these employees complaining or those who quit are angry that their "inferior" coworkers are getting the same wages.
> a few months ago when gas price was down to a mere $2.00 . It was wonderful for the public, but all I heard on TV is how bad it was for the economy.
That really pissed me off. When the gas prices were high, then the damage to the economy was clear—everyone was paying more, prices for everything across the board were going up, because the cost of doing everything went up.
And then when prices dropped? Suddenly it was "bad for the economy". I'm sure there were companies it was bad for—specifically, the companies that were riding high when prices were gigantic. But for the rest of the economy, it was a breath of fresh air.
> This reminds me of a few months ago when gas price was down to a mere $2.00 . It was wonderful for the public, but all I heard on TV is how bad it was for the economy.
WTF? Low gas prices are almost uniformly good for the economy. The only companies it isn't good for are oil companies. And they make so damn much money no matter what that it really doesn't hurt them very much.
Do you know what happens when Paul McCartney gives to charity and charity leaks his name? He cancels the donation. That's how you do good deeds when you genuinely want to help people and not pull a little PR on a side.
If this guy wanted to help his under-40K employees, there were multiple ways to do it (a) quietly (b) without pissing off other people who worked for him. I don't know if it's a poorly throught through PR stunt or if it's just a vanity / mid-life crisis thing, but it sure wasn't executed smartly.
>I don't know if it's a poorly throught through PR stunt or if it's just a vanity / mid-life crisis thing, but it sure wasn't executed smartly.
Or he just wanted to do what he thought was the right thing. I hire day laborers through a local service on a regular basis. I pay the workers directly and I am supposed to give them $9 an hour. I typically pay them $15-$20hr an hour at the end of the day.
This is ridiculous. Any change in pay structure is going to cause someone to get the short end. Who doesn't want more money? Who doesn't have getting less?
One thing's for certain: there's a whole bunch of people who are butthurt about lower class people getting more money. Wonder what that reflects about them...
It's interesting to see him being accused of being "socialist" or "communist" when his decision seems to flow from his conservative Christian upbringing.
Interesting and even nonsensical. He's an entrepreneur, owns a for-profit business and is choosing to compensate how he wants to. It's actually the definition of how capitalism can improve quality of life for everyone, is it not?
The departure of most values employees is not surprising. In their place I'd do the same. I want no part of working in a place where salary is based 100% on politics and 0% on merit.
curious all the quitters said the same thing (if you read the article)
Salaries are based on what the market will bear. Employee performance is extremely hard to quantify, and there's not reason to believe that this changes that aspect of the equation too much.
Seems like people in the US have completely forgotten that collective bargaining was a key piece to advancing workers' rights.
> Two of Mr. Price’s most valued employees quit, spurred in part by their view that it was unfair to double the pay of some new hires while the longest-serving staff members got small or no raises.
Man, that must have been awkward to explain to anyone who stopped by while you were cleaning out your desk. "Yeah, I'm quitting because you don't deserve more money, peasant. It was really nice working with you, though!"
The cool thing about how incentives work: instead of being angry that relative slackers are now making $70K, be happy that when they are fired, they will be replaced from a pool of hopefuls an order of magnitude larger then when the company had to settle on hiring those slackers in the first place.
It's funny how libertarian conservatism gets apoplectic when wealthy people make the wrong choice. Then they get all "Virtue of Selfishness" on your ass.
I would love to see a more in depth case study of this.
I also wonder how much of the issue is because it was in some respects a publicity stunt. If instead it had been quietly phased in over two years, I doubt there'd be as many negative ramifications.
So a discussion concerning making payments, primarily living expenses and student debt is what triggered this idea to help alleviate financial burdens for entry level staff. Instead of raising starting salaries to $70k, why not keep the starting market rate salaries but offer to pay $1500-$2000 per month towards an employee's student loan debt until it is paid off?
[+] [-] morgante|10 years ago|reply
That being said, I also sympathize with the workers who were making $70k. If I were making $70k and a junior developer making $30k before (all hypothetical) got a raise to $70k I would absolutely be pissed off that I am now apparently considered equally valuable to them.
Probably a better way to handle this with total buy-in from all employees would have been to give an $Xk raise, where $Xk is the amount required to bring the lowest paid employee up to $70k. This would have preserved proportional productivity values while giving everyone an awesome reward (and introducing efficiency wages). Of course, it probably also would have been much more expensive.
Tangent: a salary of $50k seems absurdly low for a web developer in Seattle. That guy should be looking for a new job immediately.
[1]: https://en.wikipedia.org/wiki/Efficiency_wage
[+] [-] PhasmaFelis|10 years ago|reply
I am baffled by this mindset. You had something that you were happy with, but now it's suddenly not good enough, because someone that you consider your inferior has it too and it's messing with your sense of superiority. This isn't even throwing a tantrum because the neighbor kid got a better toy--this is throwing a tantrum because the neighbor kid got the same toy.
[+] [-] ArkyBeagle|10 years ago|reply
I'd love to talk to somebody overpaid by three orders of magnitude but only to find out how it happened, in a "The Man Who Would Be King" sort of way. The world is far too arbitrary and random for anything like that to have too much meaning.
Indeed, someone in the office next to me in a dying company went on to harvest quite a bit of stock options - I spoke with her husband years after. She was definitely worth it, but it's still like the opposite of a tree falling on you.
The second rule is that what I make is important, but only to me and no you can't find out. Consistency has its limits.
[+] [-] jkestner|10 years ago|reply
[+] [-] shoo|10 years ago|reply
Curious. The status quo is inherently political. There is already a heavy political stance built into the structures of the workplace.
(edit: see Jeff Schmidt's book Disciplined Minds)
[+] [-] Spooky23|10 years ago|reply
My grandfather owned a bar years ago. He paid the bartenders a good wage, way more than what he was required to by law. He did it because it kept good people around and reduced pilferage.
[+] [-] unknown|10 years ago|reply
[deleted]
[+] [-] goldenchrome|10 years ago|reply
It relies on the assumption that the only motivation people would have to work, is that they will be homeless if they don't. I think the idea that you can work towards something bigger than you is a foreign concept to the majority of people.
[+] [-] guan|10 years ago|reply
[+] [-] ArkyBeagle|10 years ago|reply
[+] [-] a3voices|10 years ago|reply
[+] [-] jacquesm|10 years ago|reply
Human nature is predictable and depressing.
[+] [-] noir_lord|10 years ago|reply
She had a vendetta against me from day one with constant jibes about pay and such as prior to me starting she'd earnt the most out of the staff there.
It progressed into her making a landgrab (decided that I had to clear all days off and holidays through her etc) which I countered by speaking to my boss (and the company owner) who then told her that I was nothing to do with her and she should get back to managing the job of an office manager.
If I were not so thick skinned it would have been a deeply unpleasant experience.
[+] [-] unknown|10 years ago|reply
[deleted]
[+] [-] tangerine_beet|10 years ago|reply
A second assumption is that companies "should" reward people who have invested in educating themselves and cultivating valuable skills. You're in danger if you think like this. Companies pay good money for such knowledge and skills usually because they need to, not because they "should". That is why most will ask you to tell them your salary expectations when you apply, rather than tell you up front what they are willing to pay you. By letting you speak first, they may find you're willing to accept a less-than-market rate.
[+] [-] stdbrouw|10 years ago|reply
[+] [-] asgard1024|10 years ago|reply
[+] [-] ekanes|10 years ago|reply
[+] [-] jbigelow76|10 years ago|reply
An interesting question would be "if you could go back in time would you do it all over again?" (PR and ego would probably indicate "yes" but we would never know the real truth).
[+] [-] kitwalker12|10 years ago|reply
[+] [-] dopamean|10 years ago|reply
[+] [-] jameshush|10 years ago|reply
[+] [-] DarkTree|10 years ago|reply
[+] [-] jameshart|10 years ago|reply
[+] [-] ArkyBeagle|10 years ago|reply
I wonder if on the grave marker of humanity it will not read "THEY CARED TOO MUCH ABOUT SOCIAL SIGNALLING". The Universe is far too personal (and, curiously impersonal at the same time ) to care about whether other people are "winning". They'll get theirs, you'll get yours.
[+] [-] kdamken|10 years ago|reply
I think part of it is that what you get paid is mostly based on your experience and skill set, as well as what you bring to the company. Let's compare a customer service rep and a web developer. They're both important parts of the company, but one has a highly specialized skill set that takes a while to develop, while the other person answers the phones. The developer has taken the time to invest in themselves professionally so that they could be a higher earner. The customer service rep needs about a week of training. To put them on the same pay grade seems unfair and illogical.
[+] [-] hanspeter|10 years ago|reply
[+] [-] vwcx|10 years ago|reply
[+] [-] jonas21|10 years ago|reply
https://news.ycombinator.com/item?id=9371854
[+] [-] jetskindo|10 years ago|reply
We shouldn't let this be the norm, these employees complaining or those who quit are angry that their "inferior" coworkers are getting the same wages.
[+] [-] mcphage|10 years ago|reply
That really pissed me off. When the gas prices were high, then the damage to the economy was clear—everyone was paying more, prices for everything across the board were going up, because the cost of doing everything went up.
And then when prices dropped? Suddenly it was "bad for the economy". I'm sure there were companies it was bad for—specifically, the companies that were riding high when prices were gigantic. But for the rest of the economy, it was a breath of fresh air.
[+] [-] bsder|10 years ago|reply
WTF? Low gas prices are almost uniformly good for the economy. The only companies it isn't good for are oil companies. And they make so damn much money no matter what that it really doesn't hurt them very much.
[+] [-] eps|10 years ago|reply
If this guy wanted to help his under-40K employees, there were multiple ways to do it (a) quietly (b) without pissing off other people who worked for him. I don't know if it's a poorly throught through PR stunt or if it's just a vanity / mid-life crisis thing, but it sure wasn't executed smartly.
[+] [-] alukima|10 years ago|reply
Or he just wanted to do what he thought was the right thing. I hire day laborers through a local service on a regular basis. I pay the workers directly and I am supposed to give them $9 an hour. I typically pay them $15-$20hr an hour at the end of the day.
[+] [-] maehwasu|10 years ago|reply
He may or may not be right, but if shaking things up even outside his company was the intended effect, mission accomplished.
[+] [-] Daishiman|10 years ago|reply
One thing's for certain: there's a whole bunch of people who are butthurt about lower class people getting more money. Wonder what that reflects about them...
[+] [-] gknoy|10 years ago|reply
Isn't that literally un-doing a good deed?
[+] [-] jefurii|10 years ago|reply
[+] [-] wmboy|10 years ago|reply
[+] [-] walshemj|10 years ago|reply
[+] [-] dmitrygr|10 years ago|reply
curious all the quitters said the same thing (if you read the article)
[+] [-] Daishiman|10 years ago|reply
Salaries are based on what the market will bear. Employee performance is extremely hard to quantify, and there's not reason to believe that this changes that aspect of the equation too much.
Seems like people in the US have completely forgotten that collective bargaining was a key piece to advancing workers' rights.
[+] [-] PhasmaFelis|10 years ago|reply
Man, that must have been awkward to explain to anyone who stopped by while you were cleaning out your desk. "Yeah, I'm quitting because you don't deserve more money, peasant. It was really nice working with you, though!"
[+] [-] pessimizer|10 years ago|reply
It's funny how libertarian conservatism gets apoplectic when wealthy people make the wrong choice. Then they get all "Virtue of Selfishness" on your ass.
[+] [-] mentos|10 years ago|reply
[0] - Tax Credit for Businesses That Share Profits - http://www.nytimes.com/politics/first-draft/2015/07/16/profi...
[+] [-] scarmig|10 years ago|reply
I also wonder how much of the issue is because it was in some respects a publicity stunt. If instead it had been quietly phased in over two years, I doubt there'd be as many negative ramifications.
[+] [-] serve_yay|10 years ago|reply
[+] [-] pm24601|10 years ago|reply
Please remember this:
1. It is his company; not yours.
2. He doesn't have to check with you
3. He pays the consequences of any bad decisions; not you.
4. He reaps the benefits; not you.
5. Your (and my) opinion does not matter.
[+] [-] cheald|10 years ago|reply
[+] [-] jrs235|10 years ago|reply