Want proof that increasing the minimum wage can negatively impact business? Consider the case of Gravity Payments, whose CEO, Dan Price, announced Friday his business had fallen on hard times just three months after he had set a $70,000 minimum wage for all his employees.
“It’s just as painful for me as anyone else,” Price told the New York Times. “There’s no perfect way to do this and no way to handle complex workplace issues that doesn’t have any downsides or trade-offs.”
In April Price made national headlines when he announced his plan to set the company-wide minimum wage. The founder of the Seattle-based credit card processing firm wanted to give all his employees a decent shot at a middle class life. He even cut his own salary to make sure it could happen. As a result Price quickly earned praise from minimum wage advocates across the country.
“Income inequality has been racing in the wrong direction,” Price said. “I want to fight for the idea that if someone is intelligent, hard-working and does a good job, then they are entitled to live a middle-class lifestyle.”
That was until his company was hit with several unexpected costs that included a lawsuit and employees leaving. Many of the more skilled and experienced workers felt the new policy didn’t reward those who worked the hardest. New employees essentially got their pay doubled while the more experienced and most skilled workers saw little or no raise.
“Now the people who were just clocking in and out were making the same as me,” Grant Moran, an employee, told the Times. “It shackles high performers to less motivated team members.”
The raise also put the company at odds with several of its clients which felt that Price was attempting a publicity stunt. The biggest blow though was when Price was sued by his own brother, a company co-founder. As the Seattle Times reported, Lucas Price argued that his brother had been making decisions for the company without consulting him. Though the pay raise may have played a part, it was not the only decision Price made on his own.
Price set his plan in motion not long after the city itself announced it would gradually raise its minimum wage to $15 an hour. Mayor Ed Murray made the announcement in May, making the city one of only a handful of places to experiment with setting the minimum wage at an unprecedentedly high amount. The first increase of $11 took place in April, with the minimum expected to reach $15 by 2017 for most businesses.
Labor unions and their supporters have been the main force behind the movement to a higher minimum wage. While advocates say it will help the poor and stimulate the economy, opponents warn it could lead to job loss.
Though it is one of the more dramatic examples, Gravity Payments is not the first company to create its own higher minimum wage. In the first few months of 2015 those like McDonald’s, Gap, Walmart, Target, and TJ Maxx among others also did as well.
This report, by Connor D. Wolf, was cross-posted by arrangement with the Daily Caller News Foundation.