How much money is enough?
How much money does one need to earn before anything more becomes ridiculous?
We can talk about movie stars and professional athletes and corporate titans when considering the questions.
But, the decision by a Seattle CEO of a relatively small company is something that has people talking — rightly so.
Dan Price is CEO of Gravity Payments, a mobile credit-card payment service.
He has decided that all 120 of his employees should make no less than $70,000 a year, a figure he said will help alleviate emotional stress from money.
According to a story in the Toronto Star, about 30 of those 120 employees will see their annual salary double, while others will get a bump to that $70,000 level. About 50 employees were already at or above that salary.
Online, the story has gone, as they say, viral — and why not?
It’s a slam-dunk good news story.
Price seems extremely genuine when speaking about why he believes a decent wage is not only good for his employees, but also for his company.
His employees are understandably overwhelmed and there has been a welcome focus on the growing gap between what frontline workers make and what CEOs earn.
Earlier this month, USA Today analyzed data from the S&P Capital IQ.
The newspaper calculated that CEOs of 13 well-known U.S. retailers and restaurants earned an average of $5,859 per hour, based on a 40-hour week.
By comparison, employees at those 13 businesses making $10 per hour would need to work 60 days, or 480 hours, to earn what their CEOs pocket in one hour.
The American Federation of Labour released a study last September that showed the U.S. with a 354:1 CEO-to-worker ratio, with CEOs making, on average, $12 million and a worker earning, on average, $34,600.
The same study showed Canada with a 206:1 CEO-to-worker ratio, with CEOs making, on average, $8.7 million and a worker earning on average $42,300.
Not surprisingly, the study found Norway, a country lauded for its use of its oil wealth and its care of its residents, with a CEO-to-worker ratio of 58:1.
At Gravity Payments, CEO Price makes $1 million a year.
In order to get all of his employees to that $70,000 annual salary mark in a few years, he will take a pay cut — to $70,000 per year.
The difference between his current pay and his eventual wage will be enough to cover the upgraded salaries for 13 employees.
Of course, Price’s new salary is temporary and will rise once (if) his company recoups the profits lost to the higher wages.
He is, after all, a self-professed capitalist.
But, the plan is to keep the employees’ wages at a level believed to stave off the emotional stress of money — at least $70,000.
It will be interesting to follow the financial implications of Price’s audacious and altruistic gambit.
In the meantime, perhaps some of our country’s CEOs residing in that rarefied air of 206:1 can find some loose change in their pockets and help some of their lower-earning employees.
Imagine if each CEO halved their salaries and distributed the difference amongst the masses.
Even at half the 206:1 wage gap, the titans would still be making more than $4 million a year.
Again, how much money is enough?
~ Christopher Foulds is editor of Kamloops This Week