"How much—indeed, how little—should workers be paid?"
October 28, 2015 1:44 AM   Subscribe

It was late 2011. Haley was a 32-year-old phone tech earning about $35,000 a year, and he was in a sour mood. Price had noticed it, and when he spotted Haley outside on a smoking break, he approached. "Seems like something's bothering you," he said. "What's on your mind?"

"You're ripping me off," Haley told him.
Remember the Guy Who Gave His Employees a $70,000 Minimum Wage? Here’s What Happened Next., by Paul Keegan, Slate (originally for Inc.) [previously]
posted by joseph conrad is fully awesome (76 comments total) 36 users marked this as a favorite
 
[The Inc. link may or may not be accessible; it was the first time I clicked from Slate, but thereafter it was blocked by a login/signup notice.]
posted by joseph conrad is fully awesome at 1:45 AM on October 28, 2015


The idea of a business owner who cuts his own salary and reinvests his personal wealth into his company in order to experiment with paying his employees well is a wonderful narrative.

It's a shame that "maximize shareholder return" is the mantra of publicly traded companies. Which Gravity isn't. Because seeing a lot more CEOs and vice-presidents and other such high-paid types take pay cuts in order to distribute their 300xAveragePay salary to the other workers and stuff... that might go a long way toward beginning to rebuild trust with the typical-pay employee.
posted by hippybear at 2:43 AM on October 28, 2015 [31 favorites]


hippybear, in a way it is a company with a disgruntled shareholder - the suing brother. However, I am becoming convinced the more I think about things that just increasing productivity and profits is not the only goal of doing business. A company is, in fact, a service to all involved, including the lowest-tier employees.
posted by Laotic at 2:55 AM on October 28, 2015 [20 favorites]


Yeah, I've been also starting to see a business as a symbiotic organism for all involved. It's a shame that isn't a more prevalent view.
posted by hippybear at 2:59 AM on October 28, 2015 [14 favorites]


You aren't serving shareholders if all the good employees quit and your product doesn't sell and you go under.

When I hear the phrase "human capital management" (meaning HR), it's usually by people who don't really believe in the phrase at all. *sigh*
posted by wenestvedt at 3:15 AM on October 28, 2015 [9 favorites]


The fact that Limbaugh wants this man to fail (a business owner, doing what he wants with his own money without any government intervention) goes to show that the right wing don't really care about personal freedom, they only care that the poor stay poor.
posted by Ned G at 4:01 AM on October 28, 2015 [255 favorites]


You aren't serving shareholders if all the good employees quit and your product doesn't sell and you go under.

But that's a long-term thing and likely somebody else's problem. Even when that eventually happens, the company in decline will probably be bought out by someone else before it actually falls apart. It'll result in some people losing a pile of money, but it probably won't be the execs themselves, and it'll happen due to their following conventional wisdom, which is a lot harder to fault, when it comes to determining liability, than doing something seen as crazy.
posted by JHarris at 4:04 AM on October 28, 2015 [1 favorite]


Man, the conservative crowd sure hates this long-haired bearded guy whose concern for his neighbor makes him want to share.
posted by DirtyOldTown at 4:34 AM on October 28, 2015 [138 favorites]


But nothing's "happened next" yet. He's been sued by his brother, been profiled on a lot of talk shows, lost a few customers and employees (but not many of either), and made a profit. There's nothing cataclysmic or important there, nothing on which to judge the success or failure of his idea.

It's like Kennedy announcing the moon mission, and the follow-up is, the next day he had bacon and eggs for breakfast. Has something actually changed?
posted by GhostintheMachine at 4:41 AM on October 28, 2015 [16 favorites]


Yes, folks making 35k are now making 70k, all the rest is punditry. Next question.
posted by sfts2 at 4:47 AM on October 28, 2015 [12 favorites]


I think the more we talk about this, the better off everyone is, even if it is bacon-and-eggs-plating.

Best of the web.
posted by tapesonthefloor at 4:52 AM on October 28, 2015 [11 favorites]


Even Henry Ford knew that he wouldn't do well if his employees couldn't afford the product they made.

(Time to tax wealth. If the rich won't put their money to work, let's do it for them.)
posted by Artful Codger at 4:54 AM on October 28, 2015 [50 favorites]


tapesonthefloor: "I think the more we talk about this, the better off everyone is, even if it is bacon-and-eggs-plating."

So you start making $70,000 per year and all of a sudden you're too good for beans?
posted by Rock Steady at 5:05 AM on October 28, 2015 [88 favorites]


Is there any objective analysis of what people need to live on in the US? Is $35k low pay, or average pay? The UK government is currently trying to cut welfare benefits for people who earn £6k a year, which I think is abourt $10k.
posted by Major Tom at 5:19 AM on October 28, 2015 [1 favorite]


$70 K is arguably low for cities like Seattle or San Francisco. It is solidly middle class for much of the country however.
posted by Bee'sWing at 5:35 AM on October 28, 2015


Depends where you live. $35k outside of a major metro area is good for someone just out of college. But it's pretty low. If you have student loans or a child or elderly parent to care for, you're kinda screwed bc you earn too much to qualify for benefits.
posted by sio42 at 5:37 AM on October 28, 2015


Is there any objective analysis of what people need to live on in the US?

You could look at the Federal Poverty Level, which the government uses as a yardstick for admission to various programs such as welfare. For an individual, $35K is almost three times the poverty rate; for a family of four, it's 1.4 times. $35K is far from poverty, but low when you consider things you may need to live and work a professional job (a car (depending on where you live), appropriate clothes, internet access, etc.).
posted by MrGuilt at 5:37 AM on October 28, 2015 [1 favorite]


Thinking that people like Limbaugh want to keep the poor poor implies that they actually consider anybody apart from themselves. I believe their main concern, and why they appear threatened by this type of behaviour is that it risks making them not as rich as they could otherwise be.
posted by jontyjago at 5:39 AM on October 28, 2015 [3 favorites]


In Seattle $35k/yr will get an apodment, student loan payments, and a bus pass. You can always try the exurban commute, because nothing says livability like 2+ hours a day in commute time. Gravity's $70,000 a year only sounds like a lot if you get to live where the cost of living is something less like a cancer tumor on your bank account. I have been in the Seattle area for 20 years and while the cost of living has been high for that time the last five years have really thrown local living costs into overdrive.
posted by Ignorantsavage at 5:39 AM on October 28, 2015 [13 favorites]


$50k is pretty comfortable middle class in my rural town of 20,000+. $35k would be a lot less comfortable.
posted by ArgentCorvid at 5:40 AM on October 28, 2015 [2 favorites]


But nothing's "happened next" yet. He's been sued by his brother, been profiled on a lot of talk shows, lost a few customers and employees (but not many of either), and made a profit. There's nothing cataclysmic or important there, nothing on which to judge the success or failure of his idea.

That suit by his brother is definitely something important, in the context of Dan Price putting all of his personal wealth into the business. If he has to walk away or roll back the wage increases, that's pretty important to the experiment. And this article doesn't purport "to judge the success or failure of his idea." It's explicitly "here's what happened next", not "here's what happened finally".
posted by Etrigan at 5:50 AM on October 28, 2015 [3 favorites]


In my mid-sized Flyover Country city, if you want a fairly comfortable life and make $35k, you will need a roommate or a live-in partner. Living alone on that is absolutely doable here, but you won't feel middle class. I think both of the single guys I work with have roommates.
posted by soren_lorensen at 5:52 AM on October 28, 2015 [3 favorites]


Price is an entrepreneur and as such, will probably lose interest and want to move on eventually. In terms of exits, going public or getting bought out probably aren't appropriate here, given the company's values. The company could turn into a co-op. Will be interesting to see what happens with it.
posted by mantecol at 5:56 AM on October 28, 2015


Apparently, Slate gets paid by the gigabyte. That is not even remotely an article suitable for mobile reading.
posted by clvrmnky at 6:01 AM on October 28, 2015 [1 favorite]


The problem with seeing this as an experiment is it is not repeatable. If a company can balance the books by shifting income, I'm all for that. The general workforce is underpaid, while executives are crazily overpaid. However, that's not the model here. The model was only part wage shifting, the rest being buzz from the very public wage increase generating new business. A few other companies can try this tactic, but it won't take long to no longer get the buzz benefit. Consequently, not much can be learned from this particular experiment aside from perhaps measuring worker retention, productivity, work quality, and the benefits from those factors.

The interviews I read all focus far too much on the altruistic message. If these same players were asked if they would make this move silently, with no buzz factor, they'd have to say no. They are counting on revenue growth and the reestablishment of profits and margins that allow the former high wage earners to again earn those wages in the near future. In fact, from what I've read, there is no plan to keep the playing field even between executives and employees. After all is said and done, this all just feels like a publicity stunt, because if the company starts to fail, the wages of average employees will go down. If the company succeeds, the executive pay will again far outweigh the average employee - unless they are changing their original business model to forever include leveling.
posted by Muddler at 6:03 AM on October 28, 2015 [1 favorite]


"He wears the full hipster regalia of ripped jeans, untucked shirt, and sneakers."

I don't think we should blame the Hipsters for this one.
posted by clvrmnky at 6:05 AM on October 28, 2015 [12 favorites]


"Funded in part by Dan's savings, credit card debt, and student loans (diverted to fund his venture)"

I know this article is not about startup entrepreneurial libertarianism, but remember this highlighted part the next time some college dude millionaire goes on about how they succeeded on their own terms.
posted by clvrmnky at 6:10 AM on October 28, 2015 [6 favorites]


Im fairly certain that using your student loan funds for things other tuition and living expenses related to your being in school is fraud.
posted by McSockerson The Great at 6:16 AM on October 28, 2015 [14 favorites]


You could look at the Federal Poverty Level, which the government uses as a yardstick for admission to various programs such as welfare. For an individual, $35K is almost three times the poverty rate; for a family of four, it's 1.4 times. $35K is far from poverty, but low when you consider things you may need to live and work a professional job (a car (depending on where you live), appropriate clothes, internet access, etc.).

The federal poverty level is a debatable number, as it dates from the sixties - on the one hand, it assumes that families will spend 1/3 of their money on food when that has dropped to 1/6. On the other, it does not take into account child care costs, insurance costs and the various other things that have become necessities since the sixties. It assumes a working parent (the father, in the sixties) and a stay-at-home parent (the mother). It basically assumes that mid-century US conditions have held - that a single earner can support a family, that people live in a place with decent jobs available, that commuting isn't a huge thing, that you can squeak by without a car, that you don't need to pay a gazillion dollars in insurance, etc.

$35,000 for a young person out of college here in MPLS could be pretty sweet, actually, if you didn't have a lot of debt. You could share a really nice apartment and still afford a car. But honestly, that's not where a lot of people are going to be starting. I was making $30,000 full time in a union gig up until a few years ago.
posted by Frowner at 6:19 AM on October 28, 2015 [8 favorites]


At least if they're federal student loans, I'm pretty sure it's illegal, not sure if his loans were private.
posted by McSockerson The Great at 6:23 AM on October 28, 2015


Is there any objective analysis of what people need to live on in the US?

This isn't quite based on adding up the cost of things, but I learned in grad school that if you poll people (not poor people or rich people, just people) and ask them "What's minimum amount a person needs to make in order to live a decent life of the kind people around here tend to live?" (I'm paraphrasing here, despite the quotes, but I remember that the question implied that said person would have social citizenship on that income -- that they would be able to engage sometimes in some of the leisure activities typical, etc. not just literally eat, be minimally housed, and not die).

So someone or other has done this across places and across many societies and apparently the average answer is almost always about half the median income for that place.
posted by If only I had a penguin... at 6:24 AM on October 28, 2015 [2 favorites]


Sorry for not having a citation on the above.
posted by If only I had a penguin... at 6:25 AM on October 28, 2015


I remember reading in articles that came out at the time Gravity made this switch that he picked the $70,000 number because of studies he had read that $70K is a tipping point in the US for financial stress. He was after more than just making all of his employees not poor and not quite so much as making them all well off. He wanted them all to be at a point where money problems wouldn't eat at them.
posted by DirtyOldTown at 6:25 AM on October 28, 2015 [25 favorites]


It's a shame that "maximize shareholder return" is the mantra of publicly traded companies... I've been also starting to see a business as a symbiotic organism for all involved. It's a shame that isn't a more prevalent view.

Vote of no confidence in shareholder capitalism - "Big investors are leaning increasingly towards a long-termist and more inclusive outlook"
Finally, environmental, social and governance, or ESG, investing is on the rise, with more than half of institutional investments in Europe now taking into account at least one of these factors, while $6.6tn in assets in the US are run along these lines. Again this betrays a sense that the invisible hand of shareholder market capitalism cannot be trusted to drive good outcomes.

As with much to do with capitalism, the debate centres on the US... First, Bob Eccles, a management professor at Harvard, is leading a campaign that would make companies publish a statement of materiality — just what they think is material for investors. This might or might not include climate change, but they should be required to say. He also questions the notion that directors, who are required to act in the interests of the company, should interpret that narrowly as meaning the interests only of shareholders.

A second approach is to start a different corporate framework altogether. The “benefit corporation” commits to creating public benefits, as well as profits, and must report regularly on its sustainability. Directors must take into account the interests of all stakeholders, and not just share-owners.

There were barely any benefit corporations in the US in 2009; now there are more than 3,000, including recognisable names such as Kickstarter, the crowdfunder, or Patagonia, the outdoor clothing maker.

As for investors, the labour department this week changed its mind, issuing new guidance that fiduciaries “need not treat commercially reasonable investments as inherently suspect or in need of special scrutiny merely because they take into consideration environmental, social, or other such factors”. This was greeted with joy by advocates of responsible investing as practices in the US pension industry tend to become the de facto global standard.

In the long run, ESG factors probably help shareholders — good companies on these scores tend to do well in the very long term. And pension funds, if taking a holistic view of their job to provide a good retirement for their members, certainly have an interest in ensuring that they have an unpolluted world in which to retire. The pressure to change the present model of shareholder capitalism as well could soon grow overwhelming.
posted by kliuless at 6:30 AM on October 28, 2015 [9 favorites]


Even Henry Ford knew that he wouldn't do well if his employees couldn't afford the product they made.

FWIW, Ford had some weird ulterior motives with the '$5 day':
The Sociological Department established a system of rules and codes of behavior for Ford employees that they had to meet, in order to qualify for the $5 day pay rate. The Sociological Department monitored employees at home, as well as on the job. Investigators made unannounced visits to employee’s homes and evaluated the cleanliness of the home, noted if the family had renters, checked with school attendance offices to determine if children were attending school and monitored bank records to verify that employees made regular deposits. Sociological Department investigators also assisted worker’s families by teaching wives about home care, cooking and hygiene.
posted by wikipedia brown boy detective at 6:30 AM on October 28, 2015 [13 favorites]


Consequently, not much can be learned from this particular experiment aside from perhaps measuring worker retention, productivity, work quality, and the benefits from those factors.

Thankfully, they did measure productivity. The first round of raises was shortly followed by a 30% increase in productivity.
posted by Jpfed at 6:41 AM on October 28, 2015 [6 favorites]


I think people need to talk about their wages more with coworkers. The idea that we can't discuss something as basic as our salary needs to just piss right off.
posted by glaucon at 6:46 AM on October 28, 2015 [31 favorites]


the right wing don't really care about personal freedom, they only care that the poor stay poor

I think it's telling that in the immediate aftermath of this announcement critics were saying "this is stupid because the market should dictate wages" and "he'll unfairly increase pressure on other businesses to raise their wages" in the same breath without any apparent irony.
posted by ultraviolet catastrophe at 6:50 AM on October 28, 2015 [24 favorites]


What happened next is that people get to pay their bills. The financially astute employees will use the new income to pay off debt and start a serious savings plan. And probably everybody did some fun discretionary spending, a nice bonus for their community and probably for Walmart and Applebees. People get to have a bit less stress, because they have less money trouble. They can fix or replace their car. What happened next is that is that a bunch of people's lives got easier. That's so wonderful.

My minor concern is that staff who get used to 70K may have a very tough time adjusting if they get laid off, fired, etc. I'd be fine with that concern.
posted by theora55 at 6:53 AM on October 28, 2015 [13 favorites]


A few other companies can try this tactic, but it won't take long to no longer get the buzz benefit.

Yes, and no. I seem to recall it being a principle of economics (I think it was called composition benefits or something like that..maybe an economist can help me out) that an innovation that makes a company somehow more profitable than others (by reducing costs or increasing sales -- I think the classic example was a new type of machine) makes a company more profitable because it renders an advantage over companies that haven't adopted that innovation. Soon, other companies adopt the innovation, too, so they're not left behind. Then the original company has no real advantage (nor are any of the other companies gaining much advantage, since they're not the only ones with innovation).

BUT

There comes a tipping point when having the new thing is no real advantage, but NOT having the thing is a serious disadvantage. Essentially, everyone is forced to adopt the new innovation if they're going to survive.

So theoretically, if a few other companies adopt and get good buzz and eventually it becomes not a big deal, then there will come a point where companies that aren't adopting will get bad buzz. So in the Amazon post where people are saying 'yes, but where else would I buy, since everyone has crappy labour practices" there would actually be a useful answer to that and it would be possible to avoid the crappy companies.

Now I don't think that's likely to happen because there are the Rush Limbaugh's of the world who care more about ideology than economic principles, but my point is that there is a process by which even things that are only an advantage for early adopters can spread and become near universal.
posted by If only I had a penguin... at 6:54 AM on October 28, 2015 [7 favorites]


Is there any objective analysis of what people need to live on in the US?

You will have to do a lot of your own leg work, but the American Community Survey done by the US census is probably the most comprehensive source of data on how Americans actually live.
posted by ennui.bz at 6:59 AM on October 28, 2015 [1 favorite]




there will come a point where companies that aren't adopting will get bad buzz.

Yeah, let the market decide! My company, a major employer in my small city, quietly raised the minimum starting wage a few months ago. They did this so that they wouldn't get bad press for paying workers the state minimum. At this current moment, the idea of a living wage is getting lots of attention, and my company knew it would be a bad PR move to keep paying the least amount possible.

The raise wasn't enormous, but it's significant, and I think this is where the "the market will decide wages" could ultimately be effective. If enough employers are shamed for paying low wages, they'll feel pressure to raise wages. Nobody wants to be the last employer paying $7.25 an hour when everyone else is paying $10+. Especially not in the age of Glassdoor and "Top 100 Best Places to Work" and etc. So let the $70K guy make a lot of buzz, and let REI pay workers for a Black Friday off, and make sure my employers hear about it so they feel pressured to do similar in order to keep up.
posted by witchen at 7:09 AM on October 28, 2015 [8 favorites]


Wait wait wait, I've got a better Jesus joke for this than the one I made above...

Long-Haired Bearded Guy: I will share what I have with those around me, because it's the right thing to do.
Conservative America: Christ, what an asshole.
posted by DirtyOldTown at 7:25 AM on October 28, 2015 [41 favorites]


"The Sociological Department established a system of rules and codes of behavior for Ford employees that they had to meet, in order to qualify for the $5 day pay rate. The Sociological Department monitored employees at home, as well as on the job." (etc etc)

Oh, so you mean like the companies who are now tying insurance coverage to monitoring employee weight, smoking, etc? This country never even stops trying with the creepy anti work/home life balance stuff, does it?
posted by bitter-girl.com at 7:40 AM on October 28, 2015 [9 favorites]


The problem with seeing this as an experiment is it is not repeatable. If a company can balance the books by shifting income, I'm all for that .... However, that's not the model here.

Unless you can prove that Price anticipated the buzz factor, I disagree. As far as I can tell, the experiment was simply "what happens if we pay a respectable salary?", and the initial, pre-buzz measurable outcome was increased productivity. I think that's very repeatable.
posted by Artful Codger at 7:49 AM on October 28, 2015 [1 favorite]


Unless you can prove that Price anticipated the buzz factor, I disagree.

From the article:
This spring, he spent two weeks running the numbers and battling insomnia before making a dramatic announcement to his 120-member staff on April 13, inviting NBC News and the New York Times to cover it...
He was definitely hoping for the buzz factor.
posted by Etrigan at 8:00 AM on October 28, 2015 [2 favorites]


I think my partner's and my combined salaries are pretty close to $35k, actually! Here in Austin, it isn't what I'd call comfortable. You can do it, you can even manage living alone and some very minimal savings, but there's a lot of little financial stressors that build up and those certainly drain mental and emotional energy that could otherwise be used to do our respective jobs.
posted by sciatrix at 8:00 AM on October 28, 2015 [2 favorites]


The problem with seeing this as an experiment is it is not repeatable. If a company can balance the books by shifting income, I'm all for that .... However, that's not the model here.

I don't know about the $70k minimum wage thing, but in the article it notes that two years in a row he gave everyone a 20% raise each year and productivity increased enough to make it more than worth it. This definitely wasn't just a 'make a splash and hope it draws business' shot-in-the-dark thing.
posted by shakespeherian at 8:17 AM on October 28, 2015 [8 favorites]


Here’s What Happened Next.

Was it Buzzfeed that started this title trend? I want to be sure I know who to say, "fuck you" to.
posted by Steely-eyed Missile Man at 8:42 AM on October 28, 2015 [4 favorites]


Was it Buzzfeed that started this title trend? I want to be sure I know who to say, "fuck you" to.

I think it was Upworthy.
posted by holborne at 8:44 AM on October 28, 2015 [2 favorites]


Fuck you, Upworthy!
posted by Steely-eyed Missile Man at 8:54 AM on October 28, 2015 [18 favorites]


From the article:
For three years after his face-off with Haley [in 2011], Price handed out 20 percent annual raises. Profit growth continued to substantially outpace wage growth. This spring [2015], he spent two weeks running the numbers...
Serious buzz was at least 3 years after the start of wage increases, and numbers were run before the press releases.
posted by Artful Codger at 9:00 AM on October 28, 2015 [2 favorites]


("The average annual wage in 2014 was $75,773 in Santa Clara County, $69,347 in San Francisco-San Mateo and $60,682 in the East Bay, compared with $47,236 in the United States," according to the Mercury News's analysis of government data. [?])
posted by xigxag at 9:52 AM on October 28, 2015


Of course, the "effective altruism" argument is that it would help more people to keep the employees' salaries the same and donate the money that would have been used for raises to help relieve African poverty.

The important thing Price has unlocked is simply abandoning the attitude that employees and their salaries are costs to be minimized or eliminated instead of value creating assets. Many business owners look at their employees as people whose every dollar in salary they make are taking away money that "rightfully" belongs to the business owner.
posted by deanc at 9:54 AM on October 28, 2015 [10 favorites]


("The average annual wage in 2014 was $75,773 in Santa Clara County, $69,347 in San Francisco-San Mateo and $60,682 in the East Bay, compared with $47,236 in the United States," according to the Mercury News's analysis of government data. [?])

Income is highly positively skewed, which mean the mean tells you basically nothing. In a relatively small community (like Santa Clara) a few billionaires moving in to a community where most people make moderate income can pull the average up a whole bunch. To understand what is "sort of typical" for a place, you need the median, not the mean (i.e. average).

In fact, ONE billionaire in the city the size of Santa Clara will pull the average income up by $8000+. Might there be 2 billionaires in Santa Clara? What about 5? Mean income is bullshit used by people who want to argue that everything is just fine.
posted by If only I had a penguin... at 10:07 AM on October 28, 2015 [6 favorites]


I don't know, if I were Rush Limbaugh or a member of the CEO class, I'd be far, far more upset and nervous about the brother's lawsuit than about this guy doing what he wants to do with his own money.

It sounds like the older brother has wanted the CEO brother to buy him out for some time now but just couldn't find a way to force it - it's not like he objected to the CEO's pay during all those years when this alleged overpaying was actually going on. It looks like he just saw an opportunity in this and moved to exploit it. But if I understand the article correctly, the older brother is arguing that $70,000 a year is a reasonable payment for a corporate CEO, and the million+ he was getting before was such an obscene overpayment that it represents a legally actionable failure in the CEO's fiduciary duty to his shareholders, and is asking a court to rule to that effect. If I were the CEO of a major corporation, that's what would scare the living fuck out of me.
posted by Naberius at 10:56 AM on October 28, 2015 [6 favorites]


Is there any objective analysis of what people need to live on in the US? Is $35k low pay, or average pay?

No Wiggle Room In Housing Market
The salary gap – where top-end incomes are rising faster than middle- and lower-end salaries – plays a large role in the affordability of middle-class housing along with interest rates and prices. Which factor has more influence depends on where you live and how you make your living.

Using some simplifying assumptions (20 percent down payment and a 30-year fixed-rate mortgage), today’s middle-class household increasingly cannot afford a middle-class home. Two things hurt this market: poor job outlook (impacts income) and interest rates (impacts affordability).

...
city salary needed rate salary gap
Seattle $78,118.97 4.05 -69%.
...
Salary Gap expressed as percent of Median Salary (that is, Salary Gap = (Median Salary minus Salary Needed) divided by Median Salary); negative numbers mean the salary needed to buy the median-priced home is greater than the median salary in that city.
posted by the man of twists and turns at 11:19 AM on October 28, 2015 [3 favorites]


In fact, ONE billionaire in the city the size of Santa Clara will pull the average income up by $8000+. Might there be 2 billionaires in Santa Clara? What about 5? Mean income is bullshit used by people who want to argue that everything is just fine.

While I agree with you in principle, I don't think the numbers in this example actually work because a billionaire has to have a wealth of >$1bn, not income.
posted by atrazine at 11:44 AM on October 28, 2015 [1 favorite]


I read this article last week. I'm confused by the negativity toward him here. People think it's a publicity stunt? That he'll abandon it first chance? The salary increases are being phased in over a few years and he's said he won't cut staff. He seems sincere and the employees interviewed seem happy.

It's a shame that "maximize shareholder return" is the mantra of publicly traded companies.

It might be a mantra, but it's not a true one. See Costco (amongst others).

I am becoming convinced the more I think about things that just increasing productivity and profits is not the only goal of doing business.

The "maximize shareholder value" mantra doesn't seem to have any basis in anything, really. A few years ago I went to a talk given by Lynn Stout, who wrote a book on it:

It shows how the ideology of shareholder value maximization lacks any solid foundation in corporate law, corporate economics, or the empirical evidence. Contrary to what many believe, U.S. corporate law does not impose any enforceable legal duty on corporate directors or executives of public corporations to maximize profits or share price. The economic case for shareholder-value maximization similarly rests on incorrect factual claims about the structure of corporations, including the mistaken claims that shareholders “own” corporations, that they have the only residual claim on the firm’s profits, and that they are principals who hire and control directors to act as their agents. Finally, there is a notable lack of persuasive empirical evidence demonstrating that individual corporations run according to the principles of shareholder value maximization perform better over time than those that are not.

More of the author discussing the history around this and how it developed over the years here.

Because I take a keen interest in corporate governance have done a fair amount of work with ESG/SRI investments (mentioned by kluiless above) and I've been reading more and more about this in recent years and I think we are starting to see a shift in mentality on this issue. At this point, I think so much of our society is structured around this idea that major changes in how businesses are run will take time (as will actual changes in things like tax law, which I think is an important component); but I've seen what seems to me like decent ideas put forward by various people who know more about this than me, so it can happen. I think a fair amount of it will be driven not only by raising awareness around these ideas that "shareholder value" is not (and should not be) a be-all-and-end-all guiding principle for businesses, but also that ethical business practices and profitability are not mutually exclusive ideas.
posted by triggerfinger at 12:29 PM on October 28, 2015 [2 favorites]


I think my partner's and my combined salaries are pretty close to $35k, actually! Here in Austin, it isn't what I'd call comfortable. You can do it, you can even manage living alone and some very minimal savings, but there's a lot of little financial stressors that build up and those certainly drain mental and emotional energy that could otherwise be used to do our respective jobs.

Indeed. The median income for a household in Austin, TX is $53,946 according the Census data. The average income is $77,060. But, about 23% of households in Austin make $35K or less.

In most US localities the average household income is significantly bigger than the median income. This isn't because of billionaires because the data actually doesn't measure billionaires at all. It's from high income families, like say, many people on metafilter. Almost, 20% of the households in Austin take in over $100,000 a year.
posted by ennui.bz at 1:17 PM on October 28, 2015


Yeah, I was using billionaire as shorthand for person making a billion dollars (Think a Trump or BIll Gates), which doesn't work for other reasons: I looked up the data that the article is likely based on and it is wages not income. I had kind of assumed the article writer would use these interchangeably as so many people do. Further, it (the data) includes only base wages with no overtime, no bonuses, no benefits, no stocks etc. And since those very very high income owners make most of their very very high income by means other than base wages, that wouldn't be included. The survey actually isn't of individuals (how much do you make?) it's of employers (how many people do you have in each job and how much does each job pay. Though worth noting that the hourly wages and yearly wages are reported separately, so many of those hourly wages are for people who get very few hours).

And yes, 1000 people making a million dollars have the same effect on the mean as one person making a billion. THe point is that a few people at the top (and the people making high wages are, relatively speaking, generally few) pull up the average and not the median. Though I would guess there is far less skew in wages measured this way than in income.
posted by If only I had a penguin... at 1:28 PM on October 28, 2015 [2 favorites]


Income is highly positively skewed, which mean the mean tells you basically nothing.

For the exact reason you state, knowing that $70K is San Francisco's mean income means that it is at LEAST the median income, and almost certainly somewhat more. And that is telling us something. We know that even in SF, $70K is not a submedian wage. It's not the equivalent of fast food cashier wages, it's roughly speaking, operations manager wages, even in SF.

Whether even that is a "livable" wage is a different question, admittedly.
posted by xigxag at 1:48 PM on October 28, 2015


It's an interesting experiment. The only way it's meaningful, though, is if all the marketing and press appearances he's done about Gravity's 70k/yr minimum wage, and about how altruism pays and blah blah blah, is just a cover story he's being required to repeat by the well-organized workers who are, say, blackmailing him, or otherwise forcing him to cooperate.

If he's actually doing it of his own free will, the company's employees are still dependent on one man's beneficence, rather than being, you know, grown-ups who stand up for themselves and take what's rightfully theirs.

</dogmatic_statement>
posted by You Can't Tip a Buick at 2:05 PM on October 28, 2015 [1 favorite]


Retail outlets & restaurants in SF are having a hard time filling positions bc people cant afford to live in SF on what those jobs pay.

Rich people driving up the cost of living are one thing. But they're generally considered to be drivng out all the interesting folk. Hell, you can bareely get an affordable apt in Oakland on a retail wage
posted by Pirate-Bartender-Zombie-Monkey at 2:16 PM on October 28, 2015 [2 favorites]


San Francisco, like London, is such an insane outlier that I don't think it's actually possible to describe any wage as a "living wage" there. Basically the only people who manage to thrive there, aside from the legit 1% — the Zuckerbergs, rather than just your average 120k/yr hacker type — are people who are able to shelter themselves without fully exposing themselves to the market and its ravages. As such, unless you have enough money to secede from consensus reality altogether, the only way you'll be able to live comfortably in SF is if you've inherited a house or condo, or if you're living in a rent-controlled unit that you locked down before the first tech boom.

so obvy they're attacking rent control here hard — this is because the presence of people in rent controlled units is the only thing keeping the people favored by patrilineal capitalism from having total control over all 49 square miles of San Francisco.
posted by You Can't Tip a Buick at 2:18 PM on October 28, 2015 [3 favorites]


Hell, you can bareely get an affordable apt in Oakland on a retail wage.

Fun facts about Oakland:
  1. Thanks to the demographic shifts that occur with hypergentrification/aristocratization, the 2016 city council elections are probably going to be the last elections where ordinary people who grew up in Oakland have a chance of winning. Oakland's at the same tipping point that SF reached in the 90s. The bad guys won in SF. They haven't yet totally won in Oakland, but they're close.
  2. 15% of Oakland's population lives in the hills. 85% of them vote in every election. 85% of Oakland's population lives in the flats. 20% of them vote in every election.
  3. If we can get population of the flats to the polls this election, we can stop the market-rate developments that are driving up rents1 and use city land and city money to build sub-market-rate housing instead.
  4. If we don't vote and win in the 2016 elections, reining in the bad guys by electoral means will almost certainly never be possible again — see point 1 above.

1: I see you out there, libertarian urbanists who think that increasing the supply of market-rate housing will bring down rents in the Bay Area. I have been in many arguments with you. I have won many arguments with you. fun fact: there are useful economic concepts taught in classes after econ 101. And your econ 101 conception of the housing market breaks down badly in practice.

also you're misreading Jane Jacobs. stop it.

posted by You Can't Tip a Buick at 2:29 PM on October 28, 2015 [11 favorites]


fun fact: there are useful economic concepts taught in classes after econ 101

Phrases like, "it's basic economics" or "it's economics 101" or "it's supply and demand" are a handy signal that you have no idea what you're talking about and it's ok to stop listening to you now.
posted by Steely-eyed Missile Man at 2:49 PM on October 28, 2015 [6 favorites]


I see you out there, libertarian urbanists who think that increasing the supply of market-rate housing will bring down rents in the Bay Area. I have been in many arguments with you. I have won many arguments with you.


The compromise position is always to stop building the market rate housing and not build the middle class housing, either. Both sides win: rich people get housing they can afford (because they have money and can just outbid everyone else), and established residents get to be assured that they have "preserved the character of the city."

In fact the 20th century urban middle class was built on a foundation of massive, massive middle class subsidized housing complexes. But no one who lives there wants those to get built because the primary beneficiaries would almost overwhelmingly go to people who don't currently live in Oakland.
posted by deanc at 3:19 PM on October 28, 2015 [1 favorite]


alternately, cheap rents in cities in the last part of the 20th century were a result of cheap oil, federal highway subsidies, federal housing subsidies for suburban homes, and of the regime of white supremacy marking places with PoC as places to avoid.

I don't know what you're talking about wrt subsidized massive housing complexes, but I'm eager to listen. I know NYC has Stuy-town and Co-op City, but as far as I know those models weren't really used much on the West Coast. Are you talking about subsidies for large suburban single-family housing developments? (now I'm afraid that there's some Stuy-town size development down in LA or something that I just don't know about).

From what I know of the politics in cities I've lived in recently (Oakland, Seattle, SF for a second), there is relatively strong support among renters for "affordable" housing measures, even if the "affordable" housing produced is only really affordable for the middle classes. I am, of course, more in favor of genuine affordable housing, first because genuine affordable housing is a good that cities should look to provide no matter what, but also because the presence of poor people frightens the rich and thereby helps lower property values. But nevertheless, that baseline level of support for lower-rent (even if it's not actually affordable) housing does exist in the wider community. And, of course, support for stronger rent control measures is extremely popular among everyone but property owners.

also, though, fuck "the character of the city." that is a line of argumentation typically used by property owners who want to drive up the value of their property — you know, the people that liberal market-oriented urbanists were fighting back in the 60s and 70s. The current dispute is not about the "character of the city." It is instead about political power and control. Currently the extremely wealthy are attempting to use market power to seize/tighten control over city land and city political institutions, such that the dodges that we use to survive against the market get eliminated. We are attempting to use democratic methods to gain control over our cities, despite our weak market position.

tl;dr: it's not about aesthetics or character. it's about power.
posted by You Can't Tip a Buick at 3:43 PM on October 28, 2015 [2 favorites]


"In Seattle $35k/yr will get an apodment, student loan payments, and a bus pass."

Oh puh-lease. I lived in Seattle, last place I lived there was 2-3 years ago, by myself, I got by on well under 35k. I drove a car, rarely took the bus. I was a 20 min commute from work, to Cap Hill from West Seattle. I rented a nice, if small, little house complete with fenced yard, full kitchen, washer/dryer. Far from a pod. I even ate out fairly frequently, sometimes even at nice places.

I get that people have different levels of debt and responsibilities, but the awfulizing I see here and elsewhere is really over the top. 70k is a solid middle class income, and even someone with heavy student loans should be more than fine on that, unless they are squandering large amounts of money on the latest tech gadgets, partying, expensive clothes, etc.
posted by mysterious_stranger at 3:44 PM on October 28, 2015 [1 favorite]


I was a 20 min commute from work, to Cap Hill from West Seattle. I rented a nice, if small, little house complete with fenced yard, full kitchen, washer/dryer. Far from a pod. I even ate out fairly frequently, sometimes even at nice places.

West Seattle, Beacon Hill, and the Rainier Valley are, unfortunately, not remotely as cheap as they were 3 years ago. Hell, 3 years ago you could still find a cheap scuzzy 1 bedroom on First Hill — I know, I lived in one... until the landlords realized that people with money had realized that First Hill's right next to Capitol Hill, and as a result raised the rent from 900 to 1600 dollars a month. I haven't checked in a while, but I would be stunned if units in that building are going for less than 2k/mo now.
posted by You Can't Tip a Buick at 3:54 PM on October 28, 2015


"It was late 2011".
posted by mysterious_stranger at 5:23 PM on October 28, 2015 [1 favorite]


My minor concern is that staff who get used to 70K may have a very tough time adjusting if they get laid off, fired, etc.

Good point. I wonder if his great retention numbers are more because of employee excitement and genuine loyalty, or because now he's locked them into having to accept a big pay penalty to leave, now that they're accustomed to the above-market rate? It's very easy to count on that income and make commitments based on it. I see it with people who have enjoyed easy availability of overtime for the asking unwisely counting on that always being the case.
posted by ctmf at 5:34 PM on October 28, 2015 [1 favorite]


Sounds like the owner of the company now expects more from the $70k employees than he used to from the $35k employees, even if they're the same people. Like the CFO said, because non-staff costs don't change, they only need ~30% revenue growth to cover what's being described as greater than 30% growth in productivity. That's a good deal. If the employee needs the money to pay for increased costs of living, then they're contributing quite a bit more in work for a relatively small increase in savings/discretionary spending. It sounds like people are happier doing more work at Gravity, but other companies that roll out higher salaries and corresponding expectations might not pay for work that's as fun when done more effectively. I'm looking forward to seeing how employment changes as these experiments become more common.
posted by michaelh at 5:59 PM on October 28, 2015


I made 34k my first job out of college in 2004 in South Florida and it was not enough to be able to get a functioning car (which I needed to keep my "sweet" 34k/year job) and keep my apartment with my 3 roommates. So, uh, I think the variables are very different from place to place. Like the cost of insuring rental units in hurricane territory. I'm sure 34k a year in rural Kansas probably makes you a fucking Rockafeller.
posted by SassHat at 12:25 PM on November 4, 2015 [2 favorites]


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