In April of this year, I wrote about the credit card processing company Gravity Payments and how the owner was changing their minimum wage structure. I said:
More at the site - this is how you do it - the power of the free market and pure capitalism (as opposed to crony capitalism which is all to much in vogue these days).
Well, it seems that the free market has spoken and the word is not good. From the New York Times:
A Company Copes With Backlash Against the Raise That Roared
There are times when Dan Price feels as if he stumbled into the middle of the street with a flag and found himself at the head of a parade.
Three months ago, Mr. Price, 31, announced he was setting a new minimum salary of $70,000 at his Seattle credit card processing firm, Gravity Payments, and slashing his own million-dollar pay package to do it. He wasn’t thinking about the current political clamor over low wages or the growing gap between rich and poor, he said. He was just thinking of the 120 people who worked for him and, let’s be honest, a bit of free publicity. The idea struck him when a friend shared her worries about paying both her rent and student loans on a $40,000 salary. He realized a lot of his own employees earned that or less.
Yet almost overnight, a decision by one small-business man in the northwestern corner of the country became a swashbuckling blow against income inequality.
The move drew attention from around the world — including from some outspoken skeptics and conservatives like Rush Limbaugh, who smelled a socialist agenda — but most were enthusiastic. Talk show hosts lined up to interview Mr. Price. Job seekers by the thousands sent in résumés. He was called a “thought leader.” Harvard business professors flew out to conduct a case study. Third graders wrote him thank-you notes. Single women wanted to date him.
But all is not good in the Emerald City
While dozens of new clients, inspired by Mr. Price’s announcement, were signing up, those accounts will not start paying off for at least another year. To handle the flood, he has already had to hire a dozen additional employees — now at a significantly higher cost — and is struggling to figure out whether more are needed without knowing for certain how long the bonanza will last.
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. Some friends and associates in Seattle’s close-knit entrepreneurial network were also piqued that Mr. Price’s action made them look stingy in front of their own employees.
Then potentially the worst blow of all: Less than two weeks after the announcement, Mr. Price’s older brother and Gravity co-founder, Lucas Price, citing longstanding differences, filed a lawsuit that potentially threatened the company’s very existence. With legal bills quickly mounting and most of his own paycheck and last year’s $2.2 million in profits plowed into the salary increases, Dan Price said, “We don’t have a margin of error to pay those legal fees.”
The market has spoken. Economics is not a bloodless endeavor - for every action, there is an opposite reaction, often bloody, often unexpected. I am very happy with our dealings with Gravity Payments and I hope they can weather this bout of foolishness and continue giving the great service we have been used to.
Once again, socialism does not work - never has, never will. Its core premise is broken...