What if everyone you worked with made at least 70k/year?

[catherine]

This article (http://www.upworthy.com/a-ceo-raised-everyones-salary-to-70000year-the-backlash-against-him-doesnt-make-sense?c=ufb1)popped up in my FB feed today and it raises some provocative questions related to how people might react if their coworkers were suddenly given a hefty minimum salary.


Back in April, Dan Price, CEO of Gravity Payments, announced a plan to cut his own salary in order to raise minimum pay at the company to $70,000/year.

Picture the scenario in the article:
You make $150k. The janitor suddenly gets a raise to $70,000, which is now the minimum wage in the company.

How would you react?

[iris lilies]

How would I react? I'd worry about the viability of my company, and would start a job search. Now, if it were Bill Gates funding 120 employees at a minimum of $70,000 annually, I wouldn't worry so much working in that obviously charitable position because Gates has the cash to do it forever.

This CEO's company is in trouble because he doesn't have Bill Gates style money. It was an interesting experiment.

[ApatheticNoMore]

Most people probably already do. The exceptions are customer service and well probably outsourced workers are not earning U.S. 70k. I'm not sure labor costs are enough of a percentage of costs to worry about.

[Tammy]

I would be thrilled for my underpaid colleagues

[Kestra]

I'd be happy for my friends who still had to work there, but I'd have quit my job anyhow, as that isn't enough to put up with the other annoyances (thinking of my old employer here). Life is too short.

[ApatheticNoMore]

I might be more annoyed if everyone was doing more interesting work than me. hmpf that often seems the case :~)

[ToomuchStuff]

Based on some companies, I would expect some help to be going away and done via third party independent contractors. (hire a temp service for janitorial, etc)
I would also be worried that the lawsuit is about the money that funds this (former CEO's salary, that the lawsuit is over). I would also be interested in seeing how people react, as some would probably just become lazy, while others put forth more effort. (doesn't help I know someone who has said their goal was to be the worst one in the union of their company, of all the employee's)

[Stacy]

I would be thrilled because I would be one of the the people getting the raise. I work hard now, but I might actually see my tedious job as being something seen as valued by the company and worth keeping for awhile (factory line worker). Maybe, maybe not. But there would a long line of people eager to take my job if I didn't want it. HR can choose the very best people for the job, people who have a real commitment to it. As things stand now, they were unable to hire enough people this year because they didn't get enough qualified applicants for the wage they're paying, and they are getting behind on orders. I'd think that they'd stand to lose a lot more money by upsetting their customers and losing business.

[Chicken lady]

I'm an hourly employee. I've been working at he same place 8 years. I got a raise again this year, and I just did the math - if I worked 40 hours a week, 50 weeks a year, I would make just over 65k. (pretax). However, I only work part time, 9 months of the year and I only get paid for time spent instructing students. Open houses, required events, planning , prep, administrative work and classroom clean up are unpaid, so my actual wage is about half that. My only official benefits are two days of paid sick leave. I love my job, so I still feel well paid, and my dh has a good job with benefits, so I can afford to work as I do. If some of my coworkers who work "full time" had their wages doubled, I'd be really happy for them.

[jp1]

I suppose I'd be happy that my lower paid colleagues were now earning a decent living. As for the two employees that left, I'm curious, did they find jobs that paid more, or did they make lateral moves to similar paying jobs elsewhere.

This reminds me of the paramedic response to the $15/hour fast food worker hubbub that's been going on. His response was that if fast food workers start makiing $15/hour which is what he makes as an EMT, perhaps the issue isn't that fast food workers don't deserve that much, but that EMTs deserve more. Considering the training required and stress involved in that job I'd suspect that he's right. Especially considering how expensive an ambulance ride is. Surely the people who work in the ambulance deserve to make more than a taxi driver.

[iris lilies]

This article (http://www.upworthy.com/a-ceo-raised-everyones-salary-to-70000year-the-backlash-against-him-doesnt-make-sense?c=ufb1)popped up in my FB feed today and it raises some provocative questions related to how people might react if their coworkers were suddenly given a hefty minimum salary.



Picture the scenario in the article:
You make $150k. The janitor suddenly gets a raise to $70,000, which is now the minimum wage in the company.

How would you react?

also, I would look for positions in the company with less responsibility and with no overtime requirements.

if managers are making $75,000 in this company with overtime and on call expectations of a manager, and hourly positions are available at $70'000'why take on the angst of middle management for a measly $5,000?

[freshstart]

Most people probably already do. The exceptions are customer service and well probably outsourced workers are not earning U.S. 70k. I'm not sure labor costs are enough of a percentage of costs to worry about.

I'm misunderstanding this I think, are you saying Americans, except those doing customer service, etc., already make 70K? I read that the median household income is 51k, SS says average income is 45k

[freshstart]

I would be thrilled for my underpaid colleagues

as would I, I've worked with so many low income staff who work so hard, harder sometimes than the professionals, I would be so happy for them

[ApatheticNoMore]

How do we know hourly positions don't have on call expectations? On call expectations seem to have more to do with the position and the company than management or not. I'm not management, but that hardly means I can escape being on call (how I dearly wish it did ....).

Two people leaving is nothing unless it's a company of maybe less than 50 people, it's nothing compared to the usual turnover that happens for any reason and no reason, it wouldn't even register.

[ApatheticNoMore]

I'm misunderstanding this I think, are you saying Americans, except those doing customer service, etc., already make 70K? I read that the median household income is 51k, SS says average income is 45k

Nah, was just saying most of the people at the company I work for are probably making >= 70k :) It's mostly accounting staff, I.T. staff, finance staff, H.R., etc. and it's California so wages are higher (but not as much as cost of living is), other than customer service which likely doesn't make that and contractors in India and so on. It's not a physical product (but if it was manufacturing would be in China anyway probably!). A lot of low (and some higher) wage work is already outsourced at many companies ... customer service is outsourced sometimes (but it makes customers unhappy enough it's often in-sourced back to the U.S., companies go back and forth with it). Things like I.T. are often partly outsourced. The janitors are contracted out, in my experience that's usually the case but I've seldom worked for a truly BIG company, they might have their own janitorial staff. It probably only pays off to have janitorial staff on the payroll if you are Fortune 500 or something.

[freshstart]

I cannot count how many times IT has been outsourced and come back (usually many of the same people who got laid off), only to be outsourced again. Ridiculous. And the outsourced kinda suck, not their fault, they've never seen the stuff we use.

[jp1]

At my, really really large company, a lot of money, effort and time has been spent parsing all of the higher paid staffs jobs down to every little task that has to be done and those little tasks that can be done more cheaply in a service center are now no longer done by an expensive insurance underwriter in an expensive cost of living city. For instance, every year a fresh rating spreadsheet has to be populated with bits of data. I used to spend roughly 20 minutes per account doing it. Now someone in the Kansas City suburbs does it for probably 1/3 of my salary. Simpler tasks with less likelihood of error get shoved down even further. Inputting basic account information for a new insurance submission used to be done in the Kansas City service center. Now it's done in a service center in Manila, which is managed by people in the Kansas City service center. The people in Manila probably make 1/3 what the people in Kansas City make. For the most part all of this works. Probably because we own the service centers so we have total control over them, and because we've spent several years and lots of man hours doing this, monitoring it, tweaking it when there were problems, etc. The efficiencies aren't 100%, but they are high enough, compared to the savings, so that it's unlikely that I'll ever have to create a renewal rating spreadsheet ever again.

[mschrisgo2]

Well, if the new teachers- those in their first, second or third year of teaching- made closer to $75K
than the present $32K (most of California), they wouldn't have to take second jobs to keep a roof over their heads. And they might not get burned out and leave teaching so quickly; most leave after the second or third year. But maybe that's because after 3 years in a "side job" they can make more there full time than they do teaching.

[kib]

Funny, I just wrote about embracing the top of Maslow's Hierarchy - self actualization, getting beyond base fears. It wouldn't bother me if everyone on earth was a millionaire. But ... if we don't get beyond rampant materialism, beyond greed and profit motive, all it means to double the salaries of those on the bottom is to quadruple the cost of the goods and services rendered. Which is not good news for those of us who didn't get a raise. I don't mind at all being in the same boat as everyone else ... as long as it's a Nice boat.

[Gardenarian]

Would this lead to inflation?

[LDAHL]

I understand the State of Minnesota caps public employee salaries at 110% of the Governor's salary, although you can apply for a waiver from the State. The 2015 limit is around $165K. That must make it difficult for them to retain MDs or top-tier IT and Finance types.

[ToomuchStuff]

I suppose I'd be happy that my lower paid colleagues were now earning a decent living. As for the two employees that left, I'm curious, did they find jobs that paid more, or did they make lateral moves to similar paying jobs elsewhere.

This reminds me of the paramedic response to the $15/hour fast food worker hubbub that's been going on. His response was that if fast food workers start makiing $15/hour which is what he makes as an EMT, perhaps the issue isn't that fast food workers don't deserve that much, but that EMTs deserve more. Considering the training required and stress involved in that job I'd suspect that he's right. Especially considering how expensive an ambulance ride is. Surely the people who work in the ambulance deserve to make more than a taxi driver.


also, I would look for positions in the company with less responsibility and with no overtime requirements.

if managers are making $75,000 in this company with overtime and on call expectations of a manager, and hourly positions are available at $70'000'why take on the angst of middle management for a measly $5,000?

Both of the above go along with my thinking. There certainly needs to be a benefit for the cost of the education, as well as the costs incurred medically, for the stress and other factors/cost that one incurs for the job.

At my, really really large company, a lot of money, effort and time has been spent parsing all of the higher paid staffs jobs down to every little task that has to be done and those little tasks that can be done more cheaply in a service center are now no longer done by an expensive insurance underwriter in an expensive cost of living city. For instance, every year a fresh rating spreadsheet has to be populated with bits of data. I used to spend roughly 20 minutes per account doing it. Now someone in the Kansas City suburbs does it for probably 1/3 of my salary. Simpler tasks with less likelihood of error get shoved down even further. Inputting basic account information for a new insurance submission used to be done in the Kansas City service center. Now it's done in a service center in Manila, which is managed by people in the Kansas City service center. The people in Manila probably make 1/3 what the people in Kansas City make. For the most part all of this works. Probably because we own the service centers so we have total control over them, and because we've spent several years and lots of man hours doing this, monitoring it, tweaking it when there were problems, etc. The efficiencies aren't 100%, but they are high enough, compared to the savings, so that it's unlikely that I'll ever have to create a renewal rating spreadsheet ever again.

Look at all the downsizing over time. Some of it is due to automation, some of it is due to math and data retention, Some of it is due to companies realizing they can just be more efficient overall, with less workers. All mean more for the money "not wasted". Then they have to figure out what they want to do with the money (the next question, R&D, cushion for bad times, or bonuses for hierarchy).


Would this lead to inflation?
Yes, in the end, the customer pays for everything.


I understand the State of Minnesota caps public employee salaries at 110% of the Governor's salary, although you can apply for a waiver from the State. The 2015 limit is around $165K. That must make it difficult for them to retain MDs or top-tier IT and Finance types.

Salaries may be capped, but what about overtime? Years ago, we had an article in the local paper about the highest paid city employees. Two people in the city made more in overtime, then their regular salary and made quite a bit more then their bosses. One department was shorthanded and the person was averaging 90+ hours a week, the other person volunteered for all the OT they could get, as they were getting close to retirement, which was/is? 80% of your last three years income. (not strictly salary)
When one talks salary, they certainly need to be discussing what the work hours expectation is.

[Tammy]

If the raising of bottom wages is balanced by the lowering of top wages, inflated prices is not necessarily an outcome. There is still room in this model for variation in earnings based on education, licensure, and experience. We don't need the 300 fold difference between bottom and top to reward people for working to get a higher degree.

[LDAHL]

Salaries may be capped, but what about overtime? Years ago, we had an article in the local paper about the highest paid city employees. Two people in the city made more in overtime, then their regular salary and made quite a bit more then their bosses. One department was shorthanded and the person was averaging 90+ hours a week, the other person volunteered for all the OT they could get, as they were getting close to retirement, which was/is? 80% of your last three years income. (not strictly salary)
When one talks salary, they certainly need to be discussing what the work hours expectation is.

I believe they refer to that practice of jacking up OT the last few years as "surging" or "spiking". In our State, there was a proposal to base the final pension payout on the last five years to mitigate it. I don't think it made it into law yet.

I'm pretty sure Minnesota exempts OT from their salary cap.

[kib]

If the raising of bottom wages is balanced by the lowering of top wages, inflated prices is not necessarily an outcome. There is still room in this model for variation in earnings based on education, licensure, and experience. We don't need the 300 fold difference between bottom and top to reward people for working to get a higher degree.
I personally agree with this, 300x is off the rails, but raising the bottom tier leaves that huge ? Either the modus operandi of unchecked profit seeking changes or it doesn't. Raising wages without changing the mindset that created the 300x discrepancy just exacerbates the problem.

[ToomuchStuff]

So HOW would you go about changing the mindset? Remember we have a capitalist based system, with the right to life, liberty and the pursuit of happiness. Greed is good to many and a choice by others to get as much as they can, to do with, what they want to do with.

[kib]

Yep. That in my opinion is at least 75% of the problem. Not the rights, but the blinders-on mindset that leads to all this totally mindless pursuit of "happiness" that never occurs because it's not to be found in a pile of gold. I have no answer, I don't see this changing without a huge shift coming from I-don't-know-where, which is why I agree with you, raising the bottom = inflation.

[Tammy]

The 300x stat is only in the last several years. Only a few decades ago it was not this way with CEO pay being so over the top. I don't know how to change it but I do know that it's not that big of a culture shift - only 20 years ago we were not like this.

[Alan]

The 300x stat is only in the last several years. Only a few decades ago it was not this way with CEO pay being so over the top. I don't know how to change it but I do know that it's not that big of a culture shift - only 20 years ago we were not like this.
Where do you get the 300x stat? I believe the average CEO salary is approximately $155, 000, with compensation in the 300x range limited to a few hundred Fortune 500 types. Is this really problem?

[iris lilies]

Where do you get the 300x stat? I believe the average CEO salary is approximately $155, 000, with compensation in the 300x range limited to a few hundred Fortune 500 types. Is this really problem?

I think this is the number NPR throws around, so it must be out there somewhere.

[Tammy]

Now I need to find my source ...., and I'm starting a 3 day stretch of 12 hour days at work. Give me some time and I'll try to find it .., read it this week somewhere.

[Tammy]

http://www.usatoday.com/story/money/2015/06/21/epi-report-ceo-pay-303-times-average-2014/29000333/

[LDAHL]

Whether a CEO makes 100 or 300 or 500 times the income of the lowest level corporate fodder seems irrelevant to me (although shareholders might have something to say about it). Tearing down the rich won't raise up the poor to any appreciable degree.

Paul Ryan has talked in the past about creating a simple, unqualified guaranteed minimum income for all Americans as an alternative to the existing system of entitlements. The argument against it on the right has been that it might create a permanent dependent class. The argument against it on the left has been that it would eliminate the power of more specialized programs to influence behaviors or to target specific groups.

[jp1]

The number is actually 373x and refers to s&p 500 companies.

http://www.cnbc.com/2015/05/18/why-corporate-ceo-pay-is-so-high-and-going-higher.html

I think the reason that this number is so often brought up is because CEO pay for this group of people has gone up 937% since 1978, more than double the rate of the stock market while salaries of regular people have not.

http://www.epi.org/publication/ceo-pay-continues-to-rise/

The question becomes why have all the gains in productivity over the past several decades gone to the CEOs and not to the people who actually do the more work more efficiently.

[iris lilies]

The number is actually 373x and refers to s&p 500 companies.

http://www.cnbc.com/2015/05/18/why-corporate-ceo-pay-is-so-high-and-going-higher.html

I think the reason that this number is so often brought up is because CEO pay for this group of people has gone up 937% since 1978, more than double the rate of the stock market while salaries of regular people have not.

http://www.epi.org/publication/ceo-pay-continues-to-rise/

The question becomes why have all the gains in productivity over the past several decades gone to the CEOs and not to the people who actually do the more work more efficiently.

If you really think that the efficiency of employees is the sole reason for better productivity, I can't convince you otherwise.

But perhaps you would consider that other reasons might support better productivity, such as

* managers (including the CEO) devising strategies for better efficiency, hence they are earning some of their keep :D
* automation is a huge, and likely the biggest, factor in better productivity

those are two I can think of off the top of my head. There are others

[Alan]

The number is actually 373x and refers to s&p 500 companies.

http://www.cnbc.com/2015/05/18/why-corporate-ceo-pay-is-so-high-and-going-higher.html

I think the reason that this number is so often brought up is because CEO pay for this group of people has gone up 937% since 1978, more than double the rate of the stock market while salaries of regular people have not.

http://www.epi.org/publication/ceo-pay-continues-to-rise/

The question becomes why have all the gains in productivity over the past several decades gone to the CEOs and not to the people who actually do the more work more efficiently.That's what I thought, the number is based upon approximately 350 CEO's of the largest corporations. I think a larger sample wouldn't generate the desired outrage.

[jp1]

If you really think that the efficiency of employees is the sole reason for better productivity, I can't convince you otherwise.

But perhaps you would consider that other reasons might support better productivity, such as

* managers (including the CEO) devising strategies for better efficiency, hence they are earning some of their keep :D
* automation is a huge, and likely the biggest, factor in better productivity

those are two I can think of off the top of my head. There are others

Definitely I don't think that employees working more efficiently is the sole driver, or even a major driver, of the gains in productivity. But if amazon implements a warehouse computerization system that enables the pickers to be able to pack more boxes per hour is it really reasonable to expect all of those gains to go up to the ceo or senior management rather than be shared with the staff who are actually doing the work? The best ceo in the world is worthless without a staff of people actually doing work. Eventually that will probably change as automation continues to improve and eliminate more and more jobs actually physically doing stuff. But at some point we will run into a differnt problem. Even the best ceo of an automated operation is worthless if more and more people are not able to find paying work that enables them to buy 'stuff'.

[jp1]

That's what I thought, the number is based upon approximately 350 CEO's of the largest corporations. I think a larger sample wouldn't generate the desired outrage.

No, but there are 27M people who work for fortune 500 companies. Certainly a significant chunk of the economy so it seems reasonable to be concerned about this particular issue for this particular set of people. It would be interesting to see how much smaller a company has to get before ceo pay stops being astronomically higher than the average worker of that company and then try to figure out what's different between the companies above that size break and below it. Maybe it really is just a matter of large companies benefiting from economy of scale, but perhaps other things are at play, such as super-jumbo companies having the ability to operate internationally as a means of reducing their tax burden by shuffling income to lower tax countries. I was listening to a podcast recently, Planet Money I believe, where they were talking about how for a while when one bought equipment from Caterpillar the sale was actually from a Caterpillar subsidiary incorporated in some random country like Sweden, because the Swedish tax laws was significantly more beneficial. If I recall correctly they ended up getting in trouble for this because they didn't actually even have any employees in that country. Or how Apple ships your new iPhone directly from the factory in China rather than shipping them in bulk to the US and then sending them out to you from here to save on taxes.

[Alan]

No, but there are 27M people who work for fortune 500 companies. Certainly a significant chunk of the economy so it seems reasonable to be concerned about this particular issue for this particular set of people. It would be interesting to see how much smaller a company has to get before ceo pay stops being astronomically higher than the average worker of that company and then try to figure out what's different between the companies above that size break and below it. Maybe it really is just a matter of large companies benefiting from economy of scale, but perhaps other things are at play, such as super-jumbo companies having the ability to operate internationally as a means of reducing their tax burden by shuffling income to lower tax countries. I was listening to a podcast recently, Planet Money I believe, where they were talking about how for a while when one bought equipment from Caterpillar the sale was actually from a Caterpillar subsidiary incorporated in some random country like Sweden, because the Swedish tax laws was significantly more beneficial. If I recall correctly they ended up getting in trouble for this because they didn't actually even have any employees in that country. Or how Apple ships your new iPhone directly from the factory in China rather than shipping them in bulk to the US and then sending them out to you from here to save on taxes.I suppose it's a matter of perspective, as an example, how might employment and compensation be affected in the United States if we didn't have the highest business income tax rates in the world, thereby creating the scenario's you mentioned?

[jp1]

I suppose it's a matter of perspective, as an example, how might employment and compensation be affected in the United States if we didn't have the highest business income tax rates in the world, thereby creating the scenario's you mentioned?

I suppose then even CEOs of smaller companies could have 373x the earnings of their average worker!