Idiot that decided to pay all employees 70K a year? Reality has its say

[Ben]

Huh.  It's mentioned that he was inspired by a study showing that ~$70k is the 'optimal' happiness point.

I think I've read that study.  The best way I can explain it is that it turns out that money doesn't buy happiness, but it sure can be used to prevent or 'pay off' unhappiness.

IE, when you're hitting ~$70k/year, you stop gathering extra unhappiness from lack of funds.

Extra money will make you happier if you're unhappy because you're having trouble meeting your bills, having to budget every dollar, etc...  If you're unhappy because you have no friends, or don't have a girlfriend or something, then more money will only provide a transitional, almost illusionary gain in happiness.

I don't understand the study, as $70K buying power varies WIDELY across the country. I wouldn't be very happy getting $70K in San Francisco.

Re: Rev's point on giving everyone a $20K raise - I kinda agree, but would probably go with a percentage vs a dollar amount.

[makattak]

I think it is pissing people off because the owner decided to reduce his own salary to pay the workers more, this almost totally unheard of in the modern business environment where the top keep growing their salary by shitting on workers.

I'm disappointed Tapatalk doesn't have the raised eyebrow smilie.

Pissed off? I'm not even annoyed- this is his company and he can do as he wants. (disclaimer: his brother appears to disagree)

His experiment does not cost me anything. I'm merely certain it is doomed to failure, because I understand human nature. (Of which,  the laws of economics are a subset.)

As I noted, he is making a generous sacrifice. I think it is a foolish one, though.

[De Selby]

How dare he pay all his employees enough not to be desperate or live in squalor.

Everyone knows that markets and Christianity demand a certain level of poverty.  If he wants to go around paying people money, he should move somewhere backwards where everyone hates their quality of life, like Norway or Finland, with their foolish pay systems.

[Andiron]

How dare he pay all his employees enough not to be desperate or live in squalor.

Everyone knows that markets and Christianity demand a certain level of poverty.  If he wants to go around paying people money, he should move somewhere backwards where everyone hates their quality of life, like Norway or Finland, with their foolish pay systems.

Trololololol

[Andiron]

As I noted, he is making a generous sacrifice. I think it is a foolish one, though.

Agreed.

I don't care what he does with his own resources.  I'm just tired of the idiot being lauded as brilliant for the stunt.

[De Selby]

Agreed.

I don't care what he does with his own resources.  I'm just tired of the idiot being lauded as brilliant for the stunt.

Giving people a living through work isn't a stunt - that's what this whole "job creator" mantra is supposed to be all about.

[Ron]

How dare he pay all his employees enough not to be desperate or live in squalor.

Everyone knows that markets and Christianity demand a certain level of poverty.  If he wants to go around paying people money, he should move somewhere backwards where everyone hates their quality of life, like Norway or Finland, with their foolish pay systems.

Making under 70k dooms you to a desperate life of squalor?

Do markets and Christianity demand poverty or point out that certain behavior leads to poverty?

So Christianity needs to shut up about traditional/sexual mores but speak out and demand governments regulate contracts, employment and distribution of property?

With all the new diversity over in Norway and Finland I suspect either their "foolish pay systems" as well as their generous welfare benefits will have to go or they will have to curtail their "diversity" fetish.

[Firethorn]

I don't understand the study, as $70K buying power varies WIDELY across the country. I wouldn't be very happy getting $70K in San Francisco.

Re: Rev's point on giving everyone a $20K raise - I kinda agree, but would probably go with a percentage vs a dollar amount.

While buying power does vary, from what I understand, only something like 10% of the country is more than 20% away from the median.  There's a reason I stuck the ~ before the figure, it means "approximately".  So while yes, in some areas you might need $100k to be equally 'happy', there's also areas where $50k balances it out (there are more $50k areas than $100k ones).

Making under 70k dooms you to a desperate life of squalor?

No, I'd argue that it's the statistical point at which marginal happiness increase from more money becomes insignificant, IE 'undetectable'.  On the other hand, we don't know how much of a raise his previously lowest paid employee was receiving.

[Ron]

No, I'd argue that it's the statistical point at which marginal happiness increase from more money becomes insignificant, IE 'undetectable'.  On the other hand, we don't know how much of a raise his previously lowest paid employee was receiving.

DeSelby was the one who set up the straw man of desperation and squalor making under 70k.

Of course the obvious answer to my RHETORICAL QUESTION is a simple "no".

[Ben]

While buying power does vary, from what I understand, only something like 10% of the country is more than 20% away from the median.  There's a reason I stuck the ~ before the figure, it means "approximately".  So while yes, in some areas you might need $100k to be equally 'happy', there's also areas where $50k balances it out (there are more $50k areas than $100k ones).

Well, yes, I know what "~" means, but I generally apply "~$70K" to $72K, or $67K, not $50K or $100K.

[Firethorn]

Well, yes, I know what "~" means, but I generally apply "~$70K" to $72K, or $67K, not $50K or $100K.

20% of $70k is $14k, so yeah, I was probably stretching the 'approximate' a bit.  But then, I don't have the study handy to see what their variance and standard error was.

[Doggy Daddy]

How dare he pay all his employees enough not to be desperate or live in squalor.

Everyone knows that markets and Christianity demand a certain level of poverty.  If he wants to go around paying people money, he should move somewhere backwards where everyone hates their quality of life, like Norway or Finland, with their foolish pay systems.

Deck the thread with posts of folly,

Trololololol

[freakazoid]

I would imagine at 70k you would attract a lot of people to wanting to work there giving you a much higher worker pool to choose from. As long as he can fire all but THE hardest and smartest workers I can see this working out.

[cordex]

I would imagine at 70k you would attract a lot of people to wanting to work there giving you a much higher worker pool to choose from. As long as he can fire all but THE hardest and smartest workers I can see this working out.

It depends on a lot of things, not least of which are the jobs being filled. For many jobs, the marginal value of a slightly smarter or harder working employee isn't high enough to offset the higher wage.  The jobs for which that extra ability really matters will tend to pay more anyway.

It is also very expensive to repeatedly hire/train/fire people to find the ideal person for the job.

Or, as Hayek put it:

The curious task of economics is to demonstrate to men how little they really know about what they imagine they can design.

As for this particular example, it is fine if someone wants to try to distort the market at their own cost for the benefit of their employees. Companies certainly have plenty of history of trying to distort the market the other way. What I don't want is for people to point to this case - whatever its ultimate result - and use it to justify further artificial price manipulation by the government. The long term impact of that will almost certainly be negative for everyone but bureaucrats.

[charby]

I think people are pissed because if his business thrives, that means other businesses are going have to pay a much higher salary to keep people.

Wasn't there a thread earlier this year about businesses keeping IT wages low?

[makattak]

I think people are pissed because if his business thrives, that means other businesses are going have to pay a much higher salary to keep people.

Wasn't there a thread earlier this year about businesses keeping IT wages low?

Honestly, paying above market wage CAN have the benefit of making retention of employees easier.

I have no problem with paying above market wages, it can be a viable economic strategy. (But only if one or few companies do it, otherwise the wages are no longer "above market.")

My problem is I'm pretty sure 70K is a bit too much "above market" for many of his employees for it to be viable long term, especially for entry level employees.

I have no fear whatsoever that this will pervade the market, unless enforced by government fiat. (Which would end up making $70K worth about $30K in today's dollars...)

[Perd Hapley]

I think people are pissed because if his business thrives, that means other businesses are going have to pay a much higher salary to keep people.

Wasn't there a thread earlier this year about businesses keeping IT wages low?

That would explain it, if it were only business owners and CEOs, and such, that disapproved. A better explanation is that lots of us wage-owners know the harm that's been done by the entitlement mentality, and we see this as contributing thereto.

[MechAg94]

I think people are pissed because if his business thrives, that means other businesses are going have to pay a much higher salary to keep people.

Wasn't there a thread earlier this year about businesses keeping IT wages low?

The market responded to the IT wages and those companies are having trouble hiring at that wage.  The problem is the Govt keeps stepping in to bring in more ex-pats to help the companies maintain the current wages.  Not sure if that is a good thing or not.

[RevDisk]

I think people are pissed because if his business thrives, that means other businesses are going have to pay a much higher salary to keep people.

Wasn't there a thread earlier this year about businesses keeping IT wages low?

Ayep. And not just the H2B visa fraud, but also companies actually sharing salary information to attempt price fixing via cartel.

[Perd Hapley]

Ayep. And not just the H2B visa fraud, but also companies actually sharing salary information to attempt price fixing via cartel.

Don't unions due something similar, from the other side?

[charby]

Still in the news

http://www.inc.com/magazine/201511/paul-keegan/does-more-pay-mean-more-growth.html?cid=sf01002

[zahc]

http://www.bloomberg.com/features/2015-gravity-ceo-dan-price/

Article alleges he was retaliating and/or reacting to a lawsuit from his partner suing him for grossly overpaying himself. The wage hike was just publicity or possibly a way to drop profits even further.

"
Price announced his magnanimous act a month after his brother sued him for, in essence, being greedy....

In a follow-up interview in mid-November, I pressed Price about the inconsistency. How could what he told me about being served two weeks after announcing the raise be true when the court records indicated otherwise?

“Umm, I’m not, I have to look,” he said.

The court document, I said, definitely says March 16.
"

[Jocassee]

I would imagine at 70k you would attract a lot of people to wanting to work there giving you a much higher worker pool to choose from. As long as he can fire all but THE hardest and smartest workers I can see this working out.

I have been saying this for years. Not so much in the IT realm, thought it could apply, but with cops. Don't like the people applying to be cops at 30k a year (local cop shop starting wage)? Then kick it up to 35 or 40, that should drastically increase the quality of applicants, even bring in people looking to switch careers, and it will allow the agency to be more selective in their psych profiling.

[MechAg94]

I would agree that higher wages can be very useful to attract better workers if used correctly.  That assumes you make good hiring decisions and don't reward the low performers.  Phillips 66 refinery over in Sweeney doesn't really pay more per hour, but they have favorable overtime rules and still offer a pension for hourly employees.  They seem to treat employees decently also.  They get hundreds (sometimes thousands) of applicants for each position and can take their pick.  A nearby plant of ours just lost one of their best operators to them.  I guess each busniess has to look at the cost/benefit of having an above average work force.  

I don't think that is what this guy did.  He was just handing out raises for little intent toward helping his business.  He actually lost good employees since he wasn't equitable in the way he did it.  

[Pb]

The man's wife has now accused him of physical abuse, including "waterboarding" her! 

He has denied the claim.  Who knows what the truth is?