In 2015, we announced a $70,000 minimum wage at Gravity. In order to help pay for the increase, I cut my own salary from $1.1 million to $70,000 a year.
As of today, I still make $70,000.
I’ve learned a lot since that announcement five years ago. Three things stick out to me the most.
1. The value of money is relative
When it rains in the Amazon, it’s just another day of heavy rain. When it rains in the Sahara, it can be a miracle. The same thing is true of money.
Raising my employees’ salary by anywhere from $5,000 to $36,000 a year had a much more profound impact on their lives than cutting my salary by $1 million had on mine. Just under a third of our employees got their pay doubled under the new policy, and another third saw a significant increase in their salary. Many of those employees used this money to make material improvements to their lives.
One of our support reps told me he and his wife had been holding off on starting a family until they could pay down their student and car loans; the immediate bump to his salary meant they could accelerate those payments and start their family sooner.
They now have two children.[pullquote]Another employee used the money to help her parents replace the badly damaged roof on their house.[/pullquote]
Another support rep was able to move closer to work. The reduced commute time allowed her to spend more time with her son, and she used the extra money from her paycheck to take her son to Disneyland for the first time.
Another employee moved closer to work and traded in his run-down truck for a more reliable car. Previously he worried how he would afford repairs if something happened to his truck. Now, he was free from that stress. He also used the extra money to invest in his health. He started working out every day, meditating, and eating healthier.
He has since lost more than 100 pounds.
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Another employee used the money to help her parents replace the badly damaged roof on their house. Her parents had run a local restaurant for years and had spent so much time and money tending to their business that they hadn’t been able to invest in their own home. The roof was in such bad shape that their insurance company told them they wouldn’t cover the house until they fixed it.
Research shows that an individual’s emotional well-being — measured by the amount of stress, joy, anger, sadness, and affection one experiences on a day-to-day basis — continues to improve up to the point where they earn enough to cover basic needs and improve their emotional health. These include things like spending time with loved ones, staying healthy, and enjoying leisure activities.
Based on this research, it’s safe to assume that the employees whose salaries increased under our pay policy are significantly better off mentally and emotionally than they were before. Meanwhile, my emotional well-being is about the same as it was when I earned seven figures.
2. I don’t need $1 million to be happy — and you probably don’t either
I never set out to become a millionaire, but by my late-twenties, I was one. Having grown up in a middle class family of eight in a small town outside of Boise, Idaho, I had never known wealth like this before — and I enjoyed it. I traveled, sipped champagne at expensive restaurants, and found a passion for new hobbies that only people at the top tax brackets can enjoy.
After I cut my salary, I was able to live off savings for a while, which meant I didn’t need to change my lifestyle that much. But within a few months, I was forced to put the vast majority of my savings back into the company in order to protect it from some outside threats. Suddenly, I was forced to cut back my spending immensely.[pullquote]My lifestyle changed, but my quality of life did not.[/pullquote]
I rented out my home on Airbnb and couch surfed with friends to help make some extra cash. I slashed my expenses dramatically and stopped buying new clothes. My life was still very comfortable, but my new income forced me to be more strategic about how I spent my money.
My lifestyle changed, but my quality of life did not. Knowing that my old salary was being put to work for our employees gave me a much deeper sense of fulfillment than any bottle of champagne ever did. I also reminded myself that the sacrifices I was making paled in comparison to those millions of Americans have to make every day.
3. Our example is not enough
When I originally announced our pay policy, I assumed that, if we were successful, other business leaders would follow suit. One of the main arguments against increasing wages is that doing so makes companies less competitive. If we could prove that it was possible for a company to pay employees well and still be sustainable — or perhaps even more profitable than before — then executives would have no excuse but to re-evaluate their thinking around pay.
And yet despite the fact that our revenue is up, attrition is down, and we’ve been able to grow headcount by 75 percent, income for most low-wage workers has remained relatively stagnant. While several states and cities have increased their minimum wages, and a few large companies have announced better wage policies for traditionally low-wage workers, these moves still fall short of the seismic shift we need if we’re going to solve the crisis of income inequality in America.
In a capitalist society, we look to the private sector to solve these problems. But the most influential decision makers — Fortune 500 CEOs, Davos attendees, investors — seem to lack the will to do much, if anything, about it. Fifteen– or twenty-dollar minimum wages and higher salaries for certain service workers are a start, but they’re a drop in the bucket.
We need systemic change. Change that must begin with business leaders taking responsibility for the problems they’ve caused and employees, customers, community leaders, policymakers, and citizens holding those leaders accountable.
Gravity’s story is inspirational, but it’s not enough. How will you help?
Gravity CEO Dan Price writes frequently on American business.