Gravity Payments' Revenue and Profits Doubled After $70,000 Minimum Wage Set
slate.com
slate.com
I wish more people would realize that those earning less than themselves are not necessarily less deserving but merely less valuable in a marketed job force.
It's very common but do we have any proof?
Surely, personal circumstances are very important if you are going to try to start a business.
There is psychological circumstances like: did you grow up in a family or an environment where the idea of start a business was present?
And more practical like: Do you have technical abilities that you can sell if your project fail? Do you or your parents, wife, etc. have money that will stop your fall if the project goes wrong?
Was really Bezos or Gates or Page really "taking a risk"? And I mean a real risk.
Anyway, even if we, as a society, want to reward the "job creators", we probably don't want to live in winner take all world.
I'm curious about that statistic. A lot of these business could be hobby or other casual enterprises, tax avoidance schemes, and doomed businesses started by naive people. It doesn't mean a whole lot without some more context.
>Imagine taking a job where you had to pay for your office, office supplies, computer, and every thing else out of pocket.
Become a teacher!
>...that is a social discussion.
Social factors aren't irrelevant. People behave differently based upon socio-economic incentives. Not just entrepreneurs, either; take two engineers, one comes from a family with "fuck you" money, the other is a first generation college graduate. They both have started their own families and have young children at home. Now, imagine how their reactions might differ when placed in various ethical dilemmas.
All models are wrong, but some are useful. That particular stat covers a pretty good cross section of legitimate small businesses. Some small businesses may be a cover for an underground marinara sauce operation used by the mafia to funnel dollars to a dog fighting operation..... Sure we could muddy it up more, but I don't think that stat is all that malicious or disingenuous.
> Become a teacher!
This claim does seem to be a bit disingenuous and exaggerated. Sure teachers cover an unfair amount of supplies and get paid very little. Do they really rent their classrooms, buy their own computers, and pay for 100% of everything out of pocket?
> Social factors aren't irrelevant.
My post was refuting the claim that entrepreneurs aren't taking real risk. Granted if you come from a wealthy family you aren't taking as much risk starting a business as someone taking a small business loan. I still contend that the risk to an individual (relative to them-self, not others) is greater when starting a business than taking a job.
It was exaggerated a bit!
>Do they really rent their classrooms,
Of course not, but increasingly, my own resources are being put to use on behalf of my / my employer's students. Furthermore, remuneration in my field is easily several times what it is in education; and I think that's true for a lot of teachers. Sure, there are other benefits, but the pay is poor, approaching minimal, and that's not going to get you the best teachers.
>buy their own computers
Often enough, yes.
> and pay for 100% of everything out of pocket?
Far, far too much out of pocket.
> I was saying that entrepreneurs take significant personal and financial risks and there is a high rate of attrition for even good businesses.
I agree, and I think it's may just be a nasty feature of our country's demographics and the law of supply and demand.
I'm reminded of a post from a few years ago (I think I saw it here) examining someone's observation that a lot of engineering types were packing up and moving to Germany to start their company because failure would mean less financial hardship (that's not a great summary of the article). Here is an article in a similar vein (vane?). http://www.theatlantic.com/business/archive/2012/10/think-we...
Only a small number of bootstrapped companies (few of whom are represented on Hacker News) are risking their own money, and even then only the brave (or foolish) push it to the point where they can't sustain themselves if the business fails.
Also some business owners do leverage some retirement savings when starting a business. It's a pretty good way to get low interest money. They can sustain if things fail, but they certainly feel it if they fail.
Kind of interesting to think about what the negative consequences actually would have been for Bezos if Amazon couldn't survive the dotcom bubble.
And if you require a carrot that takes you from, say, $2M to $2.5M salary, maybe re-consider what motivates you and try to find something more intrinsic to the work & company itself.
Not that I disagree with you, I just think the numbers don't add up to be called massive.
Who are you to tell someone their motivations are wrong? I agree with you for myself wholeheartedly but I'm not about to go dictate to people what they should be motivated by. How incredibly arrogant.
The founder may have lost more money, but he had more money to gamble with. The employee does not, and losing his personal income stream is probably equally or more damaging to him.
Oh yes, I forgot about the masses of un-wealthy people who have equity.
He is an entrepreneur/founder. He isn't just a company hopping CEO with soft landings and golden parachutes galore. I think an entrepreneur deserves a solid risk premium.
They might be in a position where they don't have too much debt or it would not be tied to him and not put him in a difficult situation if it failed.
The bottom line might be that the risky part of founding the company is over.
When comparing stocks and bonds you use the risk free interest rate and take a stocks volatility compared to the broad market into account. Maybe the volatility of the business should be a consideration.
She is much more valuable to society than I am.
edit: grammar
The value to 'society' of improving a toaster by a small percentage, or the hits to a website by a larger one, are hard to calculate except by a bottom line. Any emotional impact is so indirect as to be invisible. Still exist; but we don't see them so can't count them.
Add to this: one-on-one services are limited by the time and attention one person can put into them - two hands, one heart, 24 hours in a day. Absolutely no leverage at all, in the economic sense. Exceeding that (admittedly large and important) impact happens at some point in less-direct exchanges (economic, technological) and can go up from there geometrically.
So I console myself, as a technician, that what I do affects those unseen people. And if successful, it affects millions, not just tens. It adds up to something important too.
I'd argue the huge pay differentials are often because humans are TERRIBLE at judging long term... anything. A pro athlete can fill a stadium at some $$ per seat, yes. If a pro athlete stops playing, what happens? the stadium stops filling as much, we potentially lose some ancillary jobs from decreased viewing population (but given the number of sports stars and the nature of teams, losing one outside of a very few likely won't cause much), but in the long term, what is the cost?
Now let's remove an equal number of teachers as could be paid with that single salary. Even if this is a low end athlete, given teacher pay, you're losing dozen/few dozen teachers. What is the long term cost to students who can no longer be educated, or get a much poorer education (or simply now have far bigger classes)?
I realize there are many holes in this argument as it asserts a lot about how money is distrbuted/what externalities exist, but I see it as one facet.
There are also the more well explored aspects of "we like to lionize celebrity/success" and "teachers don't have much political or social clout given their resources/our prioritization in society" (although this links back to my prior statements about long term value and society preferences.)
In summary, I think there's plenty of reason to hate/feel guilt about it, and work to change it. Yes, the feelings alone do nothing, but if no one is getting angry then certainly nothing will ever change.
A star performer's pay is possible because millions of people can enjoy his/her performance at the same time, paying a relatively small amount of money (say, $80/ticket).
The software that the poster above developed can potentially be sold to a lot of customers with no extra work, so he makes an above average salary.
A teacher cannot teach millions of people at the same time, the limit is usually set at 20-25 students.
A care-provider can only take care of one person at a time, a few during the day.
Perhaps, but a natural effect of the way that capitalist economies work is that contributions aren't valued by social utility in a fair sense, but by utility weighted by the wealth of the people to whom that utility is provided.
There are great and horrible human beings who make lots of money. There are great and horrible human beings just scraping by.
Income and goodness are orthogonal.
1) it's only been six months
2) doesn't say whether a $70,000 minimum is particularly high for the jobs that are at his company
1) It's been six months. I've recently wondered how it's going.
2) The article did say starting wage was $35K at his business.
One company can't fix this problem alone, though Gravity's effort is laudable.
Everyone getting paid the same is communism, and yes massively de-motivating that if you work harder you get paid the same. Massive pay disparity is the end result of unchecked capitalism, look at any country with low taxation, same result always. Socialism just works to get a happy compromise where you have the chance of making more through your efforts, but less people get a huge head start and fewer fall through into poverty. I'm not sure what there really is to fear here.
The difference between America's mean and median wage is quite shocking (and the worst amongst developed countries I believe). Clearly we see that this is what the right want to hold onto at all costs.
This guy should be lauded and applauded for having the balls to do such an amazing social experiment which benefits all his employees.
And how much does it scale? Will it work when the company is forced to look into profit? Right now they seem to have revenue but no profits.
How will retaining employees work when someone who has to work over time to deal with bugs is getting paid as much as the person's job it is to hold meetings.
"right-wing backlash" - anyone who might suspect that this isn't sustainable and will probably end up going away in the long run. Sounds like a PR fluff piece.
Even dev salaries today isn't sustainable and will eventually crash.
You indeed have. $70k is the minimum salary. It is possible to make more.
I understand in this situation, that some of the previously higher paid employees got upset [and left].
> Only two employees quit—a nonevent.
I also have no disagreement with the notion that higher paid employees will be more productive (though I've certainly seen individual examples where the opposite is true) but that doesn't mean it's affordable for the business owner in all situations. If I were paid $70,000/yr to bag groceries I'd be productive as hell but I'd also bankrupt my employer.
If it does end up working for him and he's more profitable and has happier employees and customers, wonderful. I don't understand why any free-market person would object to that, as long as it's his business decision and he's not being forced to pay what he pays. Clearly a $70,000 minimum wage would not work for any and all employment situations.
It's also in no way related to an actual minimum wage. Letting companies do it on their own like this one is what makes the higher wage work.
Sure higher value jobs require automation, which means their will be less jobs available but let's improve the quality of the existing jobs and figure out what we do, as a society, with all the unemployed.
I miss seeing the pride in workers eyes as they deliver me a product/service. Let's bring the pride back and figure out the rest later.
I feel that if we increase employment happiness, as a society we'd be better able to manage massive unemployment. Massive unemployment doesn't need to be a 'bad thing', labeled as 'lazy'. Instead, should be a pride thing in technology. Humanity doesn't need to work. Why must we force it to? We (humanity) can figure out how to manage the freedom of massive unemployment due to technology.
"Aldi (stylized as ALDI) is a leading global discount supermarket chain with over 10,000 stores in 18 countries, and an estimated turnover of more than €50bn."
We may have different definitions of what "small" is but I'd imagine most don't think 10k stores or €50bn turnover is "small".
Ironically what is unsustainable is not redistributing wealth towards labor. What is unsustainable is concentrating wealth towards a few people who contribute no work.
It's because it's hard and risky work to start a company. Your observation of the company owner not doing any work is a temporal discrepancy not a difference in overall risk and effort (IMO).
Then there's also owners who did a lot of hard risky work several decades ago, now insulated from that by layers of management, but don't contribute any more value to the company right-now than any project manager or warehouse supervisor.
Or ownership via nepotism which is a bit of a crap shoot. Sometimes sons and daughters work their ass off; some times they're just barely competent enough to not cause a revolt when given the keys.
When a founder forms a company he is not creating value. He is redeploying existing labor to do OTHER things. Whether that creates new value is a separate issue as said labor could create new value wherever it was before. Additionally, the founder is also creating a new corporate pyramid structure that funnels a lot of the redeployed wealth from this labor towards the people sitting on top: Whether that be himself or shareholders.
Let's say there are two companies. Company A and Company B. Company A is a established company and Company B is a startup. Lets also say there is one worker, named Chris. When Chris works for company A his work output is 20$ a day.
Let's say Chris changes his job and moves to company B. You're telling me that Company B by virtue of being a startup makes chris's work output suddenly equivalent to 100$? Tell me what magic makes this the case? What is it that makes it so new value is created out of thin air? It's not physically possible. In fact it's stupid to think that just by creating a startup you're creating value. You're just redeploying labor.
So where does new value come from if not just from a company by virtue of being a startup? The answer: When new technology or new innovations are created that fundamentally change the infrastructure of the economy so that it can be more efficient. It can happen from ANY company and it can even happen from government, it does not have to come from a startup. Examples: Apple: iphone, military: internet.
To tell you the truth, most startups amount to shit. If anything the majority of startups redeploy labor onto endeavors that amount to nothing. Usually big corporations more effectively redeploy labor. Could any random startup do what apple did to the phone industry? Probably, but waay less likely.
By "existing labor" voluntarily "redeploying" themselves, they are in complete recognition of that fact and want to partake in the additional value created.
What may appear as "utter nonsense" is actually deeper understanding. Real knowledge is to know the extent of one's ignorance.
shhh, you will upset the Founders are gods and we should worship at their Startup temples viewpoint that is the foundation of HN.
I could've waited for the rate limiter to expire but I responded hastily because I was highly, highly offended by you saying that my paragraph was "utter nonsense." You don't say these kinds of things to people in real life. I'm not sure if your post qualifies for a flag but I do know really negative comments like that are frowned upon by the moderators.
You never once mentioned startups. That is true. But you do mention the creation of a company. You're telling me that the creation of a company isn't a startup? Ok I now assume that the creation of a company isn't a startup. You're talking exclusively about split-ups, as that's the only other time I know about where company creation occurs without the creation of a startup: http://www.investopedia.com/terms/s/split-up.asp.
If a company splits up. The old company is destroyed and the new companies are the sum of it's old parts. No new value is created. Understand? Or is my assumption incorrect? Clarify if i'm wrong about what you're referring to by "sole creation of a single company."
If person A takes the risk, founds and grows the company and then sells their stake to person B, person B has purchased the claim that person A once held. If person A was entitled to the rewards for prior work without current effort, they can reasonably sell that claim to person B, whereupon B is entitled to those rewards (at the risk of the capital B put up).
In fact, being able to do so is critical to the current funding structure for many ventures (because it provides liquidity for person A, increasing the EV for A to originally start, because they can get liquidity later rather than having to hold the share for eternity to receive the value they created).
(I realize that not everyone will share this point of view, which is OK.)
If a laborer can accrue shareholder value over time. Non laborers should lose it with time.
Given that, as the article says, one actually complained to him about being ripped off on his salary, I'd say this was the case.
I agree with everything else you said. If an employer can afford to pay employees $70K and isn't coerced into doing so, more power to them. Such a salary isn't sustainable in all business. Market rate is most certainly not $70k/year to bag groceries.
It is however usually coupled with the ability to let go poorly performing workers -- something that socialist aren't keen on.
He had enough excess money so he choose to give higher salaries to all his employees. He does what he believes the right thing to do. Plus side, giving higher salaries usually has a positive effect on your job after all, as long as you can afford it. It seems to work for him and hopefully it will lead some others to do similar things.
But just by looking at this and universally forcing higher minimum wages may create unwanted consequences (Such as Lay offs, increase in un-documented exchanges or tax evasion simply because employers with already razor thin profits cannot afford salaries anymore.). Especially for small and medium sized companies.
Personally, I'd observe that if "he has sold all his stocks, emptied his retirement accounts, and mortgaged his two properties—including a $1.2 million home with a view of Puget Sound—and poured the $3 million he raised into Gravity." actually translates to "all that was necessary to fuel this", then it isn't exactly out of line to complain that a grand unsustainable stunt being used for the purpose of trying to force this on everybody else is a very silly thing to do, and has little to nothing to do with the problem of "wealth inequality". Everybody already knows that if it were possible to just pull wealth out of thin air everybody could have more. The problem is precisely that it isn't.
If it does turn out to be sustainable, then of course more power to him, but I'll wait for that judgment when the millions of dollars have run out and either have or have not been replaced by revenue. Seriously. I will in fact wait for that. Paying people well doesn't bother me, and I doubt it actually bothers anybody. But I'm certainly skeptical in a way that, say, a report from left-wing Slate about how this didn't work would leave me less skeptical, because they'd clearly be reporting it against their will, and probably have examined it within an inch of its life.
And even through what I would consider substantial bias, the article's own text leaves a lot of room to be concerned about this maneuver. He's basically spending almost the entire profit of the firm on salary, then promising not to lay anybody off or cut salaries even if times turn bad. Well... guess what that translates to... if the company hits problems, he'll end up going out of business and these people will suddenly not have their jobs at all. Or his glittering promises that you're so excited about will turn out to only have been words. Or something that does not involve everybody keeping their jobs at way above-market pay in a company that can't make payroll.
He's welcome to do this experiment, but maybe we should all wait to make sure it succeeds before getting too excited about it, and demanding that anyone who thinks it likely to fail consider themselves bad people who should feel bad. All the best to him (again, no sarcasm at all), but the most likely outcome is that he goes out of business in the next recession.
An experiment that drastically raises low-end salaries can therefore be viewed as a big threat to those whose wealth depends on being able to get away with paying their employees low wages.
We can all argue endlessly about what constitutes a low wage, to what degree we should let the market decide, etc, etc - but the idea that "If there was more money available, we'd happily use it to raise entry-level wages instead of giving it to the top-tier employees" is demonstrably false. This is why this has everything to do with wealth equality.
A solution that can't be sustained isn't a solution. It is a category error to treat it as a solution merely because you like it, or it flatters your politics, or it makes you feel good, or it provides you a cudgel with which to hit your political opponents. None of those things will prevent the company from going out of business, if it does, and then nobody has a job.
> Paying people well doesn't bother me, and I doubt it actually bothers anybody.
To which I pointed out that it might well bother some groups of people.
You also asserted that:
> ... has little to nothing to do with the problem of "wealth inequality". Everybody already knows that if it were possible to just pull wealth out of thin air everybody could have more.
To which I pointed out that it does in my opinion have everything to do with wealth equality, sustainable or no, as this experiment is (IMO) primarily about where and how payroll gets distributed, not about how large payroll might be.
I read your post carefully, several times, before replying. Please do mine the same courtesy. Thanks.
[The __emphasis__ was mine].
jerf was saying that determining if "wealth equality" can be a solved problem depends on whether Gravity's strategy is sustainable and a ultimately proven as a success. jerf is looking beyond the salaries experiment and current media hoopla.
jfindley is saying that the mere existence of the experiment without consideration of whether it succeeds is itself a conversation about "wealth inequality".
You guys are talking about 2 different things.
On one note, there's a reason that some roles are paid $40k instead of $70k and it has nothing to do with the value of the person. It's that the role doesn't create enough value - sales, retention, growth - to make that make sense. It's feasible to make an employee a few percent more effective but nearly 2x? I'd love to see that.
On the other side, I'd love to know why the the sudden influx of cash. Was it just to get rid of his assets? (a divorce?) Or did the company need the cash? If they needed it and business was good, why not outside investors? If they needed it and business is poor, then he's just doomed his whole cause because of the "see, I told you so!"
Regardless, I'm looking forward to seeing what this looks like longer term.
But he didn't pull wealth out of thin air to do this, he reinvested existing wealth back into his business.
While not every business can do this, there are arguably plenty that can. Over the past 10 years, corporate profits are up and so are executive salaries, compared to medium income.
So it's not that people wish that wealth could be create out of thin air. It's that wealth is being created, it's just being distributed differently.
I think the most insightful comment from Dan was that he realized he was still managing his business in crisis mode, hoarding cash in case another huge financial meltdown hit--but that was unintentionally impeding his business growth by harming his workforce.
This arguably describes thinking of a lot of business executives, who are hoarding cash both personally and in the businesses they lead. It's possible that this is one reason we are seeing less than stellar economic growth right now.
Anyone who disagrees is still free to use their own money to pay their own employees peanuts from their mega-yacht.
With Gravity being the exception, this is not what happens in reality.
The problem is that there isn't one universal definition of fair. Conservatives, liberals, libertarians, socialists, they generally all (with individual exceptions of course) want a society that is fair, but with different, mutually incompatible definitions of fair.
Conservatives tend to preach that in a fair society, everyone gets what they deserve. Harder working, more talented? Then you deserve more. Socialists tend to preach that in a fair society, everyone gets what they need.
The group who need the most doesn't overlap with the group who is most talented and able to work hard, so conservatives and socialists will never agree on what is fair, or even that the other group believes in fairness.
The definition of fairness is subject to research under the name equity theory [0]
The three extremes are (AFAIR):
- equal distribution
- distribution proportional to contribution
- distribution proportional to need
The problem with extreme 1 and 3 is that they provide no incentive to increase your contribution which is why "capitalism" is superior to "socialism" in terms of productivity.
Right now wealth is distributed according to your rank. Rank unfortunately is nowhere near proportional to contribution.
You are free to design your own incentive system and compete with those you believe rely too much on rank.
Then again the alternative isn't too pretty either.
That may be true under normal circumstances (you will likely see overall productivity drop once the poor start to starve or freeze to death) but that still leaves the fundamental disagreement whether overall productivity is more important than meeting everyone's needs.
http://www.economist.com/news/leaders/21578665-nearly-1-bill...
Has global poverty dropped due to unchecked free market capitalism? Is there a place where such a thing is applied?
Global shift from centrally controlled economies to more free market economies -> fewer people that are poor -> fewer people that are starving or freezing to death
> will never agree (...) that the other group believes in fairness.
This is how a political gridlock develops, how wars start. Who is going to negotiate with a side that doesn't even want to be fair? I know I wouldn't, it would be pointless.
Gold is rarer, than oxygen and carbon. The market prices it higher. Does that mean it contributes more? Is gold more important than oxygen and carbon?
Sure, there needs to be an incentive to work hard. But there shouldn't be an incentive to being born in the lucky circumstances that leads you to becoming a surgeon, or the even luckier and more exclusive circumstances that lead you to becoming a CEO (white, male, relatively privileged). And why does a CEO who works hard 80 hours a week deserve more than a janitor working 3 jobs 80 hours a week just to keep her family afloat, to get her kid enough food and a safe place and help her get through the crappy public school that the CEO pays $30-60k a year (multiples of the janitor's salary) to keep his kid out of?
There shouldn't be an incentive to treat people as commodities. Does a surgeon deserve twice as much if for whatever reason there are half the number of surgeons this decade compared to last? Does a janitor deserve half the pay just because the birthrate increased and there are twice as many people to compete against? (I'm simplifying. It's not important whether doubling the supply halves the price.)
That, or leads to a repressive state and economic ruin. You can't pretend that Denmark is socialist but not many of the failed South American countries.
Paul Graham has an interesting perspective of inequality:
> Economic inequality is not just a consequence of startups. It's the engine that drives them, in the same way a fall of water drives a water mill. People start startups in the hope of becoming much richer than they were before. And if your society tries to prevent anyone from being much richer than anyone else, it will also prevent one person from being much richer at t2 than t1.
He acknowledges that people don't do things just for financial reward. People build products because they love building things. The things you have to pay founders for is doing the mundane operational support that is required for most projects. No one likes doing that.
He goes on to argue that inequality is the result of people being able to more effectively use their talents. The "10x programmer" isn't paid 10x as much, but few programmers could argue that he should not get paid a lot more than just an average programmer despite being much more effective.
I get that inequality is distasteful, but I would rather be richer in a less equal economy that be poorer but average.
there's no debate that anyone would choose to be the richer one in any situation. The question is whether you'd rather be the poorer one in a less equal economy, or the poorer one in a more equal economy.
The CIA had a lot to do with that. It instigated coups against democratically elected heads of state and supported repressive dictators in most of South America in order to protect American businesses there.
Suppose two people start at 10. One person finds a way to go to 20 and the other goes to 11. The inequality has increased and the wealth of both people has increased.
Technically, this is a social improvement. But egalitarians would say this is a terrible situation because the gap has gone from 0 to 9.
It doesn't matter if the right wingers are poor or struggling themselves: rather than envisioning a world in which they don't have to struggle as hard, they envision a world in which they have broken beyond their struggle somehow and are now being bled by the "taker" leeches as a result of left wing political goals being met. The sad side of this is that many of these people have zero chance of breaking beyond their struggle specifically because there is not wider political support for redistributing resources.
The fall into poverty is an act of justice in this perverse mindset. Poverty is the result of bad choices of the individual in their view. Of course we can dismiss this kind of simplification as childish (the result of an intentionally crafted propaganda campaign designed to cause people to vote against their interests), but there are millions of people who will have hateful fire in their eyes if you deny that poverty is avoidable for any person with the proper magical choices.
Massive pay disparity...
Profit sharing. What's fair?
The rhetoric about minimum wage is a distraction, used to obfuscate the simple fact that labor is getting its teeth kicked in.
If corporations (et al) weren't racking up record profits and warehousing cash, I'd be more sympathetic to their plight.
The criticism, mostly originating from Austrian based economic thought not right-wing groups (however most individuals on the right subscribe to the Austrian thought), was that the economics of the $70,000 wage was not going to end well for the company, not any suggestion of opposition to fairly paid society.
Comments varied between what the profit margin would be and the effect on role distinction. The main comments were how the effect would play out for those employees that the company had previously valued at $75,000 with a double pay differential from the $35,000 now having the individuals who performed the same task being given the $50,000 wage and phased up to the $70,000; eliminating the meritocracy of a $75,000 wage. Additionally, the internal machinations and reports bore out the Austrian point of view as valued employees quit citing unequal pay raise values for the lowest valued employees. [1]
To be fair, MarketWatch and Slate bring up a doubling in profits and revenues, but how much of this is based on an increase from the publicity and is it a long term sustainable idea.
Gravity Payments is profiting $2.2 million on $150 million in revenue. The Seattle Times article notes that payment processing services are razor thin margins.
Let's do the following financial analysis: * Gravity Payments has a 1.5% profit margin at its current rate of burn, $2.2 million over $150 million.
* Gravity at announcement time had 120 employees, of which a documented 25% would see a double in their pay, 30 employees who were making $35,000. Estimating the rest of the company's effected staff, estimate another 30 will be brought up to $50,000, another 20 brought up next year to $60,000 and then finally another 20 to $70,000, for a total of estimated 100 employees affected by this move.
* Costs have now increased for the 30 base salary employees to $1.5 million more, assuming a cost increase of $20,000 per person average for the remaining group of 70, you are an additional $1.4 million.
* After the full effect of the increase is factored in, the costs outweigh the current operating situation.
* The counter-argument of increases in business are offset by the companies need to hire additional staff to handle the increase. These individuals are brought into the existing cost structure and are not able to move the profit margin.
The company will be having some issues next year making good on its promise of wage increases and certainly in 2017. This basic analysis is why the finance person quit, she saw what I am showing.
[1] https://mises.org/library/what-happened-when-one-company-set...
[2] http://www.seattletimes.com/seattle-news/seattle-company-cop...
[3] http://www.entrepreneur.com/article/249313
[4] http://www.businessinsider.com/employees-reaction-to-70000-m...
https://news.ycombinator.com/item?id=10445012 https://news.ycombinator.com/item?id=10442726 https://news.ycombinator.com/item?id=10441107 https://news.ycombinator.com/item?id=10446171
Personally, my opinion is that since karma points are made up and worthless, it doesn't matter. Allowing dupes makes it more likely that cool stories will hit the front page, at the cost of annoying a few people. Seems like a good tradeoff to me.
In any case, in the long run it all averages out. The likelihood that this works for you is just as high as it is against you.