Your comment about right-wing backlash is not documented in most publications and falsely directed at a group to reinforce your group-think against them. The only critique I could find was Rush Limbaugh saying it was “I hope this company is a case study in MBA programs on how socialism does not work, because it's gonna fail,”, although this is not a backlash in suggesting that it should be boycotted, so if you have others it would be appreciated. Rush Limbaugh is incorrect as the community does not own the company i.e. socialism, but to be fair, there is no theory on what to call this politically; it is not communism, socialism, or any other -ism. Those in the Seattle [2] Times article suggesting "backlash" point to companies behaving rationally in the market expecting fee increases in the future. The alleged companies quitting usage based on political concerns is not given to a number and without direct quotes from the companies as to the reason for quitting, I find it simply a buffer for the story. An Entrepreneur critique piece specifically mentions no ill-will to the company. [3]
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...