Also, I've read somewhere that paying someone significantly above market rate can lead to more stress due to increased fear of job-loss. $70,000 is great, but only if you're able to convince your employees that they're worth $70,000.
(edit: I missed the part about 3 year phase in. I still wonder about the effects of paying someone 60% above market rate.)
Someone who is used to living on $48k/year (their current average) suddenly making $70k/year is a huge change. And unfortunately, most people will adjust their standard of living to whatever their making instead of banking the difference.
As a result, I can easily see your concern about "increased fear of job-loss" because of what they're making.. and how hard it is to be "poor" again. It's the definition of golden handcuffs.
But the $75k equals happiness is largely predicated on it being significantly higher than median wage.
If all other companies followed suit and pay the same amount, we'd have to move the yardstick much higher than $75k.
Do they become less likely to risk leaving this role? Do they value less the opportunity to test out a different career, even if the potential salary is higher? Do they become more devoted to the wellness of the Company? How does this impact their drive? Results? Retention?
It would be fascinating to see their HR metrics 10 yrs from now.(assuming Gravity Payments doesn't put itself out of business)
Ref: http://www.huffingtonpost.com/2012/05/17/americans-spending-...?
Further, I forgot about another aspect.. many tax deductions start phasing out at $50k and are completely gone by $80k (iirc), so at $70k they're not only in a higher tax bracket, they also have less deductions so their overall tax burden will go up.
[Source: My career is advancing]
It's not like these people were all hired at an above-market rate because they were trying to prove they were above-average employees.
OTOH, take a startup that's paying everyone over $120k and is running in the red on VC money. Those employees aren't (yet) creating enough value to cover their salary.
It's just that it's become so ingrained that companies must maximize profit for their owners at the expense of the employees that we've lost sight of whether it's right or not. (I posit it's not.)
First, paying the CEO less and employees more isn't going to put the company out of business because it's all just payroll.
Second, the people actually making the decision know far better than you how much value their employees are adding to the company and whether it's worth cutting into profit to pay them more.
When you've bootstrapped your own company, hired hundreds of employees, and are making millions of dollars in profit, you can pay your employees whatever you want. Until then, stop shitting on this guy's plan to do something cool for people.
We owe a lot to unions and I'm sure they still have a role to play in today's environment.