Personal Growth

Raising The Minimum Wage For Happiness

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The federal minimum wage debate has recently heated up with large protests being staged across the country for higher pay. While the national minimum wage hasn’t been raised in 6 years, some cities and states continue to raise their minimum wage above the national requirement. Seattle, for example, set a new $15 minimum-wage law that will slowly raise the minimum wage over the course of 3 years.

Dan Price, CEO of Gravity Payments grants $33 minimum wage
Dan Price, CEO of Gravity Payments

Is a $15 Minimum Wage Enough?

Dan Price—the CEO of Gravity Payments, a Seattle-based company that processes credit card payments—announced that he was cutting his $1 million salary and using company profits so all employees will earn a base salary of $70,000. His plan will be phased in over 3 years. This means that each employee will now make roughly $33 per hour.

In contrast, the federal minimum wage in the US is $7.25 an hour, which comes out to about $15,000 a year for someone working a typical 40-hour week. Seattle, where Gravity Payments is based, started phasing in a minimum wage of $15 an hour in early April, but even that will only equal out to about $31,000 a year.

Public Reaction to Price’s Decision

Price is being widely lauded for his decision not only because it’s a feel-good story that makes him seem like an awesome guy and desirable boss, but also because most CEOs cling tightly to their pay. By some estimates, CEOs in the US make 354 times as much as their average employees.

Does Money = Happiness?

The action is definitely honorable, but what’s the reason for the $70,000 salary? The national average salary is around $50,000 a year. Why not set that as your base salary for your employees? Price told the New York Times he started thinking about making such a massive change in his company’s pay rate after reading an article about a 2010 study by Daniel Kahneman and Angus Deaton that found people’s happiness levels off around $75,000 a year. This means, when people earn above $75,000, they don’t get measurably happier. Kahenman and Deaton did notice, however, that as people get closer to $75,000 a year, they get happier.
Researchers did not find that a lower income causes sadness itself, but makes people feel more ground down by the problems they already have. So, this isn’t a guarantee that every one of Price’s employees is going to go into work with a smile on their face every day, but it will make them feel happier overall.

For anyone about to start their career, or for anyone considering career options, remember that money only buys happiness to a certain extent.

Resources

One Company’s New Minimum Wage: $70,000 a Year

 

Raising the Min Wage Cover

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