Grave Misreporting

I was glad to see this piece at Inc Magazine on the ongoing experiment in economic justice at Gravity Payments.

(Gravity Payments made waves on social media this past spring when its owner announced plans to phase in a minimum annual salary of $70,000 for all its full-time employees.)

The New York Times piece from this past summer that it mentions did indeed leave me with the vague impression that things were possibly not going well for the company. It left me with a similarly vague impression that the reporter had possibly worked harder to find disgruntled folk than to find gruntled folk to quote.

Two quotes from the Inc Mag piece struck me the most: first, from the company’s COO:

Maria Harley, Gravity’s vice president of operations, looks at a different set of numbers. While the company had to hire 10 more people than anticipated to handle the new business, most nonlabor costs — rent, technology, etc. — have remained the same, thus improving operating ratios. “We don’t need our sales to double,” she says. “We only need them to increase marginally — by about 25 to 30 percent. When I started being more logical than emotional about this, I said, ‘This is totally possible.'”

While it’s tempting to see Price’s generosity toward his employees as emotional and irrational (ah, that bleeding-heart liberalism!), Harley realized that it was her initial resistance to the plan that was unreflectively emotional. The numbers, she suggested, make Price look far more rational and logical than conservative pundits want to admit.*

Indeed, Price had every reason to believe that generosity towards employees would be good for his company. He had already tried it and reaped benefits from it! That was the other striking thing from the article:

The 20 percent raises Price implemented in 2012 were supposed to be a one-time deal. Then something strange happened: Profits rose just as much as the previous year, fueled by a surprising productivity jump — of 30 to 40 percent. He figured it was a fluke, but he piled on 20 percent raises again the following year. Again, profits rose by a like amount. Baffled, he did the same in 2014 and profits continued to rise, though not quite as much as before, because Gravity had to do more hiring.

So, he discovered that generous compensation helped his bottom line.

Well, gosh, isn’t that funny? It’s almost like he heard about how Costco’s generosity toward its employees proved to be financially prudent for the company, radically reducing costs associated with employee turnover and theft.

It’s true that salaries are a justice issue; the extent to which owners and bosses are “fair” in their distributions of the benefits of labor is a morally relevant question. The extent to which wage and salary disparities are reflective of racism, sexism, and other forms of prejudice is also worth discussing.

But I’m all for a little frank self-interest driving owners and managers to do what also happens to be in the interests of justice. The more employers cotton on to the fact that generosity works, the better off we’ll all be.

* I have yet to understand why on-the-ground conservatives–the plain, hard-working, decent folk who actually vote Republicans into office–tolerate this sort of nonsense from supposed fiscal conservative pundits. Even assuming there is a legitimate reason to keep the local or national governments from setting a minimum wage that would keep a full-time worker above the poverty line, what possible conservative rationale could there be for opposition to an individual business owner who wants to pay his workers generously? What conservative value does this violate?