The left championed Gravity Payments CEO Dan Price as a hero in the war against income inequality, but a few months after setting a minimum wage of $70k his business has encountered some unexpected problems. Well, unexpected if you don’t have any comprehension as to why socialist principles have categorically failed throughout history. It turns out that if you give the least skilled people at your company a huge pay raise, the highly skilled employees who carry the burden of getting the work done won’t be too happy to get nothing.
Start listening at 1 hour 23 minutes into today's podcast:
Below is a rush transcript of this segment, it may contain errors:
STU: Someone else who had a pretty good business was Dan Price. Dan Price is 31 years old. CEO of a company. This is a company that does like internet transactions as far as like, you know, you're paying for things.
JEFFY: Online purchases.
STU: Like a PayPal type of thing. So he decided because he believes in what the left says about income inequality. Decided to change the structure of his company. He's CEO. Making a billion bucks a year. A bunch of people were making way less than that. Is that right? He says no. So he took a giant pay cut and brought himself down to $70,000 a year. He also at the same time decided to pay all of his employees at least $70,000 a year because, you know, income inequality. It's not about the job you're doing or how well you're doing it. Just everything needs to be income no matter what.
STU: So this was a big story. The New York Times picked it up. It was a -- it was a cause of the left for a couple of weeks. Now, what doesn't happen with those causes of the left is no one ever follows up on them. This time we'll give credit to FoxNews.com for doing so. They decided to call up Dan Price a few weeks later and say, hey, Dan, you had that company doing well and you decided to turn it into an example of socialism. How is that going for you? Working out well? Everything going great? Is that what we would expect? Well, he says, I'm working as hard as I ever worked to make it work. I'm renting out my house right now to make ends meet myself. This is with -- he's talking about the difficult struggle. However, the problem is, a lot of the good employees have left.
JEFFY: Yeah, they were kind of pissed, which is what we said.
STU: See, the new employees who were not doing as much work or not as high level in the company are making the same now as the people who have been there for a while and have built the company, which is kind of crazy.
He gives raises to people who have the least skills and are the least equipped to do the job. And the ones who were taking on the most didn't get much of a salary bump. This is from the financial manager. Mazy McCaster. She's 26. She said when she talked to Price about it, he treated her as if she was being selfish and only thinking about herself. That really hurt me, she said. I was talking about not only me, but everyone in my position. Approaching burnout, she quit.
Grant Morgan, 29, also quit saying the new pay scale was disconcerting. Now the people who were just clocking in and out were making the same as me. It shackles high performers to less motivated team members.
Price, now, this is the guy who is the boss, said both of these guys -- and also Rush Limbaugh and other talk show hosts who were critical of this, were not wrong. There's no perfect way to do this and to handle complex work issues that doesn't have any downsides or tradeoffs.
So he's now losing his good employees. He's keeping the old employees at inflated rates, and he's having major problems with his company. And there's a reason for that. Socialism doesn't work. It's not a system that ever worked.
JEFFY: He lost some of his clients as well over this transition. Some employees were wound up that if they were willing to do that, then maybe something else was wrong and they weren't going to get the service that they had been getting in the future.
Now he claims to have gotten new clients because of this. But that has not paid off yet.
STU: No, because those clients are like, you know what, we don't think it's right for us to be paying for these services. They should be free to everyone. We won't send in any payments. But they're new clients.
JEFFY: He's really struggling. And he's struggling with his brother who helped him start the business. Now he's phased out the brother. And the brother is like, I'm worth a little bit more than 70,000-dollar thing. I need a piece of the pie.
STU: Yeah, you'll notice that this doesn't happen in the businesses that liberals usually run. I'll give Dan Price a lot of credit here. You know, he's actually implementing these policies that you normally only see implemented by someone named Jong-il.
JEFFY: He seemed to think -- he didn't do it -- according to the story, when I read the latest catch-up story, he didn't do it, he claimed, because of the il factor. He just, you know, felt like he saw something that somebody was struggling. He heard one of his employees struggling about some sort of school or something. Gosh darn it.
STU: He did address the income inequality part of it though. Look, there's nothing wrong with believing that. This guy actually put it into practice. The left -- for example, Obama complains about women not being paid the same and then doesn't pay women as much as men in his own administration. Hillary Clinton, the same thing in the campaigns. We've see this over and over and over again. And it's really annoying. At least this guy is trying. The best that can happen -- is why we like federalism is that you can do these things. Test them out. We can all watch someone else fail at them. And then we can decide to do the right thing. That's what's good about this country. I'm all for this guy giving this a whirl. There's a lot of companies that try crazy things like that and they usually don't work. Everyone wants to come up with a new way of running the business. Because everyone else is so stupid. And they don't understand. And they're stodgy. And stuck in their old ways. A lot of those old ways work and they do something. That doesn't mean you constantly go on with the exact same process forever.
JEFFY: But we watch other companies grow and succeed and fail. And that's the way we learn. I mean, we learn that children should not put signs in front of their house to sell worms. It's illegal. Don't do it. Don't try to sell your product with a sign, kid.