Over the past week, the news headlines and social media have continued to broadcast the developments of the $70k per year salary saga of Dan Price, CEO at Gravity Payments. Indeed, the story was one of the top-read and shared pieces here at the Times.
Given the fact that parts of this story fall at the intersection of economics and theology, I asked my resident economist-theologian friend if he had any thoughts on the Gravity Payments story. He did.
By Ryan Helfenbein
Here are the basic facts. In a bold move made back in April, Price decided to do the unthinkable. He slashed his own $1 million per year salary down to $70k while also raising every other employee’s salary up to the same amount, $70k. It was a Princeton study Price had read, stating that $75k was the ideal wage for emotional well-being in the work place, that led Price to take these actions.
Price’s popularity shot through the roof. But what happened since then is what has everyone talking now.
Dan’s brother, Lucas Price—a 30% minority owner in the company—filed a lawsuit for damages. And two senior employees quit shortly after the change, each complaining that the wage hike was unfair to skilled workers. Less skilled workers were simply sitting on the clock even after the wage increase—not exactly the behavior hoped for in the attempt to create an “emotional well-being” workplace.
Price’s wage experiment raises this crucial question: “Is equal pay for unequal work really fair?” Price failed either to consider this question or to see how his decision would trade one inequality for another. Unintended consequences come in various forms, but sadly enough in this case, these results were completely avoidable.
In a classical sense, wages are determined by a variety of economic factors like market price, skilled labor, and supply & demand. Few, if any, have ever attempted to base wage expectation on something as entirely subjective as “emotional well-being.” The value of any economic decision is its predictability: What is the likely outcome?
Price’s $70k wage experiment at Gravity Payments became just another form of collectivism, a kind of pseudo-socialism loosely applied to the workplace.
Alternatively, the late Milton Friedman argued that the profit motive is one of the most powerful forces at work in free market economies. Employees must act in their own self-interest—and they do! No employee in their right mind would put in 5 years of hard work only to see his wages flat, while new employee are paid the exacts same with little or no experience.
What wisdom could we draw from the Scriptures here? The Bible is not an economic textbook, nor is it a source from which we would immediately draw economic conclusions. But there are foundational principles found in the Scripture that lead to the establishment of a free economy. Private property, contracts, debt, and interest are just a few things contained in the teaching of the law.
But what about work? Does the Bible teach a kind of collectivism, by which there is no distinction among individual work? Should everyone be rewarded for work regardless of the effort put forth? No. The apostle Paul said, “He who does not work, shall not eat” and “everyone should earn the food they eat” (2 Thessalonians 3:10, 12). Indeed, there is wisdom in rewarding individuals based on their individual effort and no one should be rewarded for work they did not do.
And what about those who work hard? Shouldn’t they receive compensation for the work they’ve done? Yes, again the scriptures teach us: “Don’t muzzle an ox while it threshes the grain” (1 Timothy 5:18). A worker deserves fair and just compensation for the work he has done.
For the work they’ve done, they should be rewarded.
Clearly, when it comes to the value of work the Bible doesn’t promote collectivism. Unfortunately, the head of Gravity Payments is learning this age-old lesson the hard way. And for now, Price is paying a heavy one.
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