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Should All Employees Be Paid the Same?
Scientist at Work
The Company that Did
Dan Price, CEO of Seattle based credit card company Gravity Payments, in April 2015 decided to give all of his employees a raise. Well, maybe not all. The ones who were already making seventy thousand dollars a year didn’t get a bump in salary. Why not? Because with this form of earnings distribution, everyone makes the same amount. How did the employees feel about this?
Reactions from workers were mixed. The ones who were making lower salaries rejoiced when their income was suddenly increased. One woman, whose salary was thirty-seven thousand before the change, was delighted and relieved that her life would now be easier. However, the employees who worked for years to get to that level of income weren’t nearly as delighted. In fact, before too long, some decided to leave the company.
CEO Dan Price Raises Workers' Minimum Salary to $70k
About 70 of the company's 120 workers will have their pay raised to $70,000 over the next three years. About 30 of those workers will have their pay doubled."— CNN Money
How Did the Employees React?
After the initial shock and joy of the announcement wore off, there were different reactions to this bold move on the part of Mr. Price. One employee said, “He gave raises to people who have the least skills and are the least equipped to do the job.”
Another employee, who recently quit working for Gravity, told the New York Times, “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.”
Money (That's What I Want) - Rolling Stones
Making Minimum Wage
The first person in the video below is a single mother with two children, a high-school dropout with a criminal record. Her recent raise to just above minimum wage took away some of her government assistance due to the increase in pay. She explains that in her past she was convicted of shoplifting, actions influenced by her needs to have nice clothes to wear to school. After her children came along, there was the need to provide diapers for her children, so she took them without paying.
Now, with her low paying salary at McDonald's, she is unable to afford a decent car and has to take in a roommate to afford her rent. She drives a used car that is mechanically unsound. This is the story of many of the working poor who do not make enough money to make ends meet. Their situations are dire and their potential for earning high wages are limited.
What Quality of Life is there on Minimum Wage?
Hypothetical Example - Poll
Suppose you work really hard for a dozen years to get to a position that paid seventy thousand dollars per year ($70,000). You put yourself through college working nights, worked jobs way below your potential, climbed up the ladder of success one rung at a time through hard work, sacrifice and perseverance.
The assistant that works for you, calls in sick at least once a week, shows up for work late every day and finds drama in every situation. Every day, she leaves work early finding some reason or emergency that calls her away. She spends the day making personal phone calls, posting the latest gossip on Facebook and spends hours looking at photos on Pinterest. After her two hour lunch she falls asleep at her desk. She never works on the weekend like you do. Suddenly, she gets a raise to seventy thousand dollars. How do you feel about that?
Does the Assistant Deserve a Raise in Salary to $70,000?
Should Doctors and their Assistants Earn Equal Pay?
Are All Employees Created Equal?
Pattie Mihalik of the Times News Online in an article on March 29, 2014, tells the story about a patient at a local hospital. She describes a woman who, due to circumstances, is released at three in the morning after the main doors to the emergency room have been locked.
"You'll have to walk around to the other exit," she's told by one of the staff.
"I've just had surgery and the other door is a long walk to the opposite side of the building." She points through the locked door as she tells the attendant, "My car is parked right there."
"That's your problem," he retorts.
It turns out, a kind and very pregnant nurse who overheard the conversation brought over a wheelchair and pushed the patient to her car.
Do these two employees deserve to earn the same amount?
"In a perfect world, every employee would contribute the same amount, every bug would be equally important, every feature would be equally loved by users. Planning would be so easy."3
Employee With an Attitude - 5 Minutes
Would You Return to a Place that Has Poor Service?
How would you feel if the employee in the video served you at the counter and prepared your meal? Would you return for more of the same treatment? Would you report them to the manager? Would you chalk it off to them having a bad day and not worry about it?
What difference does it make? When an employee treats a customer with disrespect, it imparts the feeling that the business approves of such behavior and often, the customer will not return. In the long run, customer interaction with the staff forms the basis for the way we regard a business. At least it does for me.
Ebony and Ivory - Stevie Wonder and Sir Paul McCartney
What Has Google Discovered?
Laszlo Bock, of Google, who wrote the book "Work Rules" says they have decided to pay unfairly. He cites a power law distribution that fits almost every field they studied. As Bock notes, this means that "the top 1% of workers generated 10 times the average output, and the top 5% more than four times the average."
Longwood University's Ernest O'Boyle and Indiana University's Herman Aguinis, in a study that analyzed human performance across various fields discovered that, "Ten percent of productivity comes from the top percentile, and twenty-six percent (26%) of output derives from the top five percent (5%) of workers."
U.S. Marshalls at Work
The Pareto Principle
The Pareto Principle or the eighty-twenty (80-20) rule is a theory maintaining that eighty percent of the output from a given situation or system is determined by twenty percent of the input. In other words, twenty percent of the workers produce eighty percent of the result. But what about the eighty percent (80%) who aren't producing results? Should they be paid equally?
- 20% of the workers produce 80% of the result
Another example of the Pareto Principle is that twenty percent of customers create eighty percent of revenue.
- 20% of the customers create 80% of the revenue
If this is true, a business spends a majority (eighty percent) of their time serving customers who do not bring in the highest revenue. Often, salespeople cater to these types of customers; the ones who will spend the most money. In this sort of environment, those of us with small budgets would get less attention than the ones who spend more money. Is this fair?
The Secret To Making More Money - Jim Rohn
Mr. Jim Rohn, America's Foremost Business Philosopher
Mr. Rohn says we may be valuable citizens, valuable parents, valuable members of the community and of the world, but we are paid only for the value we bring to the workplace. We are not paid for the hour itself, but for the value we bring to the hour.
He also states that we should be students, rather than followers and that our beliefs should be the product of our own conclusions.
References and Sources
- Times News Online, Pattie Mihalek, March 29, 2015
- Young Conservatives, John S. Roberts, August 1, 2015
- Business Insider, Inside Google's Policy, Richard Feloni, April 11, 2015
- The Pareto Principle Explained, Kalid Azad
- CNN Money, August 10, 2015, Hong Kong
© 2015 Peg Cole