Seventy k, the new minimum

[Kyriakos]

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

Smart guy!

This is right up there on the social experiments I'd like to see done.

This experiment has been done before. In fact the very first act of the first ever Pasok government here (the stupid/psycho/crook party which now polls at 2%, and got 4,2% in the last election) was to officially triple all wages of factory workers.
Guess what happened. Yeah, most factories went bust. The rest is history.

 

[downtown]

Firing employees for poor performance is expensive (you need to pay unemployment) and tricky (Lawsuit risk).

The unemployment thing is a factor, but Washington is an at-will state. It's very difficult for an employee to sue over wrongful termination for anything other than a violation of a protected class, even when the law is on their side. I wouldn't worry as much about the lawsuit angle, if I was them, especially since the bottom end of the pay scale here is still typically pretty young employees.

Not to mention cost of finding a replacement. That's far more costly than people realize.

It's not for nothing, but I think it wouldn't be as bad for a company this size. Your costs are basically recruiting, time, and training. The training is a bit of a fixed cost, but if you're paying this kind of money, your recruiting costs are going to be really cheap...you'd never need to use a 3rd party, and you can just throw this on Indeed, a few college boards, advertise that pay, and boom. All the applicants you need. You can even offer a cash bonus to your employees for referrals, and skip all of that stuff too.

Churn is a problem for a lot of entry level CSR type gigs because the jobs are fairly terrible and the candidate pool often unreliable. With higher pay, you'd probably be looking at a more stable and motivated pool...as long as your actual hiring and interviewing processes are sound.

 

[classical_hero]

Considering the place, this wage isn't even the median. Yikes.

 

[Borachio]

Do you mean not even the median? Or do you mean not even the average?

I mean it's plainly not going to be the median,

the number separating the higher half of a data sample, a population, or a probability distribution, from the lower half. The median of a finite list of numbers can be found by arranging all the observations from lowest value to highest value and picking the middle one (e.g., the median of {3, 3, 5, 9, 11} is 5)

(Or it's very unlikely to be).

But it could well have been the average. And then it might make some sense to be surprised it wasn't the average.

For a standard distribution the average and the median are going to be pretty much the same. But wage distributions are typically not standard distributions, having a long high end tail.

 

[uppi]

Do you mean not even the median? Or do you mean not even the average?

I mean it's plainly not going to be the median, (Or it's very unlikely to be).

But it could well have been the average. And then it might make some sense to be surprised it wasn't the average.

For a standard distribution the average and the median are going to be pretty much the same. But wage distributions are typically not standard distributions, having a long high end tail.

Huh? A long tail means the median is lower than the average. The median for [1 1 2 10 11] is 2, the average is 5.

 

[Borachio]

Huh? I never said the median would be higher than the average, with a long high end tail. Just different.

Though for a long low end tail it would be higher than the average.

The median for [1, 2, 10, 11, 11] is 10, the average is 7.

What are you trying to say?

 

[uppi]

Huh? I never said the median would be higher than the average, with a long high end tail. Just different.

Though for a long low end tail it would be higher than the average.

The median for [1, 2, 10, 11, 11] is 10, the average is 7.

What are you trying to say?

I was trying to say, that in a long high end tail distribution (which wage distributions usually are), the average is higher than the median. So it makes no sense to look at the average, when it is not even the median. Considering that, I had no idea what to make of your post.

 

[Borachio]

Does it make any more sense to look at the median?

I've really no idea why the figure of $70k has been picked. It seems an unfathomable mystery. That much is true.

 

[Tahuti]

Does it make any more sense to look at the median?

I've really no idea why the figure of $70k has been picked. It seems an unfathomable mystery. That much is true.

7 is a lucky number in Western culture. Then multiply. Profit!

 

[Yeekim]

Is the 70K a yearly take-home figure or what?

Anyone?
I'm not terribly well acquainted with US parlance regarding wages - are we talking pre- or post-tax figures?

 

[Borachio]

It's got to be a gross figure, surely? Since, unless I'm mistaken, individuals will have different tax liabilities according to whether they're married with children etc. I guess. I don't know.

I've never heard of incomes being quoted net of tax in this sort of context.

 

[Lohrenswald]

I may be mistaken, but I think it was 70000 because with that company's income that was the amount of money everyone could get.

 

[Mise]

The very first paragraph of the article:

The idea began percolating, said Dan Price, the founder of Gravity Payments, after he read an article on happiness. It showed that, for people who earn less than about $70,000, extra money makes a big difference in their lives.

 

[Borachio]

Yes. That's true. I'd forgotten about that article. I don't know why, as it's clearly in the OP.

It still seems a rather arbitrary figure though. It surely must depend a very great deal of the locality and living expenses, I'd have thought.

Maybe that's taken into account. I don't know.

And, as far as I know, age is an even more significant factor in general contentedness than income.

 

[Mise]

I don't think the study itself is particularly good, let alone definitive, and I certainly don't think that $70k is some sort of magic number, but I also don't think it's fair to characterise it as "arbitrary". In fact, it's explicitly not arbitrary, based as it is on a survey of 450,000 people, and a study by a Nobel Prize-winning scientist. I can't think of a better number to use than $70k. If you're going to pay someone a meaningful amount of money with the goal of making them happy with the maximal efficacy, then $70k is a pretty good number to use.

 

[Borachio]

I read it's based on 450,000 responses from 1000 people. Not exactly 450,000 people.

But maybe I read wrong.

Here it is:

We report an analysis of more than 450,000 responses to the Gallup-Healthways Well-Being Index, a daily survey of 1,000 US residents conducted by the Gallup Organization.

http://www.pnas.org/content/107/38/16489.full

Looks like I did! Well, there we go!

They asked 1,000 different people on 450 days would seem the logical thing. 10 researchers each asking 100 people over 450 days. Doable, I guess. (What do you think the research budget would be? ~£300,000?)

It is indeed a large sample size.

 

[classical_hero]

Look like it didn't quite work out as planned.
http://fee.org/anythingpeaceful/detail/why-the-70k-minimum-salary-failed-and-why-thats-a-good-thing

But there was something important about human nature that Price’s cheerleaders were forgetting. Not only would it be hard for the company to afford to pay everyone that much (turns out it was), top performers would feel undervalued due to what moral psychologist Jonathan Haidt calls “fairness as proportionality.”

Pretty much is going to how those not on the progressive side would see how this would wok out. You pay your staff what they are worth and if you pay them too much then you are not getting value for money and are losing money and also it means you more productive and valuable workers will feel unappreciated and will more than likely be able to find work somewhere else. It also looks like the company might go bust as a result of this.

 

[Hygro]

Funny how that maximized-happiness income keeps steadily rising.

Look like it didn't quite work out as planned.
http://fee.org/anythingpeaceful/detail/why-the-70k-minimum-salary-failed-and-why-thats-a-good-thing

Pretty much is going to how those not on the progressive side would see how this would wok out. You pay your staff what they are worth and if you pay them too much then you are not getting value for money and are losing money and also it means you more productive and valuable workers will feel unappreciated and will more than likely be able to find work somewhere else. It also looks like the company might go bust as a result of this.

You mean hundreds of thousands per year? I didn't know you were a communist.

]2) What is a Job and What is a Career?

This is pretty simple. Event is underscored in an annoying way above for a reason, in any other position you have no event. You simply work more hours and you get paid more or less and your hourly wage moves up or down based on your tenure etc. You are essentially a money making machine for someone else.

No matter how high your hourly wage is, someone else is writing your check correct?

Lets play a game then… You are a business owner and you are paying Joe Hourly a wage of $500/hour! Man that’s a lot of money! Wait… As a rational business owner… You are only going to pay him a fraction of his actual value otherwise he should be fired right? Correct.

Want to be depressed now? In general you are being paid 5-10% of your net value. Go through the revenue, operating expense and net-income line of your company if you want to see the truth.

[...]

Walmart Example:

“As of the end of fiscal 2014, the Company and its subsidiaries employed approximately 2.2 million employees (“associates”) worldwide”

“During fiscal 2014, we generated total revenues of $476 billion”

Now lets do some real simple math here…

Average Revenue Per Employee – $476,000,000,000/2,200,000 = $216,364

Think about it. Walmart… a massive retail store that employees hundreds of thousands of people at minimum wage can generate revenue of $216K/employee. If this doesn’t make you feel replaceable nothing will.

According to classical hero, Walmart employees should be cashing in over 200 g's a year.

 

[Lohrenswald]

Why not though?

 

[GoodSarmatian]

In fact, even greater disparities between top and bottom might be a good thing in the long run. As the system implodes under its own contradictions.

Ah, good old immiseration thesis. Unfortunately the world doesn't work like that, or the North Korean people would have toppled the Kim dynasty before it became a dynasty.

Firing employees for poor performance is expensive (you need to pay unemployment) and tricky (Lawsuit risk).

That may be true, but one of most surefire ways to ensure that you get crappy employees is bad pay.