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Is Reducing the CEO-Employee Pay Gap the Right Thing to Do?

Issues of pay equity from the C-suite all the way down to the lowest-paid workers are gaining currency as the U.S. labor market tightens, and investment and political activists continue to target CEOs, business owners and companies that seem vulnerable on the issue.

And now a Seattle business owner has thrown a bottleneck into the debate with his announcement that he would cut his own pay and profits to make it possible to raise the minimum wage at his company to a hefty $70,000 a year.

Dan Price got a lot of social-media love, and presumably high-fives from his employees, when he said that Gravity Payments, his credit-card processing company, also would drastically slash his own $1-million salary to the $70,000 level, arguing that the new salary structure would benefit his firm in the long run even as it would help highlight the effects of income equality on American society.

“He’s young. He has a good intent, but wrong method.”

But not everyone feels he is going down the right path. “His mind-set will hurt everyone in the end,” Sandi Krakowski, an author and Facebook marketing expert, posted on Twitter. “He’s young. He has a good intent, but wrong method.”

And Patrick R. Rogers, an associate professor of strategic management at North Carolina A&T State University, wrote to The New York Times in an email: “The sad thing is that Mr. Price probably thinks happy workers are productive workers. However, there’s just no evidence that this is true. So he’ll improve happiness, only in the short-term, and will not improve productivity. Which doesn’t bode well for his long-term viability as a firm.”

*Of course, Price isn’t the only business leader who has been looking for ways to improve the lot of their workers, both in response to the social stresses of a slow-growth economy as well as in new attempts to hang on to workers who sniff more opportunity on the horizon. Thus McDonald’s, for example, recently announced a pay hike for the company’s lowest-paid workers and the launch of a Starbucks-style tuition program for its employees.

Also, The Wall Street Journal reported, companies are expanding financial-wellness programs that help improve employees’ financial security by offering classes, counseling sessions and even video games designed to help employees pay down debt, stick to a budget and invest for retirement.

For CEOs and business owners, especially as they deal with the politically progressive Millennial generation, and presumably a rising economy that will fuel more financial demands, issues of compensation equity and income inequality are only going to grow. Maybe Price at least can be credited for trying to get ahead of the issue.


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