The "New" Minimum Wage - $70k

[BigDaddy4]

Well it looks like good ol' liberal Seattle is at it again on the minimum wage front lines. First the $15/hr MW, now this:

http://www.nytimes.com/2015/04/14/b...-setting-a-new-minimum-wage-70000-a-year.html

His idea bubbled into reality on Monday afternoon, when Mr. Price surprised his 120-person staff by announcing that he planned over the next three years to raise the salary of even the lowest-paid clerk, customer service representative and salesman to a minimum of $70,000.

...he would pay for the wage increases by cutting his own salary from nearly $1 million to $70,000 and using 75 to 80 percent of the company’s anticipated $2.2 million in profit this year.

Interesting idea, but realistically I wonder how long that will last when so much profit is eaten up by salaries? It's his company, his money.

 

[Glass*Soul]

Those darn liberals. There's no end to their antics.

 

[SuperCloud]

Seattle has a reputation of being innovative. At least compared to many of the post-industrial cities of the Midwest. And this idea and goal of Mr. Price is innovative as well.

Billionaires--who have already stashed away money and liquid precious stones and metals over the course of their years of being billionaires--throughout Latin America, Africa, and parts of Asia like India could do something similar in their own countries.

If you have $30 million put away in different banks and one $1 million to $5 million in liquid assets is it too painful to lower your $20 million annual income to $3 million annually?

You can become attached to money perhaps too much. Like those with the mental condition of hoarder, haording in their homes, expect in this case it would be hoarding money.

It really trips me out those that make like $1 million or $2 million a month. I can never imagine making that much money per year and per month. I think if you're make $70,000 a month that is pretty good living. You know... I was what... 20 years old when I bought my first car? I think. And it was a Chevy. I bought it brand new for I think about $9,000 with a 5 year payment plan with interest that ran it to I think $12,000 or more dollars. And that was off an E-3 enlistment salary. I cant believe how much the prices of cars today have risen in the USA in contrast to the rise in most incomes. It would cost about $20,000 today to get the same amount of car today. Those new cars going for $12,000 or less are so very tiny today.

 

[Supreme]

What a legend. He seems to be setting a fantastic example. The paygap between fatcat CEOs and their ordinary workers is criminal, and it's wonderful than Mr Price has realised that and is taking a stand, to the benefit of his employees.

Just checked it out- it's around £47,000 a year, which is a *substantial* salary here in the UK, and way above the average of £26,000. His workers are very lucky.

 

[iluvatar5150]

Well it looks like good ol' liberal Seattle is at it again on the minimum wage front lines. First the $15/hr MW, now this:

http://www.nytimes.com/2015/04/14/b...-setting-a-new-minimum-wage-70000-a-year.html


Interesting idea, but realistically I wonder how long that will last when so much profit is eaten up by salaries? It's his company, his money.

According to the article, his salary had previously been consuming nearly $1 million/yr of those profits. If he's got 70 employees, then his wage cut alone would pay for a raise of about $13000/yr each.

 

[keith99]

It seems a bit ironic considering the business he is in. E.g. a business that produces nothing one that processes credit card payments.

 

[classicalhero]

It will be interesting to see if it works, but how does this company work? I have no idea of it's business model and the like. But in some companies the minimum workers get is over $100,000, but that is not the norm and i doubt this will be also.

 

[USCGrad90]

Good for him. This should build a place where people are more likely to stick around and have higher job satisfaction versus other locations. Can't necessarily do this in a publically held company, which is responsible to the shareholders for profit, but as long as they stay relevant from a technological standpoint, it should work.

 

[BigDaddy4]

According to the article, his salary had previously been consuming nearly $1 million/yr of those profits. If he's got 70 employees, then his wage cut alone would pay for a raise of about $13000/yr each.

Um, no. You didn't read it thoroughly.

pay for the wage increases by cutting his own salary from nearly $1 million to $70,000 and using 75 to 80 percent of the company’s anticipated $2.2 million in profit this year.

The article states nothing about previous year's profits. It only states this years' anticipated profit of $2.2 million. At 75% of that, that leaves an anticipated profit of $550k. If they do the same amount of revenue this year as last year ($6.5 billion according to article), that's less than 1% profit on revenue. Not a very stable business model.

But like I said, it's his company, his business model.

 

[ThatRobGuy]

That idea only works if his company is the only one to raise it to that level. The whole reason $70k is a good salary is because the minimum wage is much lower than that.

If minimum wage, across the board, was $70k, then that $70k wouldn't be so special after the prices of goods and services adjusted accordingly...

 

[BigDaddy4]

It seems a bit ironic considering the business he is in. E.g. a business that produces nothing one that processes credit card payments.

I thought so, too.

 

[BigDaddy4]

It will be interesting to see if it works, but how does this company work? I have no idea of it's business model and the like. But in some companies the minimum workers get is over $100,000, but that is not the norm and i doubt this will be also.

The basic premise of a company like this is to be a 3rd party to process credit card payments (Visa, Mastercard, AMEX, etc) for businesses. When you go to the coffee shop and buy your coffee with a debit or credit card, the coffee shop is charged a processing fee. You may see smaller businesses have a minimum $ amount to use a debit/credit card, or they add the fee to your bill. This is to cover the cost of the transaction.

Also, some gas stations have a "credit" price and a "cash/debit" price. The cost to process them is the reason why. Debit cards are easy to process because the money comes directly from your bank account and have lower processing fees. Credit cards are payments made by the credit card company to the business and can take 2-3 days to transfer, hence higher fees.

This business and others like it do the processing and reconciliations between the banks and/or credit card companies and the business.

 

[SuperCloud]

The basic premise of a company like this is to be a 3rd party to process credit card payments (Visa, Mastercard, AMEX, etc) for businesses. When you go to the coffee shop and buy your coffee with a debit or credit card, the coffee shop is charged a processing fee. You may see smaller businesses have a minimum $ amount to use a debit/credit card, or they add the fee to your bill. This is to cover the cost of the transaction.

Also, some gas stations have a "credit" price and a "cash/debit" price. The cost to process them is the reason why. Debit cards are easy to process because the money comes directly from your bank account and have lower processing fees. Credit cards are payments made by the credit card company to the business and can take 2-3 days to transfer, hence higher fees.

This business and others like it do the processing and reconciliations between the banks and/or credit card companies and the business.

Which is why Bitcoin has gained some popularity. It cuts out 3rd parties like these as well as Western Union.

Even when you use ATMs it can take days for the usage fees to be deducted from your account.

 

[Albion]

Well it looks like good ol' liberal Seattle is at it again on the minimum wage front lines. First the $15/hr MW, now this:

http://www.nytimes.com/2015/04/14/b...-setting-a-new-minimum-wage-70000-a-year.html





Interesting idea, but realistically I wonder how long that will last when so much profit is eaten up by salaries? It's his company, his money.

Apparently, this gentleman and his business can afford that. If so, great. However, we all know that most businesses would be forced to close if the same policy were made law. And his plan is possible only because he himself makes so much as the owner of a very large concern and has substantial savings. Very few owners are in that position.

 

[iluvatar5150]

Um, no. You didn't read it thoroughly.

I did read it thoroughly. In fact, you quoted the part I was referring to:

pay for the wage increases by cutting his own salary from nearly $1 million to $70,000

That's a $930k reduction in his own salary. $930k split 70 ways is $13285.71 each. As I said already, his own pay cut pays for a good-sized chunk of this.

The article states nothing about previous year's profits. It only states this years' anticipated profit of $2.2 million. At 75% of that, that leaves an anticipated profit of $550k. If they do the same amount of revenue this year as last year ($6.5 billion according to article), that's less than 1% profit on revenue. Not a very stable business model.

The company didn't have $6.5 billion in revenue; they processed $6.5 billion in transactions. Gravity doesn't publish its rates online, but from what I've seen in person and found online, discount credit card processing services charge somewhere in the neighborhood of 2%. Two percent of $6.5 billion is $130 million.

 

[USCGrad90]

Two percent of $6.5 billion is $130 million.

2.2 Million profit on 130 million is still only 1.7% profit.
A healthy business is typically around 15%.
Low profit will affect cash flow and reserves in the event of something bad happening.
Food Service is typically 3-5%
Microsoft 38%
Apple 40%
Nokia 4.9%
Dell 5%
GM 3%
Ford 5%
BMW 7%
Viacomm 18%

 

[iluvatar5150]

2.2 Million profit on 130 million is still only 1.7% profit.
A healthy business is typically around 15%.
Low profit will affect cash flow and reserves in the event of something bad happening.
Food Service is typically 3-5%
Microsoft 38%
Apple 40%
Nokia 4.9%
Dell 5%
GM 3%
Ford 5%
BMW 7%
Viacomm 18%

True, but a credit card processor also doesn't have to make anything or lay out much money for R&D or raw materials. They pay for staff and whatever IT infrastructure they need to get the job done, and that's about it. As long as they can maintain a certain level of business, they're in the black.

 

[BigDaddy4]

I did read it thoroughly. In fact, you quoted the part I was referring to:

Still incorrect. You said "According to the article, his salary had previously been consuming nearly $1 million/yr of those profits". There was no information on previous year's profits, if any. There was only the forecasted $2.2 million for this year stated.

That's a $930k reduction in his own salary. $930k split 70 ways is $13285.71 each. As I said already, his own pay cut pays for a good-sized chunk of this.

I only partially disagree with your calculations. The other "chunk" will come from 75-80% of the $2.2 million projection. At 75% of that ($1.65 million) split 70 ways is $23,571.43 each. But that's not what the article says. It doesn't say all the extra money will be split evenly amongst the 70, only that those who are making less than $70k will now make that as a minimum. We don't know how it will be split up and I would think that those who are above the $70k will still keep there current salary.

The company didn't have $6.5 billion in revenue; they processed $6.5 billion in transactions. Gravity doesn't publish its rates online, but from what I've seen in person and found online, discount credit card processing services charge somewhere in the neighborhood of 2%. Two percent of $6.5 billion is $130 million.

You are correct about the $6.5 billion as revenue. My bad, I misspoke (typed).

As for rates, debit cards are at a lower rate than credit cards. And AMEX fees are higher than Visa, MasterCard, and Discover fees. Also, depends on the contract if it is a flat per transaction fee (say $.25 per swipe) or a % of sales fee (2% +/-). Since their fee rates are propriety, a 2% average is probably not accurate, but works for purposes of discussion.

 

[BigDaddy4]

True, but a credit card processor also doesn't have to make anything or lay out much money for R&D or raw materials. They pay for staff and whatever IT infrastructure they need to get the job done, and that's about it. As long as they can maintain a certain level of business, they're in the black.

But that's the crux of it. Their profitability and operations are based on economic conditions of the retail environment it serves. To weather a recession like 2009, they must have reserves. In fact the article mentioned that's what they did in 2009 and did not lay anyone off. Kudos to them. Perhaps they have enough in reserve to weather another storm in the future.

 

[Belk]

Well it looks like good ol' liberal Seattle is at it again on the minimum wage front lines. First the $15/hr MW, now this:

http://www.nytimes.com/2015/04/14/b...-setting-a-new-minimum-wage-70000-a-year.html





Interesting idea, but realistically I wonder how long that will last when so much profit is eaten up by salaries? It's his company, his money.

I read about this in the Seattle times this morning. It will be interesting to see if his model is successful. I know that I used to work for a company that sold 403B fund management to teachers and they had kind of the same model. More of a typical profit sharing model but very generous. Everybody loved working there and we were very sad when they got bought out and absorbed.