There’s been a lot of schadenfreude from many on the right when Dan Price, the Seattle CEO of Gravity Payments decided to raise every employee’s wage to $70,000 and cut his own wages. He believed, in the long term, this would help his business, but some employees didn’t like that his move would increase the wages on less senior workers while giving little or no increase to the firm’s best, longest-serving employees. The plan also prompted a lawsuit over long-standing issues from the CEO’s brother and co-founder of the business.
Rush Limbaugh had accused the plan of being socialist. And when Price’s plan ran into snags, many acted like it was a government program proposed by Obama that deservedly went wrong.
Also recently, Netflix decided to give parents unlimited leave during their children’s first year, either if the child is newly adopted or newly born. There’s been grumbling on the right with talk show host and presidential candidate Herman Cain worrying the government will think it’s a good idea and mandate it. Many of his fans say they will cancel Netflix over it.
My reaction to this was, “Really?” A private corporation decides a new mom can take time to bond with her baby, that she doesn’t have to drop her six week old off at a daycare to get back to work or that a father of a family that’s just adopted can spend time really connecting with his new child. And you’re going to cancel your service over that?
To me this shows a fundamental misunderstanding of free market capitalism. It’s almost as if some conservatives have decided they agree with liberals, “Yep, Capitalism is about exploiting workers. If you’re not doing that, you’re a socialist.” Thankfully, this isn’t every conservative or even most conservatives, but it’s disconcerting that people are doing this at all.
Free market capitalism means freedom of choice and competition for employers and employees. During an economic downturn, companies can get away with lower starting wages because far more people are seeking jobs than there are jobs available. That’s how the system works. But it’s also the case that many companies, many smart companies, aren’t content to hire just anybody to work for them, who want the best employees who are available to compete for them.
Henry Ford illustrated this in his business practices. He paid far more than other businesses and he paid more to men married to homemakers because the wives at home worked for the company indirectly, taking care of the home and helping him so he had less to worry about. They were extravagant benefits for the time, but it worked and it helped build an American giant.
Neither Netflix nor Gravity want the government to force their changes through policy. That would ultimately undercut their competitive advantage. If Gravity survives the lawsuit, in years to come, it’ll have the pick of the best and brightest business school graduates and will help expand the business and lead for merit-based increases for those who really earn it, particularly as performance reviews and merit are part of their culture. Netflix will attract responsible, caring, family-oriented people who will work hard for their company, and be loyal to it with the similar ferocity that many auto workers felt, who never would have thought of wandering from such a benevolent boss.
It may not work out, particularly if they make poor hiring decisions. That’s how capitalism works. It’s innovation, experiments, and risks by businesses rather than mandates from the government.
Mr. Price was inspired in part by Jesus’ parable of the laborers in the vineyard in Matthew 20. I don’t know whether he was prepared for the parable to play out today as Christ presented it two millennia ago, including disgruntled employees complaining about the boss’s generosity, but the words of the owner of the vineyard to the disgruntled workers are relevant to both Gravity and Netflix, “Friend, I am doing you no wrong… am I not allowed to do what I choose with what belongs to me? Or do you begrudge my generosity?”
This is doubly true for people who complain and don’t even work for the company.