Dan Price, the young CEO of Gravity Payments in Seattle, generated a boatload of publicity and controversy last month when he committed to pay every one of his 120 employees an annual salary of at least $70,000. Price said he was concerned that lower-paid employees were struggling to make ends meet.
In light of our country’s growing economic inequality, the 30-year-old Christian saw his own $1 million salary as part of the problem. To fund the raises for more than half the company’s workers, he cut his salary to $70,000, and decided the company could afford to reduce profits by as much as half.
In the week after the story first broke Price got emails from nearly 100 CEOs lauding his decision. But not everyone was so enthusiastic.
The New York Times ran a follow-up piece detailing some of the criticism directed toward the company. Naysayers from the business world say the move to “overpay” workers rather than trusting the market rate could do more harm than good. They suggest the new salaries could spur resentment from once higher-paid workers and hurt long-term productivity. Some critics lambasted the decision as socialism.
These criticisms from purported defenders of free-market capitalism—from business professors and economists to talk show host Rush Limbaugh— evidence egregiously flawed thinking about both capitalism and free markets. They’re also at odds with the wisdom of Scripture.
Despite the concerns over the pay shift as socialism, Gravity Payments has every intention of continuing to operate as a business selling a service and making a profit. In fact, as a result of the recent publicity, several new clients have signed on. Dan Price and his company are practicing simple, straightforward, for-profit capitalism, not socialism.
Price’s move violates an understanding of capitalism that would require company to pay no more than the lowest price at which the market would allow them to hire appropriate workers. (Wal-Mart, to pick a prominent example, clearly operates on such a conviction.)
Scripture, though, has a very different perspective. To start with, God frequently and emphatically condemns business people who take advantage of their workers, particularly through exploitive compensation.
In Malachi, the Lord warns he will come in judgment against “those who exploit workers,” listing it among the ways people show they do not fear him (3:5). In the New Testament, James 5:4 reads, “Look! The wages you failed to pay the workers who mowed your fields are crying out against you. The cries of the harvesters have reached the ears of the Lord Almighty.”
But God does more than condemn employers whose wages are exploitive. Through Moses and the Apostle Paul, he shows us the alternative. In 1 Corinthians 9:9-10, Paul provides a fascinating insight into something Moses wrote centuries earlier:
It is written in the Law of Moses: “Do not muzzle an ox while it is treading out the grain.” Is it about oxen that God is concerned? Surely he says this for us, doesn’t he? Yes, this was written for us, because whoever plows and threshes should be able to do so in the hope of sharing in the harvest.
Paul makes the case for why he, like other apostles and ministers, appropriately deserves compensation for his work on behalf of the gospel. But for our purposes, it is how he makes his case that is so instructive. Paul says that it is God (not merely Moses) who commands that as oxen work to tread out a farmer’s grain they must be allowed to eat whatever supplemental grain they want. In other words, these working oxen would be allowed “bonus” feedings over and above the normal feedings (analogous to wages) provided by the farmer. Then Paul indicates that God’s real reason for this command is to instruct employers — employers of oxen, yes, but primarily of human workers — that all who help produce a harvest are meant to share in the rewards.
In fact, the real thrust of Paul’s argument is that God takes this shared-rewards principle so seriously that he extends it beyond the human workers (who plow and thresh)to the working animals whose labor helps contribute to the harvest. According to this principle, workers deserve not merely (market-dictated) wages, but an appropriate share in the rewards of business success — the harvest — they help create.
This is not just noble moral advice; it is also real-world business wisdom. Earlier this year, Southwest Airlines announced that its 2014 profit-sharing bonuses to employees topped a whopping $355 million — one-third of its total profits. Herb Kelleher, co-founder and longtime CEO of Southwest, was frequently asked how he justified such largesse. He had a ready answer: "We take great care of our people, they take great care of our customers, and our customers take great care of our shareholders.” This shared-rewards approach works so well for Southwest that for much of the company’s history its market cap has been greater than for all nine of its major competitors… combined.
Similarly, Costco pays its people nearly triple the compensation at Wal-Mart, including hefty profit-sharing bonuses. But instead of struggling to compete because of that higher cost structure, Costco dramatically outperforms Wal-Mart in virtually every bottom-line category of business performance:
- Costco turns its inventory 50 percent faster than Walmart, and compared with Walmart-owned Sam’s Club, enjoys 70 percent higher sales per square foot and double the level of sales per employee.
- Wal-Mart's revenue growth rate for the past year was 3.2 percent, and for the past 10 years was 8.5 percent. Costco’s comparison numbers are 7.1 percent and 9.9 percent.
- Over the past decade, Wal-Mart’s share price has almost doubled, while Costco’s share price has more than tripled.
Neither Herb Kelleher at Southwest, nor Jim Sinegal at Costco, ever thought that capitalism meant paying workers the smallest amount possible. They are way too smart for that. So is Dan Price.
Hopefully their examples may help more of their peers to smarten up as well. It’s high time American workers quit paying the price for the greedy shortsightedness of their bosses. After all, though God is slow to anger, he is also the ever-vigilant champion of all the exploited.
Tim Weinhold is Director of the Faith and Business Initiative at Eventide Funds, an award-winning, biblical-values-based Boston mutual fund.