Adam Smith in action

by Henry on July 31, 2015

The New York Times:

Brian Canlis, a co-owner of his family-named restaurant, is also a client. He said he was fond of Mr. Price, but was more discomfited by his actions. Mr. Canlis is already worried about how to deal with Seattle’s new minimum wage, which rose to $11 an hour in April and is scheduled to reach $15 an hour for small businesses within five years. The pay raise at Gravity, Mr. Canlis told Mr. Price, “makes it harder for the rest of us.” Mr. Price winced. “It pains me to hear Brian Canlis say that,” he said later. “The last thing I would ever want to do is make a client feel uncomfortable.” But any plan that has the potential, as Mr. Price has put it, to “set the world on fire,” is bound to make some people squirm. Leah Brajcich, who oversees sales at Gravity, fielded complaints from several customers who accused her boss of communist or socialist sympathies that would drive up their own employees’ wages and others who felt it was a public relations stunt.

The Wealth of Nations

We rarely hear, it has been said, of the combinations of masters, though frequently of those of workmen. But whoever imagines, upon this account, that masters rarely combine, is as ignorant of the world as of the subject. Masters are always and everywhere in a sort of tacit, but constant and uniform combination, not to raise the wages of labour above their actual rate. To violate this combination is everywhere a most unpopular action, and a sort of reproach to a master among his neighbours and equals.

{ 83 comments }

1

Brett 07.31.15 at 9:01 pm

That Adam Smith, man.

Of course, violating those unofficial no-raise pacts is what capitalistic markets are supposed to do. Eventually the heat or pressure of demand for employees or profits gets them to defect, unless they get the agreement/cartel in a legally enforceable fashion.

2

John Rawls 07.31.15 at 9:24 pm

Helpful information for non-seattlites is that Canlis is probably the most expensive restaurant in the state.

3

Sam Dodsworth 07.31.15 at 9:28 pm

Eventually the heat or pressure of demand for employees or profits gets them to defect…

Yes, all will be well once the transitional period is over and full capitalism is achieved.

4

Brett 07.31.15 at 9:34 pm

Same thing for Communism, comrade. Just a few more eggs to break and that omelet will be made!

. . . Seriously, thought, that’s not me talking out of my ass. Unofficial cartels exist and usually do last longer than libertarians would prefer, but they also virtually always disintegrate over time unless there’s enforceable legal barriers against them doing so (and even then . . .). Hell, even the DeBeers Diamond Monopoly has finally started falling apart.

5

jake the antisoshul soshulist 07.31.15 at 9:54 pm

Brett, I would find your faith in markets charmingly naive in a 10 year old. Do you still believe in Santa and the Easter Bunny?
I suppose greed would eventually cause the cartels to break down. But how much collateral damage would be done by then.

6

Sam Dodsworth 07.31.15 at 10:04 pm

Yes Brett, that was the joke. But I’m sorry for snarking at you now I’ve taken a moment to think – it doesn’t really help or add anything to the conversation – so I’ll apologise for not taking you seriously and return to lurking.

7

dr ngo 07.31.15 at 10:07 pm

Brett’s own example gives a partial answer to the implied question. The DeBeers monopoly lasted from roughly 1888 to 2000+, i.e., more than a century. If you are willing to sacrifice several human generations until the market “corrects” itself, you may be an economist, but you’re not much of a human being.

8

Woody Peckerwood 07.31.15 at 10:23 pm

@Brett

I fully agree.

Market forces can also work in reverse where you have an agreement/cartel, say in the form of a union artificially keeping the price of labor high and then the employees defect because of the scarcity of jobs in a poor jobs market.

9

Cassander 07.31.15 at 10:39 pm

Debeers managed a monopoly on a luxury good that was produced only in a few geographic locations. Complaining that they have a monopoly is like complaining that the French have a monopoly on champagne. How much human suffering do you think slightly higher diamond prices caused the world? And they’re the most nefarious example you have? Color me unimpressed with the scourge of monopoly.

10

Matt 07.31.15 at 11:06 pm

The new pay scale also helped push Grant Moran, 29, Gravity’s web developer, to leave. “I had a lot of mixed emotions,” he said. His own salary was bumped up to $50,000 from $41,000 (the first stage of the raise), but the policy was nevertheless disconcerting. “Now the people who were just clocking in and out were making the same as me,” he complained. “It shackles high performers to less motivated team members.”

He got a 22% immediate pay raise from what he was earning before with the promise of a 71% pay raise by the time all phases were implemented. And he didn’t have to threaten or plead to get it. But he quit as a complaint that others’ good fortune was excessive instead of enjoying his own good fortune.

Yes, Rich Puchalsky was right in this recent thread. Given the choice between increased prosperity that levels social distinctions or an austerity that heightens them, a non-trivial number will pick to be poorer if it means they have poorer-yet people left to look down on.

11

The Temporary Name 07.31.15 at 11:08 pm

Thank you for the helpful information Mr. Rawls.

12

AcademicLurker 07.31.15 at 11:21 pm

Given the choice between increased prosperity that levels social distinctions or an austerity that heightens them, a non-trivial number will pick to be poorer if it means they have poorer-yet people left to look down on.

The way I’ve heard this put is that many Americans would happily live in a cardboard box beneath a freeway overpass as long as they were assured that their neighbors would be living in an even smaller box.

13

hix 07.31.15 at 11:26 pm

The word high performer alone makes me think of McKinsey and start to vomit.

14

billmon 07.31.15 at 11:26 pm

Right up there with:

“People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices.”
Adam Smith

15

Brett 07.31.15 at 11:34 pm

@Cassander

DeBeers is the rare exception, too, hence my “even the DeBeers Diamond Monopoly” point up-thread. Almost no unofficial cartels last that long unless they’re sitting on an effectively irreplaceable piece of land or resource that no one else can legally get at. It’s just too easy to undercut them or defect if there’s a major profit in it.

I mean, imagine trying to set up an unofficial cartel on maize production, or the production of towells so you can keep the price high. It’d be almost impossible, if not impossible.

16

Greg Hays 07.31.15 at 11:53 pm

AcademicLurker@12:

The definitive formulation is, I believe, by Davis X Machina, sometime commenter on this very blog:

“The salient fact of American politics is that there are fifty to seventy million voters each of whom will volunteer to live, with his family, in a cardboard box under an overpass, and cook sparrows on an old curtain rod, if someone would only guarantee that the black, gay, Hispanic, liberal, whatever, in the next box over doesn’t even have a curtain rod, or a sparrow to put on it.”

17

Dr. Hilarius 08.01.15 at 12:02 am

A three-course meal (first course, main and desert) will set you back $85 at Canlis. Four courses for $100. A bottle of wine or a couple of drinks will add significantly to the bill. Canlis is generally booked in advance with little opportunity for drop-in dining. If you are male and are seated next to a window you must wear a sport coat or suit. Really.

The idea that Canlis can’t accommodate paying its staff $15 an hour is ludicrous. BTW, I’ve never eaten there. The information above comes directly from the Canlis web site.

18

Canadian 08.01.15 at 12:22 am

Mr. Price made over $1 million last year. He gave some of his earnings to his workers, got a lot of free publicity and more business. The NYT gave him a front page article. Is the US a great country or what?

19

F 08.01.15 at 12:32 am

Canlis is also one of the oldest restaurants in town and has always catered to the old Seattle money types. It’s known for its obsequious service (servers used to wear kimonos) and the fact that it is pretty much the only restaurant in Seattle with a dress code.

20

Nine 08.01.15 at 12:35 am

He pays all his employees the same flat salary irrespective of performance ? Whatever he’s trying to achieve I suspect he’s going about it the wrong way.
Having said that, if he scares or annoys Limbaugh and the usual libertarian suspects, then that alone will have been worth it.

21

Nine 08.01.15 at 12:38 am

Cassander@9 – “How much human suffering do you think slightly higher diamond prices caused the world?”

Probably a non-trivial amount in the form of blood-diamonds and the like.

22

gocart mozart 08.01.15 at 12:38 am

If you can convince the lowest white man he’s better than the best colored man, he won’t notice you’re picking his pocket. Hell, give him somebody to look down on, and he’ll empty his pockets for you.” ~
LYNDON B. JOHNSON, 1960, remark to Bill Moyers, “What a Real President Was Like,” Washington Post, 13 November 1988

23

some guy 08.01.15 at 12:40 am

He pays all his employees the same flat salary irrespective of performance ?

No, he is raising the salary floor, not leveling wages for all. The article is worth the time. He seems to have the right kind of convictions (not the ones you work off as a guest of the state).

24

Bloix 08.01.15 at 12:45 am

#18 – “Mr. Price made over $1 million last year. He gave some of his earnings to his workers, got a lot of free publicity and more business.”

“Price [is] cutting his $1 million salary to $70,000…”
http://money.cnn.com/2015/04/14/news/companies/ceo-pay-cuts-pay-increases/

25

christian_h 08.01.15 at 1:15 am

Adam Smith is not talking about a cartel, unspoken or not. Don’t let Brett derail the thread with that nonsense. He is talking about class loyalty, which the capitalist class has successfully maintained for several hundred years now. Why do you think bosses support austerity politics even though they know full well it will destroy a good portion of their businesses, for example? Because it strengthens their class position long term. On the other hand, what Price did is class treason even and especially if it increases his business.

26

LFC 08.01.15 at 1:30 am

christian_h
what Price did is class treason

It’s not obvious to me that lowering the gap between CEO pay and that of the workforce necessarily hurts the CEOs’ long-term “class position.” In the 1950s there was only a factor of 20 or 30 (or something like that) separating the average CEO’s pay from the average worker’s, whereas today the average CEO earns 300 or 400 times as much, yet it’s not clear that their ‘class solidarity’ was any less solid in the ’50s simply because the pay structure was less unequal. (Btw, I read the CNN piece linked by Bloix @24 — impressive that Price used the phrase “moral imperative” to describe his actions.)

27

hix 08.01.15 at 1:32 am

What makes that guy particular weird is that he A)appears to have had a specialist job with no one in a remotly similar position to compare his performance to B)was pretty much at the bottom of the company salery hieararchy thus not particular valued for his specialist knowledge or high performance to begin with

28

christian_h 08.01.15 at 2:07 am

LFC – if Price had only lowered his own pay nobody would care. But raising the pay of his workers in a way not even dependent on mythical “merit” (hence Grant Moran’s reaction) is dangerous to other bosses, as it goes counter to a lot of core tenets of neoliberal ideology. The 1950ies are neither here nor there on this – according to dominant ideology they can’t come back (and much as I hate neoliberalism I think they have a point there, postwar capitalism in the West owed much of its vitality to international constellations that are not coming back).

29

LFC 08.01.15 at 2:14 am

But raising the pay of his workers in a way not even dependent on mythical “merit” … is dangerous to other bosses, as it goes counter to a lot of core tenets of neoliberal ideology.

I see the point. Still, it will be interesting to see whether these maverick CEOs (e.g., Price, the guy at Aetna whose name is escaping me, and maybe there are one or two others) will have any broader impact on pay scales/differentials.

30

MPAVictoria 08.01.15 at 2:19 am

I think we can all agree that the interviews with some of the former employees proves Gramsci was at least a little bit right.

Le sigh…

31

js. 08.01.15 at 2:26 am

Honestly, I don’t know that I’d generalize a whole lot from one west coast techie, that whole type seems to me not terribly representative of the rest of society, even contemporary US society, fucked up as it is (@ several).

32

Samuel Skinner 08.01.15 at 3:03 am

This isn’t new. Henry Ford got nationally famous for a similar action and there a variety of attempts at welfare capitalism by companies in the 1920s. Unsurprisingly most of them fell apart after 1929, although Lincoln Electric is still going strong (they are famous for their no layoffs guarantee. They keep it by having employees cross trained, high amount of hours in good times and low in bad).

In this case raising wages high above market price incentivizes higher quality employees (both attracting them and encouraging people to work harder- they want to keep the position AND being fired from such a post looks very bad). The downside is it makes the company more averse to hiring people; as long as the field isn’t prone to constant fluctuations they should be able to simply have current employees handle it.

Is this likely to generalize? Probably not. To pull this off you need a high CEO wage and a small number of employees. Low CEO wage means there isn’t a lot of money to distribute and large number of employees means it doesn’t have much of an effect.

For example, the CEO of Walmart makes 35 million, but since Walmart employees 2.1 million people, that works out to 16 more dollars a year. Berkshire Hathaway (they control Geico and Dairy Queen) already does that to a degree (the CEO salary is 100,000).

@Matt
“He got a 22% immediate pay raise from what he was earning before with the promise of a 71% pay raise by the time all phases were implemented. And he didn’t have to threaten or plead to get it. But he quit as a complaint that others’ good fortune was excessive instead of enjoying his own good fortune.”

Or he figured that he could get more money working elsewhere. After all, what better way to show to future employers that you are a high performing employee than rejecting a guaranteed salary?

@ Nine
“Probably a non-trivial amount in the form of blood-diamonds and the like.”

According to wiki most of the blood diamond conflicts are from the 1990s, which is after the Cartel started to break up.

@Christian_h
“He is talking about class loyalty, which the capitalist class has successfully maintained for several hundred years now. Why do you think bosses support austerity politics even though they know full well it will destroy a good portion of their businesses, for example?”

Bosses =/ capitalist. People in the finance field are capitalists but I wouldn’t exactly call them bosses. It isn’t a trivial distinction- policies that are good for the finance industry aren’t necessarily those for other capitalists and so we should be unsurprised if they support significantly different policies. This isn’t a new feature- large plantation owners in the South clashed with Northern industrialists over the tariff for instance.

33

a different chris 08.01.15 at 2:01 pm

What is amazing is the customers that quit despite the fact that their cost did not change at all, and the one example has Gravity significantly cheaper than at least one competitor. How big an a-hole do you have to be to do that?

Seriously (and literally), MYOB.

34

a different chris 08.01.15 at 2:01 pm

(clarify: I know the one example is not of one that quit, it’s just the only price comparison we got)

35

Layman 08.01.15 at 2:51 pm

“Or he figured that he could get more money working elsewhere. After all, what better way to show to future employers that you are a high performing employee than rejecting a guaranteed salary?”

This could only work if he’s in a labor market elsewhere – perhaps on Mars. And the ‘guaranteed salary’ bit is a red herring – all employers have pay scales which start at some minimum, so all employees enjoy a ‘guaranteed salary’. What’s happening here is not that the salary is being guaranteed, but that the pay scale minimum is being raised.

36

bianca steele 08.01.15 at 3:02 pm

What the web guy says is pretty incoherent and I don’t think I’d want to work with developers whose thinking was so muddled (but I promised I wouldn’t talk about that place anymore. 50K is median salary for web designers in Seattle. The most favorable story I can come up with is that he’s dating one of the people getting a small raise. Or he was planning to look for a new job soon and thinks it’ll be easier to ask for a moderate raise than explain why he wants a pay cut.

What I can’t figure out is the customer who said “why would they hustle unless they’re underpaid?” Does hustle equate to take bribes? Do they think high paid workers sit around all day and do nothing?

37

Layman 08.01.15 at 3:10 pm

“Do they think high paid workers sit around all day and do nothing?”

Yes, more or less. They think that high pay is a reflection of past value, not present value. You perform well, they like you, they increase your pay. Much later, they look at their budgets and ask why your comp is so high. They question your supervisor about performance and whether they’re getting full value from you. As time goes on, they convince themselves that your pay is a reflection of your longevity, that your skills are outdated, and that you’re complacent and unmotivated. The best you can hope for then is that they’ll tolerate you. Don’t make a mistake, though.

38

bianca steele 08.01.15 at 3:25 pm

js. @ 31

OTOH, given that techies are unrepresentative, efforts to indoctrinate them in MPAV’s hegemony have to work extra hard.

39

js. 08.01.15 at 3:32 pm

Yes, but only the west coast ones!

40

Rich Puchalsky 08.01.15 at 6:03 pm

Thanks, Matt @ #10.

There is more going on with this story than a “combination of masters”, although that is certainly part of it. What Price did came as a cultural shock to nearby businesses, customers, family, and employees. It would easy to dismiss this as merely cultural, but the left itself is merely cultural and exists in relationship to non-left culture.

All of the stated reasons that people give for their reactions to this cultural shock appear to me to be arglebargle. Concerns about future employers — “socialism” — even concerns that somehow the prevailing minimum wage is going to go up from this one example — all seem to me to be pretty nonsensical. But the expressions of shock and need to get away from what happened fit quite well if what Price did was inadvertently attack people’s basic sense of personal value. How will they know that they are better than other people unless they are paid more? Even if they are really currently paid less than others in the company — how will they know that they are better than poor people? For the business owners, how will they preserve their conviction that they are the best people? This goes far beyond the importance of a couple of percentage points of profit that some wealthy restaurant owner might lose if they had to raise wages.

Given that this operates for a near-majority of people all the way down the wage scale, the left is never going to get mass support unless either a) this culturally goes away, b) the left starts talking about an approved leftist way in which everyone in society can look down on someone else. Luckily the second is possible through a sort of circular society in which different groups look down on each other for different reasons and (unlike a racist system) no one is at the bottom for all of the reasons.

Current left-leaning people in the U.S. have done their unconscious best to signal that they want such a system, and to create one, by participating in the Red / Blue division. In this way anyone on the left, no matter how poor, can look down on the bigoted, uncultured rednecks from the flyover states. But Red vs Blue is a bad division because the old, racial system is still stuck to it. One of the things the left could do is provide a framework of division that everyone knows is more of an arbitrarily adopted game than anything else. I think that something like Workers vs Thinkers vs Partiers has potential.

41

Matt 08.01.15 at 6:56 pm

If we need new kinds of looking-down-on, can we do it with GHG emissions? That way citizens of highly developed countries, and pretty every citizen of anywhere who’s not Chinese, can look down on China for emitting far more CO2 than any other country. Citizens of developed countries can also sneer at #3 India for increasing CO2 emissions faster than developed countries. China, India, and most of the world’s population can sneer in turn at the richest countries for having much higher emissions per capita. We can have a totally circular, sustainable system of contempt. There can be endless arguments over the moral implications and scientific implications of different CO2 emissions patterns. “It’s wrong that Chinese people should each be required to emit much less than Canadians by accident of birth.” “It’s wrong that Chinese people should be taking Canadian forests’ ecosystem services without compensation.” “It’s wrong that impoverished India should have to decrease coal use while Canadians are so much richer.” “It’s wrong that Canadians should have to cut back because Indians kept having big families.”

It could go on forever! I’ll start the ball rolling by proposing that North America completely phase out coal for electricity generation and winter heating. That will give ample grounds for superiority over any region that heavily uses filthy coal, even if that region’s combined emissions are not higher. We can recruit certain authoritarian follower types by dog-whistling that the places that still use coal for more than half of their electricity are not majority-inhabited by people of European descent*, if you know what I mean. If circular climate jingoism escalates to trade barriers and trade wars between major economic regions, that’s another improvement for the climate, because recessions decrease CO2 emissions more rapidly and predictably than most policy interventions to date.

*With notably rare exceptions. Greece because Greeks are lazy, Poland because of Popery, and Australia because, hmm, suitable cause linked to “national character” yet to be determined.

42

Anderson 08.01.15 at 7:01 pm

I’m fascinated that Grant Moran thinks declaring “I am an asshole!” to be forever preserved on the internet is a good idea. Guess in his circles, being an asshole is its own reward.

43

Bruce Baugh 08.01.15 at 10:02 pm

Anderson, it’s more than that. Moran is a hero in the way a significant number of Americans think. He’s speaking truth to deluded, foolish power. I’ve already seen comments to that effects show in friends-of-friends traffic on Facebook. The people Rich Pulchasky writes about didn’t just stumble into their views and aren’t just doing it as a lark – they feel it as one of their values, as sincerely as I feel mine. Their lives are built on it, and they get a lot more official reinforcement and reward than I get for mine, come to that.

44

dr ngo 08.01.15 at 10:07 pm

My reinforcement is not official, but personal (and gin-based, as it currently happens). Yay, Bruce! You go, girl!!

45

Bruce Baugh 08.01.15 at 10:10 pm

Dr. Ngo, thanks. :) Also, since I can’t drink booze, feel free to have my share.

46

dr ngo 08.01.15 at 10:43 pm

Thanks, Bruce. I anticipated your generous offer.

47

Rich Puchalsky 08.01.15 at 10:46 pm

Bruce Baugh: “they feel it as one of their values, as sincerely as I feel mine. Their lives are built on it, and they get a lot more official reinforcement and reward than I get for mine, come to that.”

Yes. Bruce Wilder’s “but what about the authoritarian followers? How’s the left going to speak for them?” is a related variant of this. Once the left lost its presumed ability to say what people’s interests really were, it lost its ability to dismiss people with different value systems as being deluded.

I don’t see it as a core left value that everyone has to *believe* in equality in some abstract sense, as long as they accept that people should be treated equally. If we managed to (as an example, not as a likely outcome) get people to agree that everyone should get the same, basic guaranteed income, it wouldn’t matter if a quarter of the people had religion as their highest source of value and sneered at the people who didn’t live godly lives, and another quarter liked to work and sneered at the slackers, and another quarter partied a lot and sneered at the squares, and another quarter spent their time writing and teaching people and sneered at the willfully ignorant. We could pay the “work should be compensated according to skill and effort!” people in tokens of some kind that they could obsessively compare against each the total tokens of other workees.

48

Dr. Hilarius 08.01.15 at 10:47 pm

Marx spoke of houses but the point is applicable to wages:

“A house may be large or small; as long as the neighboring houses are likewise small, it satisfies all social requirement for a residence. But let there arise next to the little house a palace, and the little house shrinks to a hut.”
Wage Labour and Capital (December 1847), in Marx Engels Selected Works, Volume I, p. 163.

49

anon/portly 08.02.15 at 12:37 am

10 But he quit as a complaint that others’ good fortune was excessive instead of enjoying his own good fortune. … Given the choice between increased prosperity that levels social distinctions or an austerity that heightens them, a non-trivial number will pick to be poorer if it means they have poorer-yet people left to look down on.

23 But raising the pay of his workers in a way not even dependent on mythical “merit” (hence Grant Moran’s reaction) is dangerous to other bosses, as it goes counter to a lot of core tenets of neoliberal ideology.

28 What Price did came as a cultural shock to nearby businesses, customers, family, and employees.

40 How will they know that they are better than other people unless they are paid more? Even if they are really currently paid less than others in the company — how will they know that they are better than poor people?

If a superficial reading of this one NYT story did not comport with personal prejudices, who would be so quick to draw sweeping conclusions about something like whether this came as a “danger” or “shock’ to other businesspeople? The article says reactions “were split on whether he was a brilliant strategist or simply nuts,” which strikes me as the obvious reaction to a business move that gets you (1) lots of new customers; (2) lots of ex-customers; (3) profiled in the NYT; (4) sued by your own brother. I think the “danger” and “shock” idea, despite a couple of wacky (now I know why I’ve never eaten at Canlis – and all this time I thought I just didn’t hang out in the right circles) anecdotes, is pretty much wishful thinking. Note especially (1); Adam Smith’s point may be less relevant to an industry with lots of slack.

And if a superficial reading of this one NYT story did not comport with personal prejudices, who would be so quick to draw sweeping conclusions about Grant Moran’s underlying motives for quitting? Grant Moran’s (who actually offers multiple reasons for quitting, not just the pay issue, but anyway) reactions to the pay changes are not really that different from Maisey McMaster’s (the other employee who quits). She also thinks the structure of the raises were fundamentally unfair, but somehow escapes being called an “asshole” by any CT commenter.

“He gave raises to people who have the least skills and are the least equipped to do the job, and the ones who were taking on the most didn’t get much of a bump,” she said. To her, a fairer proposal would have been to give smaller increases with the opportunity to earn a future raise with more experience.

A couple of days after the announcement, she decided to talk to Mr. Price.

“He treated me as if I was being selfish and only thinking about myself,” she said.

Maybe if his business goes south, he can spend lots of time commenting on CT. He’ll be welcomed as a kindred spirit!

50

some guy 08.02.15 at 1:02 am

js @ 31, not so much a techie as part of the finance sector. Payment processing, not apps.

a different chris @ 33, some customers may have left but 350 signed up in one month where they would usually see 200. I think this counts in the win column.

51

Warren Terra 08.02.15 at 2:38 am

F 08.01.15 at 12:32 am
Canlis is also one of the oldest restaurants in town and has always catered to the old Seattle money types. It’s known for its obsequious service (servers used to wear kimonos) and the fact that it is pretty much the only restaurant in Seattle with a dress code.

This, exactly. I’ve been there once, when I turned 18, I think. the food was extremely good (though not extremely interesting, as I recall), and I hated it. The view, though, was tremendous – as I recall, it’s on a bluff overlooking Lake Union.

It’s probably not still the most expensive restaurant in town, though it probably was when I was growing up – there’s a lot of more hip-to-the-moment New Money places in town. But it has always been the restaurant of Old Money Seattle, as F says, and (1) the idea of this icon of privilege lowballing its employees is disgusting; and (2) it’s quite likely the reporter knew exactly what this source would represent when she chose him. To anyone who knows a bit about Seattle, quoting a Canlis executive on the need to show the poors whose boss is a deliberately charged act.

52

Tyro 08.02.15 at 3:04 am

. Guess in his circles, being an asshole is its own reward.

Web developers have enormous egos relative to their technical skills, in part because while the job they do is technically difficult in its own way, they are not seen as “real computer scientists” by the core technical developers and this breeds a certain insecurity within their professional culture. Basically the salary compression ended up creating his worse nightmare: it put him in the same (economic) category as the administrative staff, when much of his self-conception was centered around proving that he is in fact a member of the technical hierarchy (which is is, but simply not economically at his level).

53

magari 08.02.15 at 3:25 am

…yet it’s not clear that their ‘class solidarity’ was any less solid in the ’50s”.

Mark Blyth’s Great Transformations teaches us that despite the latent tendency of the economic elite to form a cohort, capitalists really put that into gear in the 1970s. He suggests that the effective political organization of capital explains much of the neoliberal era and the way we think/discuss workers/labor.

This episode I think reflects both the latent tendency and the way in which capitalists have shaped the public discourse regarding labor, as well as good ole American ‘rugged individualism.’

54

Bruce Baugh 08.02.15 at 5:49 am

Magari, thanks for the reading recommendation!

55

Barry 08.02.15 at 12:04 pm

anon/portly: “(2) lots of ex-customers”

Who are ex-customers for no good reason except —-?

56

Barry 08.02.15 at 12:09 pm

BTW, people keep mentioning Ford. From what I had heard, the $5/day salary was a very clinical, calculated move. Ford had massive problems with absenteeism[1] and turnover. A $5/day salary meant that Ford could get good workers, and pick and choose among them. It meant that getting fired from Ford meant a substantial pay cut.

I read an article once wherein a Netflix executive stated that they had no problems getting skilled technical people – they just looked at the market rate, and set their salaries 20% higher (they also have a nice ‘easing out’ policy, which lowers the risk).
They then pick and choose among a lot of elite people.

[1] I realized that when you go from ‘gang labor’ to an assembly line, absenteeism hurts. If you have 5% absenteeism in a ‘gang’, you probably have 5% lower production; in an assembly line, it’ll cut production quite a bit.

57

Barry 08.02.15 at 12:12 pm

Oh, that guy Moran: “Mr. Moran also fretted that the extra money could over time become too enticing to give up, keeping him from his primary goal of further developing his web skills and moving to a digital company.”

Well, he can live at the same level for a year, bank $15K, and be in much better shape for starting his own company. And the first thing that would happen whenever he started his own company is that his salary would reset to $0, anyway.

In the end, it’s resentment.

58

hix 08.02.15 at 1:23 pm

It is rather very doubtfull that performance pay gets payed out to the best performers or attracts and retains particular skilled staff. More likely the performance pay fans are particular competitive and overconfident. The environment then brings out the worst in their personality.

59

Barry 08.02.15 at 3:24 pm

Yes. In my office a co-worker is paid more than I am (6% more). When you look at her long track record of high performance, she should be paid a lot more.

60

engels 08.02.15 at 4:39 pm

“…what capitalist markets are supposed to do…”

In the words of Bob Dylan: “is that some kind of joke?”

61

anon/portly 08.02.15 at 6:04 pm

“Who are ex-customers for no good reason except —-?”

Who knows? I thought one of my main points was the dubious value of drawing conclusions from one NYT article (which, again, I suspect that no CT commenter would do from any NYT article that didn’t happen to comport with their ideology). You’d have to ask those customers.

62

anon/portly 08.02.15 at 6:23 pm

The more I think about it, it’s really amazing that so many lefty CT commenters read this article and then choose to heap abuse on Grant Moran. (But not on Maisey McMaster, who more or less says the same thing, perhaps because her views on the pay unfairness happen to have been provided in a more congenial brief snippet).

There really is an obvious candidate for “asshole” in the article, and it’s not Grant Moran. It’s the guy who became a millionaire while pushing his employees long hours, then decided to share the wealth not by rewarding those who had put in long hours in the past (or present) – the people who you’d think a lefty CT commenter would think the most exploited! – but in a more arbitrary, “statement” sort of way, that some might interpret as a touch self-aggrandizing.

I’m not saying the millionaire needs abuse heaped on him, maybe his motives are pure as the driven snow, I just think it’s interesting that the commenters seem to identify with the exploiting millionaire, not the exploited employee. (If exploitation it is).

I don’t think there’s anything to Rich Puchalsky’s idea that this article illustrates the idea that people get utility from having someone below them on the financial scale to look down on (I think Moran and McMaster’s views are a different thing altogether), but these comments support the idea that people get utility from having someone below them on the moral scale to look down on. Of course the numbers on the moral scale mostly have to be made up….

63

Anderson 08.02.15 at 7:40 pm

“It’s the guy who became a millionaire while pushing his employees long hours, then decided to share the wealth not by rewarding those who had put in long hours in the past (or present) – the people who you’d think a lefty CT commenter would think the most exploited! – but in a more arbitrary, “statement” sort of way, that some might interpret as a touch self-aggrandizing.”

1 For the kingdom of heaven is like unto a man that is an householder, which went out early in the morning to hire labourers into his vineyard. 2 And when he had agreed with the labourers for a penny a day, he sent them into his vineyard. 3 And he went out about the third hour, and saw others standing idle in the marketplace, 4 And said unto them; Go ye also into the vineyard, and whatsoever is right I will give you. And they went their way. 5 Again he went out about the sixth and ninth hour, and did likewise. 6 And about the eleventh hour he went out, and found others standing idle, and saith unto them, Why stand ye here all the day idle? 7 They say unto him, Because no man hath hired us. He saith unto them, Go ye also into the vineyard; and whatsoever is right, that shall ye receive. 8 So when even was come, the lord of the vineyard saith unto his steward, Call the labourers, and give them their hire, beginning from the last unto the first. 9 And when they came that were hired about the eleventh hour, they received every man a penny. 10 But when the first came, they supposed that they should have received more; and they likewise received every man a penny. 11 And when they had received it, they murmured against the goodman of the house, 12 Saying, These last have wrought but one hour, and thou hast made them equal unto us, which have borne the burden and heat of the day. 13 But he answered one of them, and said, Friend, I do thee no wrong: didst not thou agree with me for a penny? 14 Take that thine is, and go thy way: I will give unto this last, even as unto thee. 15 Is it not lawful for me to do what I will with mine own? Is thine eye evil, because I am good? 16 So the last shall be first, and the first last: for many be called, but few chosen.

Perhaps your idea of a “lefty” is arbitrary, Portly Anon.

64

Tyro 08.02.15 at 7:41 pm

The more I think about it, it’s really amazing that so many lefty CT commenters read this article and then choose to heap abuse on Grant Moran.

Your comment comes across as saying, “you lefties are hypocrites! You say you’re all tolerant, but you criticize other people and make judgments about what they do!”

65

Matt 08.02.15 at 8:06 pm

Moran didn’t quit in protest when Price was making a million dollars and he was making $41,000, so it’s obviously not some even handed principle of “you must be paid according to the hours you put in” driving him. The CEO was not working 1400 hours a week to justify his old million dollar income over Moran’s old $41,000.

I heap scorn on Grant Moran because the numbers he provided make him out to be ridiculous. He was in line for a 71% pay raise thanks to the new policy and that’s when he chose to quit? AFAICT he quit because he thinks income is your life’s report card, not just how you pay the bills, and the teacher graded other people unfairly easy. At only 29 years old Grant Moran is already thinking and behaving like George Costanza.

I don’t know if Gravity Payments will be successful in the long run. Most businesses don’t survive in the long run. They go out of business or get absorbed. I don’t even know if the $70k pay floor will prolong or shorten the life of Gravity Payments. But the quoted criticism of Gravity Payments from ex-customers and ex-employees isn’t about whether or not the company can succeed while spending that much on salary. None of the quoted critics said anything like “Gravity Payments was spending too much on Price’s salary before, and reallocating it among lower-level employees is a lateral move for a company that needs to trim costs.” They expressed resentment and unease that the undeserving may get the princely income of $70k. If median household income in the USA had tracked overall economic expansion since 1970, the median household income would be closer to $90k.

66

None 08.02.15 at 8:19 pm

anon/portly@62 – “then decided to share the wealth not by rewarding those who had put in long hours in the past (or present)”

How do you know who puts in the “long hours” (which, by the way, is not the same thing as productivity) ? The folks who said so to the NYT ? Why should we take them at their word on how awesome they are ? Shouldn’t the CEO be the best judge of performance
?
The libertarians are really in a panic over this one … on the one hand no one makes you work at Walmart, so leave if you don’t like it. On the other hand they are all for workers rights in this firm, eh anon ? lol

67

Rich Puchalsky 08.02.15 at 8:34 pm

The idea that the second person who quit (I haven’t ignored her) was “exploited” by Price not sharing the wealth is an interesting one. She didn’t get a pay cut, so she didn’t lose anything. She had no legal right to “the wealth” that Price chose to redistribute, which was his (perhaps produced by prior exploitation of workers — but good luck demanding it for that reason!) So she lost nothing and only did not gain what she thought she should have gained in comparison to other people, out of money that was freely given away. If Price had given away all that money to the Cecil the Lion Sentiment Fund, she presumably would have either applauded or at least said that it was his money and he could do what he wanted with it. It’s only because it went to her co-workers that she objects.

In other words, this fits my thesis exactly. It’s an anecdote, yes, which is kind of unavoidable since the whole thing is an anecdote. But the problem is not that we aren’t reading it carefully.

68

bianca steele 08.02.15 at 9:10 pm

I can think of reasons why someone might not want to make $30k more than he can get elsewhere, with suddenly a $30k raise. They’re all kind of weird, though. Maybe his share of the rent will go up, maybe all his friends make less than $50k, maybe he has child support. Or maybe he’ll be expected to put in longer hours and pay for the cab he can’t afford now. Who knows? But what he said is that non-merit pay “shackles” high performing members of the team to less performing ones, which makes no sense.

On my reading, the woman, who helped develop the raise, objected to the final plan because some people, including her, would feel resentful about it, and she stood her ground when the CEO said he’d go through with it anyway. I don’t remember why she quit.

69

a different chris 08.02.15 at 10:35 pm

>The more I think about it, it’s really amazing that so many lefty CT commenters read this article and then choose to heap abuse on Grant Moran.

When I actually look at the comments instead of simply examining the stuff inside my own portly head, I discover that up to the point of this comment, which was comment # freaking 49, the name Moran had only showed up 4 times.

I almost never label people as trolls, but the more I think about it….

70

hix 08.02.15 at 11:15 pm

I am sorry for the guy, no matter how stupid the stuff he said is. But its already to late, hes already on the Nytimes Frontpage with his real name. Crookedtimber comments wont cause him any additional harm like a Rush Limbaugh 5 min hate on top would.

71

Van Buren 08.02.15 at 11:55 pm

Academic Lurker @ 12

This would have come as no surprise to Thorstein Veblen a century or so ago.

72

TM 08.03.15 at 1:20 am

Matt 10: Once in a class I discussed an upcoming election. A student related that her brother was going to vote against a minimum wage hike on the ballot. He was going to vote for the first time in his life, so angry was he about the proposed increase. Why was he angry? Well he himself was making only little more than minimum wage. Should any burger flipper now make as much as him with his college degree? He couldn’t stand the thought.

The increase did pass by a big majority though.

73

David Irving (no relation) 08.03.15 at 3:01 am

Matt @ 41, if you want something to sneer at Australians about, just recall that many of us are descended from deported criminals, which is why we steal more “Game of Thrones” episodes than anyone else.

74

Neon Trotsky 08.03.15 at 4:58 am

So effectively this guy did exactly what libertarian types said they should do if they are actually concerned about inequality, poverty or what have you, and yet they’re the biggest critics of this move.

Which only reveals what most everyone knew, that they don’t actually care about freedom and individual choice, but are simply apologists for capitalism.

75

anon/portly 08.03.15 at 7:35 pm

63 Matthew 20:1 (“For the Kingdom of Heaven is like unto a man that is a householder…”)

So, salvation by faith, not acts, means that Grant Moran is wrong to feel that a particular ongoing remuneration scheme is unfair? Maybe….

Okay, Grant should be happy if he makes 50K and Bob in the mailroom, who puts in fewer hours now, was not around to put in the long hours needed in the past, and does work that requires less education and who was planning on leaving once his band lined up a tour, also makes 50K. Grant is morally wrong to object.

What if they give Bob 100K? Still wrong to object? What about Bob the VP making 2200K? It seems to me that you can only rely on the bible verse to make an argument that everyone should make the same income, regardless of effort. Once you have differential incomes, then extending this logic would seem to suggest that we should not care about income inequality. If we go to a system where one person works 1 hour per year, another works 3000 hours, both make 50K, everything is fine. But maybe my thinking is flawed.

Meanwhile we’re all sure John 8:7 doesn’t apply in the least to comment 42?

76

anon/portly 08.03.15 at 8:11 pm

65 AFAICT he quit because he thinks income is your life’s report card, not just how you pay the bills, and the teacher graded other people unfairly easy.

Instead of characterizing his views (which again are coming as filtered and condensed in 3 paragraphs of a NYT article) as “income is your life’s report card,” why not drop the looking-into-his-soul thing and more charitably and accurately characterize them as “income should reflect effort and productivity?”

Then, my point in my last comment stands, some of us work 1 hour per year, others 3000 hours per year, no problem, no income inequality if we all make the same 50K or 70K? Maybe I have this wrong – maybe we should look at income inequalities as simply good fortune for others and forget about them. Or maybe being paid the same regardless of effort is not income inequality. I thought a real part of the argument about income inequality was that incomes should more accurately reflect effort and productivity, not just that incomes should be more equal, regardless of those things.

77

Matt 08.03.15 at 8:47 pm

If he were upset that pay doesn’t reflect hours worked he should have been more upset with the old system where the CEO got 25x his pay without putting in 25x the hours. If he were upset that pay doesn’t reflect education he should have been more upset with the old system where the CEO got 25x his pay without acquiring 25x the educational credentials.

Productivity? Maybe. I don’t even know how you could compare that across a web designer, a mailroom clerk, and an executive. They don’t receive the same inputs or produce the same outputs.

78

anon/portly 08.03.15 at 8:50 pm

67 So she lost nothing and only did not gain what she thought she should have gained in comparison to other people…. It’s only because it went to her co-workers that she objects.

Can I re-write this for accuracy?

Ideal-world 67 So she lost nothing and only did not gain what she thought she and others like herself should have gained in comparison to other people…. It’s only because of the particular scheme by which it went to her co-workers that she objects.

In other words, this fits my thesis exactly.

Once her concerns about other employees are factored in, does it still? Or should we just discount those entirely?

79

Marc 08.03.15 at 9:08 pm

You can rewrite it all you want. The fact is, a couple of people quit because they were bitter that the salary floor got raised, and that helped other people more than it helped them. They were completely content with an alternate reality where the CEO got a lot more money and all of the employees got less.

Fools like that deserve to be mocked almost as much as arrogant libertarians on comment threads do.

80

Layman 08.03.15 at 9:54 pm

“If we go to a system where one person works 1 hour per year, another works 3000 hours, both make 50K, everything is fine. But maybe my thinking is flawed.”

B it is, then.

81

ragweed 08.05.15 at 7:01 am

There is an interesting parallel here with the early days of the dot.com boom. When many of the early internet companies went public, their entire staff, including admins, receptionists, and mail-room employees, received huge stock-option payouts and became millionaires overnight. Somehow there wasn’t the same outrage over “why should the receptionist get a million too”, (except when it got to Forbes and they started to complain about stock options as robbing real shareholders by diluting future earnings). Now, granted the receptionist getting stock-options had often worked there a while and done long hours too (though not always if they were fussy about non-exempt overtime), but the situation has a certain rhyme.

82

Branko Collin 08.05.15 at 9:34 pm

Backlash, NYT writes. Interesting choice of words. Some of the elements of this ‘backlash’ are the same as the things that a company experiencing sudden success encounters. A cash flow problem is normal if you need to fulfill an unexpected amount of orders, and it wouldn’t be the first time that shareholders sue a company they learn is faring better than they thought.

83

bianca steele 08.06.15 at 2:59 pm

@81

OTOH, I have heard hourly employees deciding not to put in for overtime (i.e. to put in for 40 hours/week when they worked 60 or more), on grounds that they’re a public company and they get stock options. And in the same breath talk about how responsible and orderly they have to be, now that the company is publicly traded.

It’s interesting what range of opinions can be comfortably expressed in comments here. These workers were unlucky enough to be named in an article in a paper that’s notorious for not reporting things the way participants think is accurate (probably notorious only because it’s famous otherwise, admittedly). Their actions could have been framed differently and everyone here would be supporting them.

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