Grounding the conversation around Gravity Payments' $70K minimum wage increase

Anyone see the article last month about the Seattle company that brought the minimum wage of its employees up to $70K? If you read the New York Times on a regular basis – or any other major nationally syndicated U.S. newspaper, for that matter – then this story may be familiar to you.

The company in question is called Gravity Payments. Apparently Gravity Payments is a credit-card processing company that provides financial services for other companies that want to accept credit cards. But what the company does – i.e. how its business practices affect the economic order and society – is apparently of little interest to the mainstream media outlets that have made a story out of this. What gets everyone’s attention is that the company’s good-guy CEO – a good looking young-thirties white dude with quasi-messianic long hair and a beard – is the perfect poster-child for next-gen tech and financial businesses that care. More on this later.

The New York Times piece, which was published to the NYT website at the tail end of July, certainly isn’t the first to address Gravity Payments’ pay raise. Dan Price, the man behind the company – as the NYT would have us believe, the one-man, Steve Jobsian brains-behind-the-operation visionary who single-handedly made the company into a marvelous success – announced earlier this year that he was raising his company’s minimum wage to $70,000. Numerous articles were written about the increase soon after it happened. In April, the story popped up in Forbes, USA Today, the Washington Post, virtually everywhere else you would expect.

The NTY article from late July was supposed to put a new spin on the already-worn story by highlighting challenges that the company has faced since implementing the wage increase. The idea, I think, was to problematize the idealized image of the company a little bit – or pretend to, anyway. A few sober considerations are presented to complicate otherwise rosy picture that Mr. Price paints – for instance, highly qualified and hard-working employees naturally thought it was unfair for everyone in the company to get an across-the-board raise. But most of the “challenges” the company has faced are hardly roadblocks – angry letters from concerned conservative businessmen who think that instituting a high minimum wage will have ruinous consequences, that sort of thing.

None of the discussion of challenges really matters, though, because the real point of the article is to give Mr. Price a platform for shutting down his critics. Most of the article (and, if you are reading on the website, the accompanying video clip) consists of select quotes from Mr. Price, and there is little in the way of contrapuntal reporter commentary. The reader (or viewer, if you just watch the clip) is supposed to walk away knowing that Price is a great guy who courageously fends off neoconservative nuts in the pursuit of economic justice . . . or something like it. In fact, even Price’s failure to anticipate the contentious consequences of wage hike does not much besmirch our image of him as a visionary– on the contrary, his sort of youthful, confident-yet-bashful naivete only makes him more endearing.

And this should all be great, right? Isn’t this what we want – a heroic technocratic bringing wealth to the masses?! A scion of business with a vision for tackling income inequality – the biggest problem of our age, if you believe such illustrious modern-day liberal prophets as Paul Krugman and Thomas Picketty – through doing business. This is exactly what we need, isn’t it?

Whether Mr. Price has what we need or doesn’t, his way of doing business certainly satisfies a certain craving. Indeed, articles like this one are like crack to the dominant “liberal” establishment – the so-called progressives who are mostly white, mostly quite high income, and mostly concentrated in fancy finance cities like NYC and tech hubs like San Francisco and Seattle. Really, what is disturbing about the article isn’t about the economics or the politics. All things considered, what Price did for his employees was highly commendable. What is problematic is everything in the background, all the privilege and race and class inequalities that the article treats as given and thereby implicitly perpetuates. And though little of it is overt, you don’t have to be very astute to recognize clear as day that the political philosophy being peddled by the NYT and the establishment it serves does more to prop up the inequality-producing capitalist machine than it does to challenge.    

Without getting into tremendous detail about any of the background presuppositions in particular – I’m sure they’ll be plenty of opportunities for that in the future – here are some observations that should some light on what this article is supposed to do. 

(1)   Missing the bigger picture. Little to no attention is paid to what Gravity Payments is, or does. Of course if the authors  of the piece were legitimately concerned about the inequality, then you think it would be worth commenting at some length on the fact that Gravity Payments is part of the credit industry. Now it is certainly possible that Gravity Payments has a model that sets it apart from other financial and credit institutions that makes it much more grassroots-friendly than your typical player in that universe. The company website seems to suggest just this, promising that Gravity can empower smaller-scale enterprises to use credit card services that otherwise might not be able to afford to do so. But however you slice it, we are talking about a company that is part of the financial industry here. And there is fairly widespread consensus – including among dominant liberal economists, not to mention their more radical brethren – that the financial industry is to blame for much of the inequality that afflicts our modern world. So why doesn’t the NYT address this – or even so much as comment on the irony? Probably because the NYT knows its readership – mostly white so-called “progressives” who rail against income inequality but work predominantly in the legal, financial, and other sectors that prop up our current economic system. Articles like this function as a way to resolve the cognitive dissonance that would otherwise tear apart wealthy progressives. How do you reconcile your high economic position with your purportedly humble politics? Worry not! For you can be fabulously attractive, successful, and yes, wealthy, and still be a social justice warrior (you know, the kind who, like Mr. Price, know how to deal a “swashbuckling blow against income inequality”) so long as you deploy your wealth in the socially correct fashion. And never mind how you got your money . . . what matters is what you do with it. Which brings us to the next:

(2)   The faux-sacrifice. We are supposed to love Price and applaud his wage hike in large part because he (sort of) paid for this from his own pocket. As it goes, it seems that Price brought his own yearly income down to $70,000 from somewhere near $1M a year when he opted to raise his employees’ income to the same. Truth be told, the fact that Price voluntarily relinquished the lion’s share of his wages so that his employees could earn more is quite laudable. But the article’s attempts to paint all of this as selfless martyrdom is frankly insulting to normal wage-earners out there. First, as the article makes clear, Price’s net worth is well into the millions of dollars, which means that the income he continues to draw from his company is essentially irrelevant . . . unlike most of us, Price is financially secure for life and he needn’t lift a finger to keep things that way. And though his income has been artificially restricted, Price is presumably still one of the principal holders of the company’s equity. So whatever Price’s current income may be, it is unquestionable that his wealth has been little affected by his purported sacrifice. Nonetheless, the article would have you believe that Price is really struggling to get by since he took this self-imposed hit . . . as we learn, Price hasn’t earned such a small yearly salary (which is nearly double the median family income in the United States, mind you) since he was in his early twenties! (If you watch Price’s interview, you hear this as Price is shown exercising in what appears to be his own personal gym. Such suffering.) It’s understandable that the NYT wants to show us how much Price has given up to make his vision work – we’re supposed to see what a great person he his. But shouldn’t the reader get a little context here? Shouldn’t the NYT reader be reminded every now and then that $70,000 is actually quite a lot of money for most people. In fact most American families get by on much less.

(3)   Everyone in the video interview is white and (apparently) white-collar. In the video interview accompanying the article on the NYT website, there is a scene showing Price speaking to a room full of forty or fifty of his company’s employees. It is hard not to notice that virtually everyone in the room is white. I don’t think this point should be overstated – there is nothing to suggest that Price or the NYT reporter are racist in their hiring or filming practices. But the demographic profile of the people in the video is worth considering for several other reasons. First, however fantastic Price’s wage increase may be for his employees, those employees do not appear to constitute a representative sample of society. And the unfortunate reality is that other successful up-and-coming West Coast companies that might be likely to implement mandatory minimum wages similar to Price’s are likely to have a very similar racial makeup to Gravity. Unfortunately, this means that, from a racial and economic justice standpoint, these benefits will largely accrue to people from an already socially (if not necessarily economically) privileged background. Now if we could get some bigger companies with a more diverse employee base (think McDonald’s or Burger King) to sign up for the $70K minimum wage plan, then we’d be talking!

Aside form (though related to) the question race, it is also worth noting that all the “employees” in the video are white collar workers of some type or other. There might be a few receptionists in the mix, but there does not appear to be anyone from the janitorial staff, for instance. Why is this significant? One reason may be that, to the extent Gravity is serviced by such personnel, they very likely are not company employees. Likely they are hired on as independent contractors; perhaps they work for some other company that almost certainly doesn’t pay its staff $70K a year. All of which is to say that they are unlikely to receive the sorts of benefits that the “privileged” employee class gets. I have no idea what kind of arrangement Gravity has in this respect – and it appears neither does the NYT, which didn’t think that it worthwhile to asking mildly probing questions about the scope of the wage increase policy.

(4)   Hero worship is dangerous. One last point -- which was to some extent intimated above – is that the article very troublingly puts Price on a pedestal. Indeed, just like so many other articles published on Gravity’s wage increase, everything revolves around the CEO. Why is that? Readers might be inclined to think this is natural – after all, Price is the visionary who dreamt up the policy, correct? Doesn’t that suggest that he is the best person to interview? Well, think about it – that would depend on the purpose of your article, wouldn’t it? If you wanted to write about how the wage increase affected the lives of the company’s employees, who do you think would be in the best position to discuss that?  

What is really going on here is old-fashioned hero worship. And why should this surprise? A lesson from propaganda and PR is that ideas are swallowed up much more easily when they are associated with and embodied by purportedly great individuals. Here, Price – the ubermensch-wunderkind shown exercising in his personal gym in one sequence and commanding his employees in the next, founded a successful company in his early twenties, and, now in his early thirties, has revolutionized business by exercising a social conscience within it. What ideas, then, is Price being used to convey here? Something about considerateness and altruism (at least for your immediate employees), but arguably the core message here is about entrepreneurialism. Indeed, though the article speaks somewhat to the importance of caring for the well-being of others, it is much more intensely focused on Price’s indomitable spirit, his willingness to take risks over the objections of naysayers and move forward with a bold plan that is, really, the wave of the future. What business is supposed to be!

Price’s use as an exemplar is unsettling because it naturalizes the very inequality Price himself purportedly rejects. As stated earlier, Price is portrayed as a man possessing special knowledge, keen abilities, and high intelligence. Not unlike a Steve Jobs or Mark Zuckerberg, he is the “genius” behind the company’s success. And upon beholding such brilliance, people are made to understand their place – beneath their betters, of course. (Never mind that “genius” is almost always nothing more than a proxy for money or power – or social capital accumulated by the expenditure of money or the exercise of power.) And this is particularly troublesome because the purported visionaries in stories like this one are almost universally rich white males. Thus an ancient patriarchal power structure is renewed anew every time one reads articles like this on, even if such renewal is contrary to the author’s and the subject’s express intent. The effects can be mitigated, sure, but because this power structure has some significant staying power, it cannot and should be casually ignored. Which is not to say that articles about commendable acts such as Price’s should not written. On the contrary, they certainly should be, albeit with a more interesting cast of characters and some context to ground people in the actual issues. Mythical heroes are not the answer.

The Debt Debacle

Boy are we in trouble.

Everyone who has been following political news these past few days knows by now that Obama, Reid, Boehner et al. just negotiated an agreement for ending the debt-ceiling holdup initiated by Republican members of the House. The deal consists of no new revenue-raising measures (i.e. taxes), but does contain over two trillion dollars in spending cuts. Most news coverage on the deal has celebrated the amazing feats of bipartisanship that brought the deal to its closure; coverage of Giffords returning to Congress comes to mind. (Giffords’s return to Congress is of course a wonderful thing, but few can deny that the spectacle of her return drowned out serious coverage of the substance of the debt agreement). While a large number of Democrats have dissented and expressed their disappointment with the bill, the consensus in popular discourse (or at least in America’s televised media) is that the agreement saved the day; at the very least, it was a necessary evil. They proclaim: The world of politics requires that tough decisions be made—the Democrats had to compromise in order to avert disaster. Of course the radical, progressive branch of the Democratic Party would be disappointed by the way negotiations turned out! But they are fringe elements of the political system, so who difference does their dissatisfaction make to the bulk of us?

Of course this is all bullshit. The deal is not only a tremendous loss for the left—more tragically, it’s really, really bad for America.

The reasons the agreement bodes ill for liberals are obvious. Revenue was not raised as Democrats wanted; socially valuable discretional spending on education and infrastructure are going to get cut; Social Security and Medicare costs are still going to spiral out of control under a Democratic president’s watch; and of course progressives have been alienated by Obama’s failure to leverage the superior bargaining position he attained in the beginning of the showdown and reluctance to invoke the fourteenth amendment as a means to legally circumvent the whole ordeal. The agreement does contain some provisions for defense cuts, which is a minor plus for Democrats. But really, who cares? The political consequences of this new agreement are inconsequential in the grand scheme of themes; come election season, none of this will figure into people’s votes—Americans don’t have a knack for remembering. They do, however, care about unemployment, and other indicators of economic catastrophe. So…what we really should be talking about are the economic consequences of the agreement, not the politics of who wins brownie points today.

And this is what disturbs me: virtually no one is talking economics!

Brad Delong posted a short entry on his blog shortly after the agreement was announced with an early guestimate that the proposed cuts to spending would hack 0.4% from our 2012 real fiscal GDP growth.

http://delong.typepad.com/sdj/2011/07/the-debt-ceiling-deal.html

In the world of macroeconomics, this is a pretty big chunk of change. And the timing couldn’t be worse: newly released economic figures have shown that growth over the past few years has been much lower than previously believed. Many indicators are suggesting we are about to plunge right back into full-fledged recession. As any real macroeconomist will tell you, a huge slash in government spending will also decimate demand, leading to more job losses and tanking productivity. A reduction in spending now is just stupid from a policy perspective.

Unfortunately almost no one is drawing on the Great Depression as a historical example for what this spending cut could do to our economy. In 1937, just as the US was beginning to bounce back from the worst years of the crisis, the Conservative Coalition came into power in Congress and forced the rollback of many New Deal policies, effectively hacking away at fiscal spending (sound familiar?). Compounded with some ill-timed monetary maneuvers on the part of the Fed—and some other messy things going on with international capital flows—the US sank right back into recession.

Of course, defenders of the deal will point out that the spending cuts are back-heavy: only twenty-some billion dollars in spending cuts will go into effect in 2012, for example, the majority being instituted in the last few years of a ten-year period (though this still is more complicated…more cuts would automatically be triggered if spending caps out at some point along the way). While it is true this does mean that the burden on the economy won’t be as severe as it could be, one could hardly list this as a plus; and in fact if projections that we are about to re-enter recession are correct, then the institution of mandatory, inflexible spending cuts over the next ten years will do nothing to pull us out of it. Why should we be so eager not only to walk off the plank, but to tie our hands behind our backs before doing so?

While everyone on MSNBC is talking about what a travesty the debt agreement will be for America’s social safety net (and believe me, it will be), few are talking about the even more startling economic ramifications this massive cut in spending could elicit. The compassion of the left for the poor is, ethically speaking, what makes it the superior ideological pole, so understandably many liberals take up arms over the flagrant human rights violations that accompany socially toxic right wing policies. Thus the bleeding-heart reaction of liberal media news outlets to the debt ceiling agreement is unsurprising. But what liberals often forget is that their ideology—which holds firmly to the value of equality—is not only good for the poor: more dramatically, it benefits the economy as a whole! Until liberals learn to be standard-bearers of this empirical truth, and until they make a push to change the discourse around what being liberal looks and sounds like, they shall continue to alienate potential allies among the public. Ostentatious invocations of social justice may sound like music to the choir, but to those outside the congregation they inevitably come across as naïve and pretentious posturing.

Leftists: learn to trump up the nationalism! Conservatives aren’t the only ones who care about this country. If there’s anything most Americans can agree on, it’s that a robust economy is good for America.

Make them see that your way is best, and they will listen.

The pitfalls of ideological meritocracy

When libertarians and other free market fundamentalists are forced to offer a defense for the sort of unfettered capitalism that they advocate, they are almost guaranteed to invoke meritocracy in some form. Somewhat more surprising is that among the political left there are many who claim to be meritocrats at heart; probably this has something to do with the fact that the ranks of vocal liberals swell with educated technocrats, and it is common for people with a good education to believe that it (or, at a deeper level, their supposed intelligence) entitles them to a larger slice of the pie. What makes this surprising is that pure meritocracy is in effect at odds with core liberal ideals, among them social mobility, economic vitality and egalitarianism.

Most attacks against pure meritocracy revolve around an inherent difficulty in determining what makes some people more deserving of reward than others. While this is certainly a question worth pursuing, there is an even more fundamental problem in meritocracy worth addressing. To put it plainly, meritocracy is structurally infeasible. The ideological thrust behind meritocracy is that social capital—whether in the form of human talent, intelligence, or moral value—ought to be aligned with material wealth. Viewing matters macroscopically, the most salient rationale for instituting a meritocratic system is transparency: we want assurance that our rich men and women are not so by accident, that they really deserve their wealth and power. Otherwise the social order would appear simply unjust. Viewed in this light, meritocracy serves not only as a justification for inequality—it satisfies the itch for truth that is so central a part of Western thought.

Of course, as dozens if not hundreds of political scientists, economists, sociologists and philosophers of various stripes have suggested in one manner or another, the problem in attempting to align social capital with its material counterpart is that doing so creates a messy feedback loop. In short, wealth becomes a justification for itself; simply being rich implies that one is the superior sort of being deserving of being rich. Though this rather clearly reverses the intended directionality of the merit-wealth relationship (at least in name—few would be so stupid to think that the already-rich are ignorant of the benefits of a wealth-merit conflation), structurally there is no way to unravel it when money and social value are made tantamount. And any system that permits wealth to exist as a basis for itself will license the sort of speculative bubbles that threaten economic productivity and political stability. But this is just one of many emergent problems: economic hierarchies are crystalized and what’s more turned into classes; and because occupations are somewhat likely to select for certain ethnic groups or geographically privileged persons, racial segregation and regional disparities are extremely probable outcomes.

Think of it this way: in today’s major industrial countries there are plenty of people who do not self-identify as wealthy who yet are able to carve out a niche for themselves and attain purpose. Consider, for example, the teachers, artists and musicians you have met in your life. The argument goes that academics and intellectuals would fare much better under a true meritocracy, which might perhaps be true for some, but certainly wouldn’t for others; for there will always be writers, scientists and other thinkers whose work runs contrary to the status quo, who have trouble securing research funds for lack of interest or application despite the novelty and brilliance of their endeavors. But in a world where wealth is the only thing that matters, what incentives would they have to go on in the face of adversity? And supposing they slugged on and made some grand new discoveries anyway—who would bother to listen to them, given their poverty and obscurity?

It seems evident that the most structurally sound economic arrangement for society must take care to avoid equating material worth with social capital rather than trying to splice the two together. Only by maintaining a strict disconnect between social capital and wealth can we establish an adequate checks and balances between material worth and the various other abstract values we assign to individuals and institutions (i.e. cultural status, moral uprightness, etc.). Staggering social and economic capital also ensures that society be kept dynamic: creativity and innovation will not be kept down by artificial social hierarchies, but encouraged even among the most materially underprivileged members of society.

Economists have demonstrated that social mobility in general fosters growth, as it allows labor and talent to distribute optimally; economists slip up, however, by supposing that this mobility is strictly vertical, and in particular determined solely by income. A better model for social mobility should be multidimensional: the reality is that people have many incentives to action, among them the acquisition of material worth, certainly, but just as well the accruement of status and power and the attainment of moral righteousness. A dynamic society requires all these different variables be allowed to ‘slide’ independently of each other; by fixing status to wealth, we inhibit people’s freedom of action.

But, one might object, isn’t freedom of action just what unfettered capitalism is designed to do? No—while theoretically free market doctrines do nothing to assign status-values to material parallels, empirically it is clear that the invisible hand does nothing to keep them separate, and indeed more often than not weds the two. Who would you say has higher status: the doctor, or the teacher? The lawyer, or the engineer? Notice that neither education nor moral righteousness is the sole determinant of your judgments—income differences seem to play a key part. One could of course argue that those differences correspond to some difference in social value—doctors are generally smarter than teachers, one might argue—but then we enter chicken-egg territory, since the same people will tell you that the medical profession selects for smarter people precisely because of its higher wages. The proliferation of essentially poisonous fast food and the distension of certain segments of the entertainment industry should be proof enough that the free market, left to its own devices, does not simply reward the deserving. The only thing that could be said beyond doubt is that it rewards the profit-seeking.

Which mode of governance, then, would best serve to maintain the balance between material wealth and the various types of social capital? Pure socialism and communism should be rejected on the grounds that they attempt to eliminate material mobility altogether. The outcome of such a leveling would be not unlike trying to tether status to dollars, for it too would lead to the establishment of a rigid social hierarchy, this time on the basis of supposed innate worth. Whether this measure correspond to intelligence or some indicator of ‘talent,’ it is hard to imagine that determining the worth of human beings so narrowly could be a good thing.

The only sound option left us is some form of social democracy. Systems of social democracy are unique in that they self-consciously employ a system of social values to counter-balance excesses in wealth-accruement, neither obviating wealth disparities to the point that economic incentives disappear, nor allowing those disparities to build to the point where class lines become clearly defined. That this is important comes from the observable fact that the emergence of a clear class structure engenders social capital for those at the top, enhancing the prestige of money and thus inflating demand for it as an end in itself. (We might take this class-eradication function as the defining characteristic of social democracy, but that is beside the point.) 

As a further thought, social democracy—despite its relative lack of technical pretense—is the only system of government that recognizes the truly complex nature of human decision making. Economics as a discipline will remain incomplete until it successfully incorporates the findings of sociology and psychology about how people interact and institutionalize. What I am recommending here is that academics and policy makers take the first steps toward formalizing a rather simple model for a hybrid sociological-economics which takes into account the role social capital plays as an incentive in people’s lives. The beauty of such a model is that through it the rational actor assumption (which underlies almost the entire field of economics, despite the obvious problem that human beings are not robots) could probably be preserved to some degree as a viable model, assuming one got the relative weights of money, status and power somewhat accurate. The world’s social democracies have proven to produce the highest living standards in the world; from this empirical evidence alone we have enough to weigh in against pure meritocracy, and also good reason to believe in the benefits of capital-staggering.

What's this all about?

Now that I am come to my second post, it seems proper that I take some space to lay out the general purpose of this blog, and indicate what sort of content readers should expect from it.

On the surface level my aim is to provide a smart and thoughtful commentary on the state of things in the modern world. The subject matter I intend to cover shall be broad, encompassing matters of philosophy, economics, politics, science, aesthetics, ethics, education and psychology. I plan not to become too wrapped up in any one of these subjects, but at the same time I shall strive not to be too general or superficial in the treatment of any one. To the greatest extent possible, I shall endeavor to make this a blog about everything—a grand and sweeping survey of academia, art, history, civilization, conscience and consciousness, that is, everything that makes us human. Thus at a deep level, my ultimate objective shall be no less than to probe the meaning of life, and beyond that to consider questions of its practical fulfillment.

No doubt the foundation I have here laid must sound impressively overreaching to any well-grounded reader. Surely I must have delusions of grandeur! For starters, the mere notion that I could cover every issue of importance to mankind is both hubris-laden and absurd. To address the dismay any sane reader must now be experiencing, let me remark in anticipation that this project will no doubt have shortcomings. Just like any other human being, my perspective on the world is informed by my own experiences, and my assessment of how the world decomposes into its component pieces is inextricably a product of my own subjective worldview. Consequently one legitimate weakness of my writings is that they will draw upon a limited pool of knowledge (mine), meaning the subjects I discuss, the examples I invoke, and the intuitions that guide me will together conspire toward a reductionist painting of what humanity is. And yet while I cannot be objective in the truest sense (as only an omniscient could), I can do my best to be fair in my analyses. That is, in matters that boil down to binary true-false relations (i.e. which can be considered simply in terms of what is and what isn’t), I can use the principles of logic to arrive at informative answers in spite of my biases and limited perspective.

Building upon this, my expectation is that the brunt of this project shall consist of logical arguments made in favor of this position or that on the sort of issues I have described above. I say ‘expectation’ in that, speaking truthfully, I cannot state for certain whither I might take this project as time progresses. Besides weaving incidental arguments, the overarching trajectory of my writings should adumbrate a general philosophic position for how individuals conduct themselves and societies are arranged. The best method for laying this edifice will require, I believe, a fair lick of playing by ear; and as it happens, my faith in the human mind’s ability to improvise lies at the heart of the utilitarianism-with-a-twist principles that motivate this project.

Which brings me to my final point: though much of the space I reserve for this blog shall be dedicated to the drafting of analytical arguments, the project’s ultimate end is an ethical one. It is one thing to make a convincing case for the correctness (or truth) of one’s position, but it is quite another to write something that makes people better—or, perhaps better said, which gives people the impetus to make themselves better. To achieve such an end, I plan to do whatever I can, experimenting here and there as necessary—and of course, given the scale of the task I have set for myself, I shouldn’t expect to be done in a hurry.

Introduction

What better a way to set the tone for things to come than with music?  Here is Ravel's Introduction et Allegro for the harp, flute, clarinet, and string quartet.  Enjoy!