Jon Schwarz – Dan Price, the CEO of a small Seattle credit card processing company called Gravity Payments, announced several months ago that over the next three years he’ll gradually raise the minimum salary there to $70,000.
How did his counterparts at other businesses react? Let’s get a prediction from Adam Smith, who wrote this 239 years ago in the most famous book about economics ever published, The Wealth of Nations:
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.
Was Adam Smith right? As a recent New York Times story demonstrates, he called it precisely:
Brian Canlis, a co-owner of his family-named restaurant, is [a client of Gravity Payments]. He said he was fond of Mr. Price, but was more discomfited by his actions. …
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.” …
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 …
As for other business leaders in Mr. Price’s social circle, they were split on whether he was a brilliant strategist or simply nuts. As much as they respected him, they were also disturbed. “I worry how that’s going to impact other businesses,” said Steve Duffield, the chief executive of the DACO Corporation, who met Mr. Price through the Entrepreneurs’ Organization in Seattle. …
Roger Reynolds, a co-owner of a wealth management company, said his discussion of the pay plan with Mr. Price got heated. “My wife and I got so frustrated with him at a cocktail party, we literally left,” said Mr. Reynolds …
One of the most peculiar aspects of U.S. politics is that Adam Smith and The Wealth of Nations are vociferously celebrated by conservatives. Here’s what one loyal Reaganite said at a memorial after Reagan’s death in 2004: