Arguably, the United States economy today is more than two-thirds consumer spending. For this reason, the nations GDP growth is chained to income growth, something which has seen the labor unions demand a substantial raise in the employee minimum wages increasingly. However, in the case of Gravity Inc. Seattle, in April 2015 Dan Price, the CEO of this payments firm made a decision to raise his 120 employees minimum wages to $70, 000. His bold action has since then received both positive and negative responses from people across the United States. This essay, therefore, seeks to analyze the gravity case from an HR point of view.
Firstly, Dan Prices move and decision to increase his employees annual wages to an approximate of $70,000 was beyond personal. According to him, one of the key reasons why he made this change was to bring about a sense of income inequality in the United States. This is substantiated by the fact that his intentions to bring about an income balance or rather an equality between the amount earned by the rich and the poor, was set on primarily changing the manner in which America does business. In a similar regard, it is evident that Prices wage rise decision was intended to alter the face of the American Business, for the better. This is essentially evident from the fact that, before making the big decision on his employees annual wage changes, Price, like any other entrepreneur or corporate boss in America, was initially scared by the economic recession, at the time. For this reason, he found himself tightly controlling the companys costs, which was inclusive of his employees annual wages. Thus, in a nutshell, it is evident that Prices reasons for the wage changes were to bring a new revolution, not only to his company but also, to a majority of the American businesses, as well.
While the Human Resource team, in various organizations, is responsible for hiring and compensation of the employees in an organization, certain key factors should be put into consideration before making a decision as huge as that made by Dan Price. The following are some of the factors that I would consider as a VP of an organization, before instituting an increase in the organizations minimum wage.
i. Review the current market comparables
As a VP of Human Resources, it is important to review the salaries of the organizations employees by comparing them against those of other employees in other companies with similar features as your own organization. This can be perfected through accessing this kind of data with the help of a salary consultant or even accessing the data from available compensation databases.
ii. Considering the general economic conditions
The general economic situation is also another important factor that should be put into consideration before altering the organizations annual minimum wage. This includes considering the changes in the general cost of living, and the inflation rate, among others. Regarding the consideration of the cost of living, as a VP of HR, this can be primarily measured used Consumer Price Index (CPI), which is issued on a monthly basis by the United States Bureau of Labor Statistics (Osberg, 2015).
iii. The Ability of the organization to pay that amount to its employees
While labor unions have increasingly demanded a substantial raise in the employee annual wages, the decision on what amount to increase, all boils down to the prosperity and the ability of the firm to pay that amount to its employees. In the same vein, an organizations supply and demand is basically the most fundamental determinant of the companys wage rates. Thus, in this regard, if the firm is highly successful and is also doing well in the market, then instituting an annual wage increase for all the employees would be justifiable.
As a VP for human resource, the pressure to deliver, keep employees motivated, and at the same time ensure productivity is experienced. As of the Gravity case, Prices overall goal was not only to motivate his employees and increase the productivity of his firm but to primarily change the face of the American business, which has for a long time, thrived in economic inequality. Firstly, the overall goal, in this case, would be to enhance income equality. In the modern day today, income inequality has increasingly become prevalent. This income variation has been characterized by the top earners capturing large shares of the overall income gains while the income of those who earn little amount only rise a little. This being said, as a VP of HR in a certain, organization, the following are some of the things that I would have done differently, so as to achieve similar goals as Price.
i. Build assets for the working families
Through his decision to increase his employees annual wages, Price was able to achieve his overall goal which changed him from a mere classic entrepreneur into a crusader, who radically advocated for income equality in America. Thus, so as to achieve similar goals, as a VP of HR in a certain organization, I would come up with policies that encourage higher saving rates but at the same time lower the building assets cost for employees both in the middle and the working class. Additionally, the building of assets would also involve encouraging the access to low-cost financial services and home ownerships, which in the end ensure that an income equality, between those with high earnings and the rest of the employees, is stricken (Walsh, 2015).
ii. Institutionalize well-designed labor market policies and institutions
Similar to Dan Price, I believe that a business should have a purpose larger than just making money. Therefore, as a VP working in the Human Resource office, I would strive to institutionalize excellent labor market policies which would relatively increase the minimum employees wage. This, in turn, would narrow the distribution of the distribution of both the labor and wage income. In a similar regard, setting up institutional arrangements would not only benefit the organization and its employees but would also strengthen the trade unions, which consequently reduce the labor earning inequalities through the enhancement of a distribution of earnings that is more equal.
Similar to Gravity Inc., there are a couple of organizations that would successfully implement the increase in the annual employee wages, owing to their productivity and their ability to pay their employees. A good example of such a firm is McDonalds, a well-renowned fast food giant. Unlike much other organization, McDonalds voluntarily suggested that it would increase their minimum wages by a significant 10%, without having to wait for the Congress to suggest a minimum wage. Additionally, Aetna, a health insurance company would successfully implement the change in the minimum wages for its employees. The reason why this is possible for the company is due to the fact that the company has already set a plan which would see an average pay rise of about 11% for every employee.
Conversely, despite the fact that the congress insists on an increase in the minimum wages in many organization, there still are those companies who are not able to achieve a minimum wage rise, which is as low as $15. For instance, despite being a large company, Wal-Mart, is one of those firms who are not able to successfully implement a minimum wage increase change. According to an SEC filing, Wal-Mart has an actual profit which is approximately 3% of its total revenue. Thus, considering the millions of employees working for the company, this insignificant amount of profit could easily be wiped out just with the implementation of a $15 wage (Saltsman, 2016).
In conclusion, while a majority of the modern day firms in the United States are overly pushed by the labor unions and the congress laws demanding for an increase in the employees minimum wages, Dan Prices move to raise his, was voluntary. For this reason, he his decision has not only positively impacted his firm but has also served as an example that is today, being emulated by a number of business operation. Additionally, from a human resource point of view, if a majority of the firms in the United States would follow suit concerning Prices move, then America will no longer have to deal with the prevalence of income inequality.
Osberg, L. (2015). Economic Inequality in the United States. Taylor and Francis.
Saltsman, M. (2016, May 20). Why Wal-Mart can NOT afford to pay workers a $15 minimum wagecommentary. Retrieved from http://www.cnbc.com/2016/06/20/why-wal-mart-can-not-afford-to-pay-workers-a-15-minimum-wage-commentary.html
Walsh, D. J. (2015). Employment law for human resource practice (1st ed.). Cengage Learning.
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