breaking news

Seven arrest warrants issued in Fort Valley State University sex investigation

Atlanta company raises all pay to $50k: quirky or smart?

Most smart employers want to pay enough to get the workers they need, but not more.

Yet, an Atlanta company with technology that fuels Airbnb, has raised the minimum pay for all employees to $50,000 and the company’s chief executive says the firm will save money in the long run by paying more.

Wait, what?

True, said CEO Andrew McConnell, although he took some convincing.

The idea came to him along with an executive he hired from Portland, Ore. A guy who wanted the company to mimic Gravity Payments, a Seattle company that made news in 2015 by lifting the pay of everyone on the payroll to at least $70,000.

The new executive’s suggestion drew a jaundiced response.

“I said, I’d like to be morally good, but I also have to run a business and look at the economics,” said McConnell.

But the new executive had been friends with Dan Price, the CEO of Gravity Payments. He believed in the idea and he was persistent. was founded in Atlanta in 2013 with the financial backing of Jackson Square Ventures. The company makes arrangements with management companies and owners that guarantees them an income when their property is listed on Airbnb.

“We have a network of about 1,200 management companies,” McConnell said. “Instead of taking a percent of what you get…We will tell you exactly what you will make. We take the financial risk.”

It’s not a huge company. Fewer than 20 employees, although they’re hiring at least a half-dozen more: a business manager, a couple data analysts, an engineer, some sales people.

Many people – especially techies and executives – make more than $50,000 a year. But large numbers of office personnel and maintenance workers do not. And of course, the pay is typically lower in retail, warehouses and many healthcare jobs.

Yet if Gravity Payments is the model, why not lift everyone’s pay to $70,000?

Well, McConnell said, the tax burden and the cost of living is lower in Atlanta than in Seattle. “I think $50,000 here is like $71,000 or $72,000 in Seattle.”

Raising the floor to $50,000 still lifts above most companies.

The per capita personal income in metro Atlanta is $47,348, according to the most recent data from the St. Louis Federal Reserve Bank. By comparison, Seattle’s is 36 percent higher — $64,553.

The median household income in Atlanta – which would include two-paycheck families – is about $62,000.

McConnell said he read about Gravity Payments and started thinking more deeply about pay: How could higher pay make the jobs different?

“So I started running the numbers,” he said. “We found that doing this could actually save us money.”

If the pay is higher, the job needs to be more valuable to the company. That means giving the employee greater responsibility and finding ways to automate more menial tasks.

“We create such good jobs that you can raise the minimum and they will end up delivering more than $50,000 of value to the company,” he said. “And on the back-end, you raise the pay and you create a better talent pool of people coming here.”

It’s the right thing to do, but it is not philanthropy, he said. “It’s benevolent self-interest.”

So the pay went up.

Average wage growth in Atlanta during the past year was 1.8 percent, according to jobs data site Glassdoor. In contrast, some people at got raises of 40 percent. The whole payroll increased 20 to 25 percent.

“We did it all at once on April 1,” McConnell said. “We warned people so they didn’t think it was some kind of April Fool’s.”

Naturally, profit margins are taking a hit.

“I think it’s penny foolish and pound wise,” he said. “We are playing a much longer game than playing for one quarter or for a year. If this moves us to be more productive, then it is an investment well worth making.”

If it’s sensible, why isn’t it a trend? After Gravity Payments made its big splash, there were few mimics.

In fact, paychecks have increased less than they should have, said Jed Kolko, chief economist of Indeed, the Internet jobs site.

The labor market is tightening as metro Atlanta employers hire and the pool of unemployed slowly shrinks.

“We have seen some acceleration of wage growth in the data, although not as much as you would expect from such a low unemployment rate,” Kolko said.

Considering typical corporate pay in Atlanta, is paying more than they have to.

There is, he said, a famous precedent for that, Kolko said. “The best-known historical example of that is Henry Ford who famously raised the pay of his auto workers to $5 a day.”

Higher-than-market pay makes the most sense when it’s hard to find good workers or when worker mistakes are especially damaging.

And, while it won’t always work, in the right situation higher pay can boost productivity, Kolko said. “It gives an extra incentive for people to perform really well.”

Perhaps the best financial reason to raise pay is to keep good performers from quitting, because it is often very expensive for companies to find, hire and replace workers, he said. “So higher pay reduces that churn, which is especially important if you are in an industry where it is hard to find workers.”

Gravity Payments was derided by many critics for being PR hungry or corporate hippies who would run themselves out of business.

Three years later, Price says the move was worth it, but not without a certain cost. In a recent op-ed piece in Inc. magazine, he said the company has prospered, growing by more than one-third. But the company had accidentally re-branded itself.

“This brand misalignment has had a negative impact on our company by confusing prospective clients and obscuring our commitment to independent business advocacy,” he wrote. “We have become ‘the $70K company.’”

Per capita personal income, by metro:

Atlanta: $47,348

Seattle: $64,553

Charlotte: $46,679

Dallas: $51,099

New York: $65,846

Los Angeles: $55,624

Phoenix: $42,218

Source: Federal Reserve Bank of St. Louis

Reader Comments ...

Next Up in Business

Delta to launch flights from Atlanta to Ontario, Calif.
Delta to launch flights from Atlanta to Ontario, Calif.

Delta Air Lines announced plans Friday to launch flights between Hartsfield-Jackson International Airport and Ontario, Calif., adding another way to get from Atlanta to Southern California. Atlanta-based Delta plans to operate one daily flight on the route starting April 22, 2019 and a second daily flight starting June 9. The route will be flown with...
Norfolk Southern CEO talks potential Atlanta move as  Gulch vote nears
Norfolk Southern CEO talks potential Atlanta move as  Gulch vote nears

The CEO of Norfolk Southern told employees Thursday the company is looking to consolidate its headquarters in Atlanta, “but only if many aspects can be resolved,” the Virginian-Pilot newspaper reported.  Though the company had previously discussed a potential consolidation of its operations, the comments by CEO James Squires were...
Techstars Atlanta effort to spur growth
Techstars Atlanta effort to spur growth

Tech accounted last year for nearly 300,000 jobs with average pay of $85,681 a year and a total payroll of more than $25 billion, according to the Technology Association of Georgia. The region is a leader in some tech specialties, like fintech, the software behind credit card transactions and credit processing. But much of it starts...
Phipps Plaza breaks ground on luxury remodel, seeks tax break
Phipps Plaza breaks ground on luxury remodel, seeks tax break

Crews in hard hats are about to make Atlanta’s fanciest mall less mall-like. The $300 million remake for Phipps Plaza in Buckhead will include plenty of upscale additions, with one important exception: No new retail stores. In fact, the mall is dropping from three anchor department stores to two, with the recent closing of Belk. Phipps&rsquo...
Coca-Cola gives $2 million for youth programs in Atlanta
Coca-Cola gives $2 million for youth programs in Atlanta

The Coca-Cola Foundation has donated $2 million to support youth development programs in Atlanta. The grant to the Atlanta Police Foundation’s Vision Safe Atlanta campaign will fund programs like the At-Promise Center. The Center serves more than 300 at-risk youths who live on the city’s Westside, providing educational and professional...
More Stories