This Price Is Right — About Reducing CEO Pay So Companies Can Pay More to Their Lowest Paid

Stephen Herzenberg |

No, not Keystone Research Center labor economist Mark Price. Dan Price. CEO and owner of Gravity Payments, a credit card processing company in Seattle. Although the two men do kind of look alike.

CEO Price plans to raise the minimum salary at his company to $70,000 per year.  He’ll slash his own salary until the company gets back to the profit level it had before raising its minimum salary.

Price’s rationale for increasing his company’s minimum wage: lifting the pay of lower-wage workers will make them happier (increasing income above $70,000 makes less difference to happiness), and the company will benefit in the long run. Price also felt his action might “highlight the corrosive effects of income inequality in American society.”

When you look at who is criticizing Price’s action — e.g., Rush Limbaugh — you know Price is on the right track.

Price’s pay-leveling approach would make particular sense in Pennsylvania’s nursing home industry. As we documented in a report released last week, the CEO at the nursing home chain HCR ManorCare earned $18.4 million per year over a recent seven-year period — $129 million total. Meanwhile, typical nursing assistants in nursing homes earn about $27,040 per year. This is a CEO-to-nursing-assistant pay ratio of 684 to 1 in an industry in which 81% of for-profit nursing home revenue comes from taxpayers (via Medicaid and Medicare). As this column in the Carlisle Sentinel points out, there’s something very wrong with this picture.

The same happiness research cited by Price suggests that lifting the earnings of low-wage nusing home workers making $27,040 per year (or less) would have a profound impact on their quality of life. Leveling top-to-bottom pay ratios could also improve quality of care in nursing homes, driving down staff turnover that severs the caregiver-resident relationship and reinforcing the calling that led many nursing assistants to caregiving.

CEO and minimum pay at Gravity Payments, which largely serves other private businesses, is up to the company’s top management. The pay at publicly funded nursing homes is up to all of us: It is a policy choice.

Distribution of the public funds on which this industry depends could be conditioned on decent pay at the bottom and justifiable pay at the top — justified morally and based on a real (not invented) connection to improving care quality.

If we make the moral choice Price has made for more equal pay, we can transform the lives of workers and nursing home residents. What’s the wait?