Q 1: How will the new $70,000 minimum salary impact Gravity’s employees?

Ans: According to research by Economist Angus Deaton and Psychologist Daniel Kahneman,
emotional wellbeing of an employee is improved if his income would be around $75,000. This
study further suggests that benefits of happiness is carried from personal to professional sphere.
Based on this research, it is expected that the new $70,000 minimum salary will enhance the
productivity of employees at Gravity because if the social needs, associated with wealth, of an
employee is being fulfilled easily with a good salary, he/she would be working more diligently at
his work. With this much salary, one can easily help out his family, pay off loans, afford an
apartment or can have a child with better financial position. Some employee may also decide to
stay at Gravity for long. On the other hand, some find this decision offensive for them and might
decide to leave the company because this decision would be unjust in a way that the people
having least experiences will be going to get enormous raises.

Q 2: How will the $70,000 minimum salary impact future financial results at Gravity over the
short-term? Over the long-term?

Ans: Price announced his $70,000 minimum salary decision on Apr 13, 2015. To get to know
about short term results, we can refer to some exhibits given in the study. For example, Figure 1
illustrates that Net Income of Gravity Payments is continuously rising in the months following the
month in which decision is made i.e., April-2015. Whereas Figure 2 is showing an increase in total

Figure 1 Figure 2

assets in the month of July-2015 i.e., after months of decision taken. But all of this was obtained
on the expense of reducing profit margins and losing some clients who were afraid and left in
anticipation of rising fees and declining services. Some considered it too much competitive for
small businesses as it’s hard pill for them to swallow to make $70,000

Following figures also show the impact of decision on number of accounts Gravity gained and its
monthly recurring revenue (MMR), which are also showing positive signs, year-on-year basis
results.
 Figure 3

Figure 4

Over the long term, the answer lies with the customer retention. Apparently, immediately after
the decision is taken, Gravity Payments experienced an inrush of inquiries, job applications, new
clientele etc., but since the business model of Gravity is designed in a way that it starts to earn
profit 13 months after the customer signed-up, Price has to better focus on how to retain
customer. Considering the short-term results which showed positive signs, it’s expected that
Gravity will keep getting new clients which in turn result in growth of revenue. In the words of
Harley (VP Ops.) “This kind of decision takes a lot of planning, but it takes a lot of guts, which Dan
has.”

Q 3: Was Dan Price right or wrong to set a $70,000 minimum salary at Gravity?
Ans: Dan Price was obviously right in his decision. The reasons have been well explained in
above two questions. i.e., higher productivity of employee, prolonged employee retention,
better financial results and growth in clients and revenue etc.

Q 4: What should Price do, if anything, to spread his vision beyond Gravity?

Ans: Following are the tasks Price should do to spread his vision.

1. Since the present and previous city mayors both were advocating the raise in minimum
salary for workers, Price should liaise with them in advocating this right of worker as
speaking out from an official government platform will add the value to this notion and
more and more organizations and companies would be motivated by his practically
implemented idea of raising minimum salary.
2. Price’s decision had sparked the debate over social media, as Exhibit 9 reflects increased
websites traffic, elevated likes, followers, shares and interactions on SNS. Considering
this response, he should use social media power to convey and spread his vision not only
locally but globally to other countries.
3. Price may start a campaign through his own resources using collaboration with his peer
CEOs and clients as well. For example, a reasonable concession in processing fee given
to some business on the condition that they will try to implement Price’s policy in their
own organization. Similarly, having talks within the Seattle with CEOs of a dozen global
giant companies like Google, Facebook, Twitter etc. and showing them the short-term
and long-term benefits of adopting this policy.