Why Companies Are Implementing Their Own Minimum Wage [e193]

May 22, 2015

The guys close out the week by discussing why companies like Google and Facebook are raising their ownminimum wage pay and how one company in Seattle isblowing up the minimum wage model.

Full Podcast Transcript

NASIR: All right. Welcome to our podcast where we cover business in the news and add our legal twist to that news. My name is Nasir Pasha.

MATT: And I’m Matt Staub.

NASIR: I feel like I don’t have to introduce myself anymore – like, ever – not even on the podcast. I’m just talking about in general anywhere.

MATT: Just go right into it.

NASIR: People should know who I am.

MATT: You’re the new… I don’t know. Who’s the most recognizable person?

NASIR: Abraham Lincoln.

MATT: Most recognizable living person.

NASIR: Oh, Abraham Lincoln.

MATT: I was going to say Obama but I think it’s an athlete – like, Michael Jordan, I think used to be the most well-known person, most recognizable person in the world.

NASIR: But maybe not now. If you think about it, there’s a whole generation of kids that haven’t even seen Michael Jordan play.

MATT: What was it? Like, Jordan and then Tiger Woods was really popular. I don’t know. Maybe Lebron James now.

NASIR: No, it has to be a movie star or celebrity, not an athlete. It’s more universal.

MATT: There’s not even any big movie stars or musicians.

NASIR: Actually, it depends – like what you referenced last week – their Q score. My Q score has gotten up there enough that I should just not have to introduce myself anymore.

MATT: Yeah, you should wear a shirt that has your score on it.

NASIR: Yeah.

MATT: Very good. Well, good work.

NASIR: Thank you.

MATT: Next time you and I are in the same spot and we’re meeting someone for the first time, I’ll just introduce myself and you won’t say anything.

NASIR: Exactly. And, if they don’t know me, I’ll get upset too.

MATT: Just leave?

NASIR: I’ll act offended, yeah.

MATT: Well, I can’t make a connection from that to this so I’m just going to go into this but there’s a couple of things that have popped up, one of which is a little bit older but just increases in pay in general. And so, the reason we’re talking about this – for those of you who haven’t heard – Facebook just announced or recently announced that they’re going to pay a minimum $15.00 per hour to contract workers, right? Yeah, to contract workers such as cafeteria staff and janitors just to deal with this minimum wage thing that’s going on. I mean, $15.00 is higher than pretty much everywhere else other than the one spot in Washington State.

NASIR: I don’t know if they’re at $15.00 yet. I think they will be or something but, yeah, you’re right.

MATT: What’s interesting about this is it’s raising the minimum hourly rate of contractors, contract workers, so not employees.

NASIR: Yeah, I thought that was strange too.

MATT: Contractors will receive a minimum of 15 days of paid vacation, $4,000 new child benefit for parents who don’t receive parental leave. Isn’t that, like…?

NASIR: Exactly. That’s why I think, when they say “contractors,” I think this article’s incorrect somehow.

MATT: It has to be – inc.com?

NASIR: No, I’m serious, because also they’re talking about lower paid workers regarding their janitorial staff and cafeteria. Like, okay, you could have a janitor or cafeteria workers in contractor status but, with Facebook having a campus and a building and they probably need something there on the full day, I don’t think that’s the case in this case so I still think they’re still employees.

MATT: Yeah, that was the first thing I noticed, too. Just the job they were performing, it seemed like it was an issue. This has to be employees, I guess.

NASIR: First of all, no contractor gets paid vacation or new child benefits, you know?

MATT: Well, we won’t dig too deep into that. If it’s the case that they are independent contractors, we’ll maybe talk about it. But this kind of connects to this company in Seattle. I guess Washington State really loves to treat people well. This company said he’s making the minimum wage of employees that work for him $70,000 a year which obviously far exceeds whatever the minimum wage is. I believe it was a county in Washington, wasn’t it?

NASIR: Well, okay, Washington is at $947 since April 1st 2015 and will increase to $15.00 by 2017 so you’re right about the state and it’s only for employees for over 500 employees, if I recall, and for all businesses in 2021. We still have a couple of years for that. Facebook may apply to that. I assume they have more than 500 employees in Washington.

MATT: I would assume so.

NASIR: Wait, hold on. Is Facebook in Washington? I thought that was Microsoft.

MATT: No, Facebook’s in California.

NASIR: Never mind; don’t listen to me. But Google, by the way, increased their minimum wage for its lower wage workers to $15.00 too and I’m looking at another article – because I was trying to confirm, is it contractors or not – and it looks like this other Guardian article is saying $15.00 an hour for contractors and vendors. On top of that, company also announces other benefits include 15 vacation days and $4,000 bonuses for having a child. But I don’t know if that’s necessarily connected to the minimum wage for contractors.

MATT: This is something that all companies experience and that’s competitors offering higher pay – no, not necessarily poaching your employees but it’s a nice incentive to have them to leave. In this situation, I mean, I assume the employees that are getting paid minimum wage probably aren’t as crucial and I would say are probably more replaceable than the higher paid executive – possibly executive – level employees. I don’t know if that’s necessarily the case here but, on the flip side, I think what’s good in raising this pay is it convinces employees to stick around longer and show some loyalty. It’s less money you have to spend training other people, just dealing with that whole hassle, and making your employees happy is obviously a big thing and I think this is going towards that and so I think that’s the main reason for why this is.

NASIR: Yeah, and I think it’s important to note that who announced this was the chief operating officer who is a person named Sheryl Sandberg and she in particular has made some waves in her outspoken discussion regarding the disparity in the tech sector between men and women and their wage. And so, it’s not too surprising this is coming from that but you bring a good point – what was the pressure for them to do so? Even though Google did this already a little bit ago, from a cultural perspective, there’s just kind of not necessarily political pressure but cultural pressure to keep up with that and, you know, Facebook wants to be seen as the leaders in their industry and leaders of innovation, not only in their actual service and their great facebook.com website but also in their workplace.

MATT: Well, I mean, everything I’ve heard is both Facebook and Google are pretty good places to work. I think there’s a pretty overall happy environment there. It’s obviously part of the culture.

NASIR: We should also talk about that other Seattle company which is very interesting. They’re a company called Gravity Payments which is some kind of credit card processing company. They announced – this was back in April but I think it was even before that, I think it was more than a month ago – where they announced they had a meeting at the company and they basically announced that everyone is now making at least $70,000 per year and that’s their minimum wage, and that’s pretty huge for some people that went up quite a bit.

MATT: Obviously, they just pulled quotes from people that worked them but one of them says, “This gives me the ability to travel and see my family more.” It’s like, well, now that you make more, taking time off work, that’s not the idea. But what was cool about this was how do they do this?

NASIR: Yeah.

MATT: The CEO was taking $1 million a year in salary and now is getting paid $70,000 a year. That’s the ultimate motivation for the people that are I guess at the lower rung of the totem pole – the CEO of the company making the same as you. That’s got to be a good environment for them.

NASIR: And before the wage increase, the average salary at Gravity was $48,000.

MATT: Still good.

NASIR: And over 70 employees ended up getting raises. It’s pretty fascinating because, you know, I’m sure, as business owners, and even I, we look at a lot of discussion on a philosophical perspective on how to create an environment for your employees and treating employees right to make your company better. One aspect of that that I see reoccurring is, if your employees like you and believe in the company and feel a sense of not ownership but dedication and appreciation for their employer, they’re going to work hard. They’re going to work hard for you and I can’t imagine a better way. I know money is only one incentive but the fact that the CEO is taking a price cut in order to get that $70,000 – and it’s not just any simple raise, it’s a significant raise for some people.

MATT: It’s not even just a price cut. Going from $1 million a year to $70,000 is quite the difference.

NASIR: Yeah, that’s right.

MATT: He looks like a pretty young guy, too.

NASIR: We should know it looks like the raises will be phased in over the next three years. You know, you always have to read between the lines and the fine print. But, still, significant.

MATT: It will be actually increased over time with inflation.

NASIR: Yeah, exactly.

MATT: By the year 2040, it actually will correct out to $70,000 a year.

NASIR: They’re going to have to keep up with it anyway because, you know, with Washington’s minimum wage increase.

MATT: Well, if that jumps that high, what is that? 15? I think we’re only like halfway.

NASIR: Oh, yeah, that’s like $31,000-some, not even close. Yeah, $70,000 is about $30.00 an hour or so.

MATT: Double minimum wage. If you actually are employed with two positions there, you can come close to it.

NASIR: Exactly, maybe that’s what’s going on.

MATT: I was actually watching Office Space last night because it was on and they had, was it Milton who actually had been fired a long time ago?

NASIR: Yeah.

MATT: No one had officially pushed him out of there.

NASIR: He’s basically working for free.

MATT: It’s like, “We’ll just let this one sort itself out.”

NASIR: Very good. So, that’s what’s going on. You know, we’ve been talking about minimum wage just to kind of give a quick update. I mean, I think we’re still seeing, you know, 2014 was a big year in minimum wage legislation but it’s slowed down quite a bit. I think, nowadays, we just hear some rumblings here and there. But, from a federal level, it’s quieted down quite a bit, but there’s been about six states or so in the last year that have increased their minimum wage.

MATT: Yeah. I mean, it’s been a pretty big thing. I guess we’re coming up, California? No.

NASIR: No, we still have another…

MATT: 2016, right?

NASIR: Yeah, 2016 I was going to say, exactly.

MATT: Yeah, I was thinking of the three days paid time-off or paid sick leave kicks in July 1st – that’s what I was thinking of.

NASIR: Texas is still at $7.25 – no changes in the works. New York…

MATT: I thought everything was bigger in Texas. I guess except the minimum wage.

NASIR: Not the minimum wage. New York’s at $8.75 right now and that was changed this last December and, beginning of next year, I should say December 31st, it’ll go up to $9.00 and there’s some other rules with, like, other minimum cash wage jobs and so forth. One more, Illinois, employers may pay, okay, that’s at $8.25 but then Chicago is going to $10.00 on July 1st.

MATT: That’s pretty good.

NASIR: That’s going to affect quite a number of people.

MATT: Some good pizza there. Actually, I like the Italian beef, preferably.

NASIR: The Italian what? Beef? I’ve had the deep-dish there and I think we’ve talked about it. It’s not my cup of tea or pizza.

MATT: Yeah. You don’t like the deep-dish pizza.

NASIR: Yeah, that’s what it is.
All right. Well, thank you for joining us everyone and have a good weekend.

MATT: Yeah, keep it sound and keep it smart!

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Legally Sound Smart Business

A business podcast with a legal twist

Legally Sound Smart Business is a podcast by Pasha Law PC covering different topics in business advice and news with a legal twist with attorneys Nasir Pasha and Matt Staub.
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