Dan Price, the CEO of credit card processing company Gravity Payments, recently set a minimum salary of $70,000 for everyone at his company.
He saw himself, as did many others, as a benevolent, ideal boss who cared about his employees. But when some employees quit because of this action, it revealed that whether Price meant to be or not, he was a corrupter of justice.
Price, like many liberals today, sees income inequality in-and-of-itself as a moral evil. He has said, “I want to fight for the idea that if someone is intelligent, hard-working and does a good job, then they are entitled to live a middle-class lifestyle.”
Price over the next few years will almost double the starting salaries of entry-level employees to $70,000 and, in solidarity, cut his own million dollar salary to that level. How could he afford to do this? His business is successful for sure, but in order to pay primo wages for entry level jobs, he had to flatten his whole wage structure. Workers who had been at his company for years or who were contributing the most economic value to the company did not get their wages doubled if they received raises at all. There would simply not have been enough money to do this. In any case, to raise everyone’s wages correspondingly would have perpetuated income inequality.
Price’s action was a real-life version of an action depicted in Ayn Rand’s Atlas Shrugged. In that novel, the owners of the Twentieth Century Motor Company decided to run their car factory on the Marxist doctrine “From each according to his ability, to each according to his need.” In that factory the best and the brightest were penalized for their productive virtues with more work and lower wages in order to meet the needs of those who were not as productive. The best people left, production declined, needs multiplied as everyone tried to be the neediest, customers fled, and the factory collapsed.
Sure enough, Price has found some of his best workers leaving as well. His company is still hanging on, though, with some financial challenges ahead. But the reasons for employees leaving highlight important ethical truths.
The employees who left felt they were treated unfairly because they had worked the longest and contributed the most but were not being rewarded for their abilities. This is the dark side of the thoughtless obsession with equality of wealth or condition. Equality in this context is fundamentally unjust. It’s a rejection of the basic principle of justice that individuals should earn what they get.
And this is the dark side of the notion of “entitlement” to a certain salary or condition. It requires productive individuals to cover the costs of those who are granted unearned benefits. In the case of Price, it is his business, so if he can convince some of his employees to foot the bill for others, he, as the business owner, is entitled to do so. His workers may choose to stay or go, and his customers can bear the inevitable rise in his prices and decline in the quality of his product, or they can shop elsewhere.
But in the political realm we are not allowed to choose whether to foot the billions that pay for welfare entitlements. The government simply taxes us and transfers the money to those who are said to “need it.”
Price and other liberals fail to understand that there is nothing morally wrong with inequality of condition as such. What is important is whether someone acquired wealth legitimately by producing goods and services to sell to voluntary customers. In this country cronyism is the real problem. Big banks, auto manufacturers, money-losing PC eco-companies, and others all profit through political pull rather than by serving the needs of customers. The problem is not rich individuals. It is individuals who grow rich by stealing from others with the aid of their political hacks and cronies.
It’s good business practice for companies to reward employees in order to keep them happy and productive. And most of us want higher salaries. I know I do! But entrepreneurs must judge what works for the bottom lines of their companies in the long run, and an unjust system will not work. Worse, it perpetuates envy in the stunted souls of those who demand the unearned, and it creates unearned guilt in those individuals who deserve praise rather than censure for their productive achievements.
Edward Hudgins is research director at the Heartland Institute and former director of advocacy and senior scholar at The Atlas Society.