Here) Before I go any further I would like to clarify that this is not an argument for or against McDonalds. I think it is great they are trying to help employees make the most of their money. This is simply to show what real minimum wage is going to get you.
This is their breakdown of the budgeting:
First: Let's assume you are a normal human being and do not work 80 hours a week. At Michigan's minimum wage you would make:$1,184 dollars a month working a 40 hour week BEFORE taxes. Oh and this is also before a lot of employers will be reducing their full-time staff to 30 hours a week because of insurance requirements. Michigan also has a higher minimum wage than other states. Consider yourself lucky.
Next: Monthly expenses.- Savings! HA with $1,184 a month we won't even consider savings.
- Mortgage/Rent for this area in Michigan I will say is pretty reasonable.
- Car Payment. According to Dave Ramsey the average car payment is $475. But let's say we have a junker and cut that payment in half that's still about $237 dollars.
- Car SLASH home insurance: LOL! 100 dollars to insure your car AND your house? Let's put it this way: I have never had a ticket or accident and I am paying $140 a month for car insurance, (but if you had that junker that gives you the cheep car payment, you can bet your sweet ass you will be paying more for car insurance!) Let's just assume you are renting and you choose not to have renters insurance. I mean... after that car insurance payment can you afford renters?
- Health Insurance? What Health Insurance? And who has ever paid 20$ a month for health insurance? Let's assume, because you have a minimum wage job that the state gives you free insurance.
- Heating. This is my favorite. ZERO dollars!?! I think I will be fine if I live in Michigan without heating for a winter. See you in the spring when I defrost. DTE Energy says the average cost for natural gas is $80 a month. Let's say you skimp on the heat, because your broke and your bill is $60.
- Cable/Phone. Cable is not something you need to live and a phone is important for emergencies. A 60 minute airtime card for TracFone for the basic phone needs is $20 a month.
- Electric I would say is reasonable
- Oh wait... Where is food on their budget? Nowhere. I do a lot of couponing and still spend about $200 a month on food/groceries/health and hygiene.
- Also, How are you supposed to get to work? The majority of Michigan residents live in rural areas and have to drive to work. Because gas is something so crazy it is hard to budget for that and with that Junker car you have for a low car payment you can be sure it is a gas hog. Let's assume you pay $150 a month in gas for your car.
Monthly Gross Income: $1,184
Monthly Expenses:
Savings: $0
Mortgage/Rent: $600
Car Payment: $237
Car/Home Insurance: $140
Health Insurance: $0
Heating: $60
Cable/Phone: $20
Food/Groceries/Essential Living Supplies: $200
Gas for Your Car: $150
Monthly Expenses Total: $1,407
Monthly Spending: - $223
Oh would you look at that. You are in the red! Living with the bear minimum. I guess they were right, you better not be buying any food! Remember: I did this with Gross income (before we take out taxes) and you are still $223 dollars in the red.McDonalds and Visa have a great idea trying to teach employees how to budget, but it will never be effective, because they are not teaching them how to budget for their real life, or even how to budget to have enough money to eat. Unfortunately, this is how many people live every day.
The executives at McDonald's clearly have a skewed version of reality when it comes to saving and spending on minimum wage. With that said, I still have a few issues with your analysis of their proposed budget.
ReplyDeleteDoes the two jobs part of the budget assume that there are two people in a household working? If so, then the 80 pay hours a week would seem more reasonable. It doesn't seem like enough information is given, however, to determine if McDonald's means one person needs to work 80 hours of if a household should have 80 working hours between all residents.
I agree that the idea of saving is a little lofty -- people that live paycheck to paycheck don't often save much. Some other items in the monthly expenses don't really belong. Most people that work minimum wage don't have a car payment at all. They save up several hundred dollars (usually from tax credit refunds) and buy a junker to drive around for a year or two. If you're over 25 and have a clean driving record, PLPD can be as low as $40 a month, so the estimated $100 is actually a little high.
I mentioned tax credits -- something this budget doesn't really state, and it may be where they get some of their figures. When they state that heating will cost you nothing, they're pretty accurate. Most cold weather states, Michigan included, have legislation that prevents your heat from being shut off from about November until May. It's literally illegal for DTE or Consumers to cut your heat off during those months. On top of that, states (again, Michigan included) give tax-paying workers a "Home Heating Credit" every year if they file for it when submitting yearly taxes. This credit goes straight to your gas provider to be credited to your gas account, and usually amounts to several hundred dollars. Anyone who is working a minimum wage job and has children is eligible for this credit. Not everyone is aware of this assistance program, but it is very real. My household has literally paid less than $200 a year for heat.
You mention that the budget created by McDonald's doesn't include money for food. You're right -- it doesn't explicitly state that. It does, however, allocate $800 a month for "Monthly Spending Money." I think food is implicitly grouped into that category. Also, many states offer some sort of Bridge Card program that allows people of low income to purchase food at no cost to them. This would help ease at least some of the burden of food cost.
Lastly, you mention that people who work minimum wage jobs are just "given" health insurance through some sort of government assistance. Not true at all. Unless you are under 18 or an elderly person, there is no form of "free" government healthcare. Even if you are in one of these two groups, Medicare and Medicaid are far from free. So, while $20 a month for healthcare is a far cry from actual costs, it is erroneous to assume that minimum wage workers are being provided with free healthcare.
Let me conclude by saying I'm not defending McDonald's concept of minimum wage budgeting. I'm not even saying that minimum wage workers are fairly paid or fairly treated. I'm just trying to point out that there are some crafty ways to make minimum wage work. I grew up in a family where a single parent provided for himself and his two sons on as little as $14,000 a year. It is doable.
Jim,
DeleteMany of these points I certainly agree with you on. This is reflective of my experience. It would be impossible to write on all the possible variations people can make to their budget. That's why it is important for each person to create one.
First off, I am assuming this is for one person for two reasons. 1. I know more about budgeting for one person and 2. to simplify the argument and talking points.
A lot of these things I would like to dive deeper in, but for the sake of my target audience and personal blog preferences I prefer to keep things a little short. One of the things that got cut from this was the car payment. I don't have a car payment and I never have. (I paid cash for my new vehicle) However, getting that Junker can lead to a lot of repair bills that can be very costly. So that is an alternative to that car payment selection. (I am also aware my insurance is high, but this is one of the parts where it is reflective of my own experience.)
I am aware of the Home Heating Credit and I think it is a wonderful and necessary program.
The bridge card is a very difficult program to get into and in my experience is more difficult than the insurance provided by the state. (If that isn't your experience you can flip the food and insurance costs and adjust them, but it would mostly all come out in the wash.) I was also assuming the monthly spending money included food and such, but Middle School has taught me every budget needs to include the cost of food. I am surprised they didn't have it categorized.
Absolutely! Thousands of people make minimum wage work. I have no idea how they do it with a family and I have deep respect for them. I actually am pleased with McDonald's. I am no way attacking them. I think that it is wonderful that they are trying to help their workers manage their money and help them make what little they have work. It is something that is important. It is just an eye opener and they have a lot of work to do to further improve the program.
Thank you for the comment and allowing me/prompting me to explain a little more in depth than I did in my article for length reasons. It is very nice to see that you do not take anything at face value and always read critically! My main point and take home message here is just to raise a little more awareness and realism to the issue. Poverty is something I feel very strongly about and like to bring awareness to.