Minimum Wage and McBudgets

[Loki]

I'm open to the possibility that the so-called McDonald's budget, odd as it is, may be enough to live on, provided you live in the right area, lead the right life etc. I think it's helpful for young people to learn the ways in which they can make their finances work a little better. However you should bear in mind that the budget presupposes either a dual-income household or a single person working two full-time jobs at minimum wage. For a dual income household, ie. one with 2 people, the numbers are right on the verge of not working out, especially if you include the missing items or or make sure the costs are accurate (eg. healthcare).

For a single person the numbers might work out but that presupposes 1. that the person can actually get and keep that many hours at two jobs whose schedules are compatible (difficult for many minimum-wage workers who keep getting their hours cut and are still expected to work on short notice or no notice at all) and 2. that the person survives for any length of time. Finally these numbers get fucked by the addition of even one child or even one mishap such as sickness, an accident etc.

Now, I don't know about your situation and what your expenses are, but when you compare your personal budget to the McBudget it might help to keep in mind that your life may be different from the lives of a person who works minimum wage for a long time even without bad habits entering the picture.

Why would 2 people working full-time jobs only make $18k a year? Two full-time minimum wage jobs should net you nearly $30k a year...The place I live in is no New York, but the cost of living here is roughly average for the US as a whole.

[wiggin]

Minx, I suspect the truth lies somewhere between what you and Loki are saying. Assuming one is careful with money and lives outside of very high rent areas, it is generally possible for an adult to live on a remarkably low income without huge sacrifices. This makes some assumptions (for example, a modest number of apartment/housemates as necessary, minimal money being set aside for savings, no splurges), but is really not unreasonable for the vast majority of places to live in the US (I don't get too worked up by people living in NYC or SF and complaining about the cost of living - they can always move elsewhere or get a better paying job). The story gets much better with two adults who both have a full time minimum wage job, though not much better. It gets marginally worse as family size increases - there are significant tax advantages for the working poor, but it doesn't completely offset the cost of children. I lived quite comfortably on my grad school stipend (which, granted, was higher than Loki's) and was able to save a few thousand dollars a year in addition. I was leading a much more privileged life than I imagine genuinely poor people experience, yet I wasn't making all that much more than the amounts being bandied about here. Now, my combined income with my wife has quintupled from those days, and our quality of life has not changed appreciably - the big difference comes in our savings/investments, the ridiculous cost of living in our neighborhood (our choice, that), and the occasional splurge (e.g. vacation). But our day-to-day life is essentially identical.

The real issue comes when you start to think of this as a long term situation. For someone in their teens or 20s, it's a not unreasonable amount of money to live on. As one gets older, though, there are increasing costs that are going to crop up - the absolute need to have good healthcare, child costs, and the need to save for retirement. In this context, you're absolutely right - it's nowhere near a living wage with this set of consumption/saving goals. Yet I think we need to be realistic here - should minimum wage jobs be a career path? I would argue not, and those who are still living on such an income going into their 30s are making a serious mistake (and have probably made some poor choices).

The issue, of course, is that some people are getting stuck in minimum wage jobs as they get older. It's probably due to a lot of complex factors, and I have no doubt it's a social ill that should be addressed. I question whether increasing the minimum wage is the way to go, though - wouldn't it make more sense to improve education, fund worker training programs, address substance abuse issues, improve financial literacy, reduce unwanted pregnancies, etc? Those are the actual problems, not minimum wage, which more or less works for the teenager burger flippers of the world. A nice advantage is that addressing the issue this way has all sorts of other wonderful knock-on effects, while just increasing the minimum wage is rather less miraculous in this regard.

I can't speak for Loki, but I suspect that he agrees that there are people in the US experiencing genuine financial hardship, and that said hardship is not always their own doing. There are events that can derail even the best intentioned person's life, and it can lead to financial ruin and genuine poverty. But that's why we have social safety nets, to catch those people who fall, help them get on their feet again, and then let them get on with the business of living. There's legitimate arguments to be had about the shape and extent of that safety net, and how we might improve it (though not necessarily through expansion). But low wages are a symptom, not the problem.

[Aimless]

Why would 2 people working full-time jobs only make $18k a year? Two full-time minimum wage jobs should net you nearly $30k a year...The place I live in is no New York, but the cost of living here is roughly average for the US as a whole.

Two full-time minimum wage jobs at $7.25/hr (ie. not the tip-augmented kind) will get you ca 30k/year before taxes, guessing ca. 24k net (pessimistic estimate), ie. ca 2k/month in net income, as in the budget example (the company has indicated recently that the budget reflects a dual-income household). Unless these two people work at the same place at the same time, their expenses are likely to be higher when it comes to cars, gas, insurance. Healthcare costs will also be higher as will phone costs. Food costs will be a little higher. And any kids at all will blow the budget to hell (28% of minimum wage/sub-minimum wage workers are parents). For one person, the numbers might very well work out.

[Nessus]

The real issue comes when you start to think of this as a long term situation. For someone in their teens or 20s, it's a not unreasonable amount of money to live on. As one gets older, though, there are increasing costs that are going to crop up - the absolute need to have good healthcare, child costs, and the need to save for retirement. In this context, you're absolutely right - it's nowhere near a living wage with this set of consumption/saving goals. Yet I think we need to be realistic here - should minimum wage jobs be a career path? I would argue not, and those who are still living on such an income going into their 30s are making a serious mistake (and have probably made some poor choices).

The issue, of course, is that some people are getting stuck in minimum wage jobs as they get older. It's probably due to a lot of complex factors, and I have no doubt it's a social ill that should be addressed. I question whether increasing the minimum wage is the way to go, though - wouldn't it make more sense to improve education, fund worker training programs, address substance abuse issues, improve financial literacy, reduce unwanted pregnancies, etc? Those are the actual problems, not minimum wage, which more or less works for the teenager burger flippers of the world. A nice advantage is that addressing the issue this way has all sorts of other wonderful knock-on effects, while just increasing the minimum wage is rather less miraculous in this regard.

"Improving education" (whatever that means specifically) inflates the value of education, and is meaningless in the long run. Especially since the only value added - type work left in the post-industrialized west seems to be menial clerk-type stuff, you don't need contour integrals to work a till. Addressing substance abuse issues sounds nice, but what does it really mean? Your nation has been addressing them for several decades and has managed a rather nice for profit prison system, but this again does not seem to do much for the roaming urban youth (other than jail them to use their labour directly). Financial literacy is something I agree with, but without the vast amounts of consumer credit going around the wider public has little to no access to the increased wealth in the west (see inflation-adjusted worker earnings vs. worker productivity and business profits), so this might just end up making the social situation worse. It's not like people are keen on curbing their standard of living just for the sake of corporate profits, no matter how much folks like Loki are for it. As for the reproduction thing, I'm kinda on the fence. Less children is good for the ecological situation, but to say that large corporations should orchestrate the breeding habits of nations seems a tad monstrous. The legal definition of genocide is only an inch away from that, is corporate profit really that morally valuable?

Conversely, I'm certainly not saying increasing the minimum wage is some kind of golden magic bullet. I did see someone mention elsewhere that the price of a burger would go up a fraction of what you'd expect if fast food workers were given substantially better wages, but these kind of soft science evaluations are just that. What I would argue, though, is that it is symptomatic of a diseased culture where the argument always fundamentally stems from the interests of capital and not the people. Whether this can be addressed in a capitalist frame-work, I don't know.

[Loki]

Two full-time minimum wage jobs at $7.25/hr (ie. not the tip-augmented kind) will get you ca 30k/year before taxes, guessing ca. 24k net (pessimistic estimate), ie. ca 2k/month in net income, as in the budget example (the company has indicated recently that the budget reflects a dual-income household). Unless these two people work at the same place at the same time, their expenses are likely to be higher when it comes to cars, gas, insurance. Healthcare costs will also be higher as will phone costs. Food costs will be a little higher. And any kids at all will blow the budget to hell (28% of minimum wage/sub-minimum wage workers are parents). For one person, the numbers might very well work out.

You'd get pretty much all of that back in tax refunds. A family of 2 earning $30k would probably end up paying about $2k in taxes. Last I checked, I'm also paying taxes on my $18k (plus a nice $360 a year to the grad student union of which I am not a member)...

My rough budget (before wife moved in):

Rent: $600 a month (could have gotten an apartment for $450 if I was willing to lose some comforts)
Bills: $60 a month
Supermarket: $300 (I don't buy cheap food)
Fast food: $120
College fees: $100 a month (includes insurance)
Electronics/accessories: $20
Air travel: $150
Other: $50 (being really generous here)
Total: $1400

Post tax paycheck (per month): $1400

If you look at the expenses, I could have easily cut nearly $150 a month from food without hurting my diet (in fact, it would probably improve it), could have saved another $150 on the apartment, and the air travel is a function of me being a dirty foreigner with a foreign significant other. Were I not a college student, I'd need to spend an extra $100 a month on health insurance.

[Nessus]

A good and socially valuable motivation to make decisions about breeding:

[wiggin]

Minx - $24k net is extremely pessimistic, income taxes are essentially zero or negative on this demographic. Also, owning a car is a bit of a luxury on minimum wage, no? If the availability of public transit/biking options is low, then the decreased rent is likely to more than make up for the cost of a beater. Kids don't blow it as much as you think because of the EITC and state versions thereof, but it certainly makes it more challenging.

Nessus - disagreed on inflating the value of education. I think you're falling for a subtle version of the lump of labor fallacy. I assume you mean that 'too many' educated people competing for a limited pool of jobs requiring said education would reduce the wage premium of said education. I strongly disagree - more highly educated/trained people translates into a net increase in jobs at all training/income levels. Regardless, you don't need to give people a bachelor's degree at an Ivy League institution to get them out of minimum wage, dead-end jobs. An actually adequate high school education with some minimal vocational training can easily make you far more employable at far higher wage levels.

As for drugs, I think we both agree current approaches have failed, that's why I suggested we fix them. Focus on treatment rather than criminalization, decriminalize the soft stuff, and focus all enforcement efforts on the big guys at the top.

Financial literacy doesn't mean people wont' take advantage of cheap credit, it just means they'll be smarter about it.

Re: less children, I don't really care if the outcome is more or fewer children - I just want pregnancies to be actually desired, and children to be appropriately cared for. Obviously it would be focused on education and voluntary action rather than some forced sterilization hellscape you're wont to imagine.

I think that you're certainly seeing the argument here revolve around issues of business and capital, but there's a fantastic argument to be made wrt the worker rather than the business. Essentially, minimum wage reduces the number of jobs available for the poor (since jobs that would only get paid below the minimum wage are often performed in other ways, e.g. mechanization). You're placing a limit on the working poor's labor market, essentially disallowing them to compete with other workers on price. If someone WANTS to sell their labor for less than minimum wage (because they can't qualify for others), they are up a creek. There was a famous economist whose name escapes me now who spent a lot of time exploring this point. As you increase the minimum wage and more and more workers of varying skill levels start to become included, the effect gets worse and worse. Furthermore, the wage premium incentive to improve one's skills/productivity disappears for a much larger range of skills, effectively incentivizing workers to stay in dead-end jobs.

There are all sorts of worker-centered reasons why a high minimum wage is not a great idea.

[Aimless]

The real issue comes when you start to think of this as a long term situation. For someone in their teens or 20s, it's a not unreasonable amount of money to live on. As one gets older, though, there are increasing costs that are going to crop up - the absolute need to have good healthcare, child costs, and the need to save for retirement. In this context, you're absolutely right - it's nowhere near a living wage with this set of consumption/saving goals. Yet I think we need to be realistic here - should minimum wage jobs be a career path? I would argue not, and those who are still living on such an income going into their 30s are making a serious mistake (and have probably made some poor choices).

The issue, of course, is that some people are getting stuck in minimum wage jobs as they get older. It's probably due to a lot of complex factors, and I have no doubt it's a social ill that should be addressed. I question whether increasing the minimum wage is the way to go, though - wouldn't it make more sense to improve education, fund worker training programs, address substance abuse issues, improve financial literacy, reduce unwanted pregnancies, etc? Those are the actual problems, not minimum wage, which more or less works for the teenager burger flippers of the world. A nice advantage is that addressing the issue this way has all sorts of other wonderful knock-on effects, while just increasing the minimum wage is rather less miraculous in this regard.

I can't speak for Loki, but I suspect that he agrees that there are people in the US experiencing genuine financial hardship, and that said hardship is not always their own doing. There are events that can derail even the best intentioned person's life, and it can lead to financial ruin and genuine poverty. But that's why we have social safety nets, to catch those people who fall, help them get on their feet again, and then let them get on with the business of living. There's legitimate arguments to be had about the shape and extent of that safety net, and how we might improve it (though not necessarily through expansion). But low wages are a symptom, not the problem.

Agreed on all counts including the notion that a single person earning a full-time minimum wage can probably live all right on that wage. I don't think that raising the minimum wage would in and of itself solve those social problems that worry me the most. My informal calculations and commentary on the McBudget isn't an argument for raising the minimum wage--it's just a way to highlight some of the challenges that many minimum wage workers face. We need to have a good idea of what those challenges are rather than to waste time and energy focusing on excuses. Taking single mothers as an example, if we can't appreciate the extent to--and the ways in--which their resources fall short of their needs then we have no hope of taking the right measures to ensure that they and their kids get out of poverty.

Re. personal experiences, my experience has been that if you have enough, then having a little more won't really influence your lifestyle very much. Similarly, if you have a little more than enough, getting a little less will likely not necessiate many dramatic or unreasonable sacrifices, provided fortune favours you. However, if you don't have enough, even if it's by a small amount, your life will suck considerably more than the lives of anyone who has enough, and your life will likely be a lot more vulnerable to any and all setbacks. You can define "enough" in many different ways, but the gist of this little rant is that it's hard to draw conclusions by comparing dollar amounts without taking things like threshold effects into consideration. Loki makes 3k/year more than a full-time minimum wage worker makes before taxes, and he has a better deal all 'round in addition to that higher income. You made even more than that when you were in a similar stage in your career, again without taking into consideration any other resources and advantages you may have had. Clearly this income was more than sufficient for your needs and I don't believe those particular experiences will serve you all that well in your attempt to get a fair idea of how it is to not have enough (even though I have no doubt you have some understanding, rationally, of what it must be like).

My personal experience has been that, when I have had more than enough, even by just a little, my life has been all right, and when I've had less than enough despite my best efforts to keep spending at a minimum, my life has been shit. I have seen the same with those of my friends and family who've gone through--or are going through--rough times, and I see it from time to time among my patients. Personally I was very surprised when I discovered just how different--crappy, terrifying, uncertain--life could be with just a little less income. Iirc there was a link to a "poverty simulator" here a while back that tried to make this point about what it's like to really live at or just beyond the edge.

[Loki]

Is there a particular reason why a 30-something person is still making the minimum wage at that point in their career?

[Veldan Rath]

They got laid off of thier real job 99 weeks ago?

[Loki]

I.E. It's not their permanent job; they only have it before they get a real job. In which case, it's not the end of the world if they're losing some money each month.

[Veldan Rath]

I agree, but just getting there before the others did.

[Loki]

I do have to say I feel bad for people in their 50s and early 60s. I really don't understand why so many businesses discriminate against those people. It's not like any firm is providing life-time employment. The elderly worker will probably stick around just as long as a young worker.

[Aimless]

Is there a particular reason why a 30-something person is still making the minimum wage at that point in their career?

Black single grade-school drop-out with two kids and no other skills living through a recession?

[Nessus]

Nessus - disagreed on inflating the value of education. I think you're falling for a subtle version of the lump of labor fallacy. I assume you mean that 'too many' educated people competing for a limited pool of jobs requiring said education would reduce the wage premium of said education. I strongly disagree - more highly educated/trained people translates into a net increase in jobs at all training/income levels. Regardless, you don't need to give people a bachelor's degree at an Ivy League institution to get them out of minimum wage, dead-end jobs. An actually adequate high school education with some minimal vocational training can easily make you far more employable at far higher wage levels.

As for drugs, I think we both agree current approaches have failed, that's why I suggested we fix them. Focus on treatment rather than criminalization, decriminalize the soft stuff, and focus all enforcement efforts on the big guys at the top.

Financial literacy doesn't mean people wont' take advantage of cheap credit, it just means they'll be smarter about it.

Re: less children, I don't really care if the outcome is more or fewer children - I just want pregnancies to be actually desired, and children to be appropriately cared for. Obviously it would be focused on education and voluntary action rather than some forced sterilization hellscape you're wont to imagine.

I think that you're certainly seeing the argument here revolve around issues of business and capital, but there's a fantastic argument to be made wrt the worker rather than the business. Essentially, minimum wage reduces the number of jobs available for the poor (since jobs that would only get paid below the minimum wage are often performed in other ways, e.g. mechanization). You're placing a limit on the working poor's labor market, essentially disallowing them to compete with other workers on price. If someone WANTS to sell their labor for less than minimum wage (because they can't qualify for others), they are up a creek. There was a famous economist whose name escapes me now who spent a lot of time exploring this point. As you increase the minimum wage and more and more workers of varying skill levels start to become included, the effect gets worse and worse. Furthermore, the wage premium incentive to improve one's skills/productivity disappears for a much larger range of skills, effectively incentivizing workers to stay in dead-end jobs.

There are all sorts of worker-centered reasons why a high minimum wage is not a great idea.

I think we (as in the forum) agreed before that breaking up quotes is bad form, so I'll try my best here instead:

I really do not understand what kind of reasoning backs up the idea that "more highly educated/trained people translates into a net increase in jobs at all training/income levels"; how are more arts bachelors going to make Wal-Mart hire more full-time workers? It's a race to the bottom in the sense that as globalization moves more and more low-level jobs into the third world, having marketable skills requires more education, I agree there, but this can only go on so far. Not everyone can become a bio-chemist or statistician. Meanwhile, the last remaining so-far non-outsourceable line of labour is service, which again does not require much book lurnin', though people skills certainly help. Also, and admittedly this is a hairy tangent, one of the best candidates for the next bursting bubble in the US is the student loan business, which certainly makes me leery of advising this line of thinking for the next decade.

Treatment for drug addiction is not politically feasible in the US (or soon anywhere in the west, see the UK and 'scroungers' for instance), punishment is always preferable to addressing underlying causes. And, again, there is profit to be made in the current policies, whereby they are not likely to change anytime soon.

Given that I've not dealt with credit, I can't comment on wisely using it I suppose. The underlying premise still assumes a situation where one beforehand places themselves in a situation where they face harsh penalties or an undesired wage earning position, which seems distasteful.

I'm not imagining a hellscape of sterilization, I just find it bizarre that international law dictates political entities cannot negatively influence reproduction but evidently corporate profits and "the invisible hand" should? Indirectly, of course, being 'smart' about your pay-check is not exactly being strapped to a surgeon's table!

As I said, I'm not imagining minimum wage being some kind of deus ex machina. In the Soviet system, everyone had a job, but fat lot of good that did. A group of workers getting organized and trying to negotiate a better payment for their services? Good for them. Especially given that these workers in particular tend more and more towards the 25+ age groups, don't really have prospects for anything else, but would still like to have a human experience before the death panels get them. If we're being honest about the changing socio-economic conditions, you have to recognize that service industries today are what manufacturing labour was 50 years ago, in the west.

You're still arguing from the mind-set that it is the capital that is important, not human life, even if you don't seem to realize it. Again, I do not know whether that axiom can ever not exist in a capitalist world order, so this line of argumentation can be seen as pointless bleating.

[Aimless]

I do have to say I feel bad for people in their 50s and early 60s. I really don't understand why so many businesses discriminate against those people.

Image, insurance and insolence.

[Ominous Gamer]

I do have to say I feel bad for people in their 50s and early 60s. I really don't understand why so many businesses discriminate against those people. It's not like any firm is providing life-time employment. The elderly worker will probably stick around just as long as a young worker.

We've covered this before. Insurance.

[Loki]

Black single grade-school drop-out with two kids and no other skills living through a recession?

They had over 12 years to get some skills.

We've covered this before. Insurance.

Plenty of businesses provide pretty crappy insurance...

Image, insurance and insolence.

I'd rather have a 60-year-old worker than some guy straight out of college who has no idea what he's doing and isn't particularly motivated to work...

[Ominous Gamer]

Plenty of businesses provide pretty crappy

Which would be made worse by raising costs due to the increased expenses from insuring older employees.

[Loki]

Pretty sure businesses get group rates as long as they have more than a handful of employees.

[Ominous Gamer]

And those rates change and are calculated based on how expensive it is to insure that business (regardless of size). Older people use health insurance more, which would cause rates to go for the entire company because the insurance company is paying out more.

We have to renegotiate our insurance every year, we've even been warned that we if don't start using the government owned locations we would end up losing our current plan because of their coverage costs.


And my dad was straight up told by a ex-coworker of 20+ years that hiring him would cause problems with their insurer.

[Illusions]

I'd rather have a 60-year-old worker than some guy straight out of college who has no idea what he's doing and isn't particularly motivated to work...

That 60 year old may not be motivated to listen to you, or take your suggestions or directions seriously because they're 60 and you're half their age.

[Loki]

They will if they want someone to pay for their hip surgery.

[Ominous Gamer]

and to show how hard it is to hold 2 full time jobs in the lower spectrum, McDonalds has admitted that 90% of their workforce in the UK are under zero hours contracts. An extremely common practice in the US as well. Which means no guarantee for a set number of hours, or when you would work. Making balancing 2 part time jobs, not to mention full time jobs, just about impossible.

[Flixy]

I've got a zero hour contract, which can be annoying (sick? No income. Technical problems at work? No income for me.). Luckily in my case it's compensated by good wage.

And working unpredictable hours makes it very hard to combine with a second job. If you can't always work your assigned shifts, you will lose your job.

[Veldan Rath]

And a lot of these min wage jobs could be like that as the managers are dealing with teenagers with rapidly changing schedules (not to mention no shows). Trust me, when I was running a theater, I REALLY want to do set schedules, as then every one knows when they work and there is stability. However, I was quick to learn that high school and college kids have nothing near a set schedule.

[Flixy]

And a lot of these min wage jobs could be like that as the managers are dealing with teenagers with rapidly changing schedules (not to mention no shows). Trust me, when I was running a theater, I REALLY want to do set schedules, as then every one knows when they work and there is stability. However, I was quick to learn that high school and college kids have nothing near a set schedule.

Oh, I understand, but it also makes combining two part time jobs like that impossible.

[Veldan Rath]

Not impossible. I had a few employees that stuck to a mostly firm schedule. Guess who got more hours if they be came available (and a higher rate of pay eventually). They could work 2 jobs if their other ER had half a brain too. Or, most likely they did not need a 2nd job, as they were eventually getting the hours with me.

[RandBlade]

Ditto to everything Veldan said.

Flexible contracts have advantages for both employer and employee. And allow us to rapidly increase hours if need be and not just decrease them - whereas if you were contractually required to offer the increase forever you'd avoid signing it. It also allows us to keep staff like uni students on file rather than having to terminate employment.

In any business I've known with flexible contracts it is the employees far more than the managers who are requesting changes. I've spent more time than I'd want to think trying to keep everyone happy because they've got a party they JUST MUST go to next week or it'll be social suicide. Most managers would like nothing more than keeping the schedules simple and repetitive and not be the most complicated jigsaw puzzle ever. Actually its "I can't come in tomorrow" normally by the time I get informed they want the day off not even next week.

Flixy ... I'm shocked that "sick = no pay" for you. Here if you work variable hours (which are getting denigrated as zero hour contracts) your eligibility to Statutory Sick Pay is determined based on your average wages. Specifically whether you've earned enough to go above a tax threshold (currently £109 per week). Work above the threshold and it doesn't matter what the contract says. Work below the threshold and again the contract makes no difference.

https://www.gov.uk/statutory-sick-pay/eligibility

SSP pays nothing if you're only sick a day to three but that's again nothing to do with contracts (its so you don't get paid for throwing a sickie I believe).

[Khendraja'aro]

Depends on the kind of job you have over here. One of my student jobs in a call center was like that: If I was ill I got sick pay based on the number of days and the average pay (we also got paid from day one but also had to visit a doctor for an official waiver). Another call center job paid better but did not have that kind of compensation for sick days.