logo
Sign in or Register

Already a member?

Sign in

Or sign in with your account on:

Not a member yet?

Register
    

What Would a Livable Wage Actually Look Like?

  +Follow December 26, 2013 9:20AM
Share:
Tickers Mentioned:

On July 15 McDonalds Corporation (MCD) released a sample budget for employees outlining how to better manage their finances on $24,720 a year. Here it is:

The chart was widely mocked on several fronts. For one, in the “income” section, it assumed an employee would have an undefined “second job” that brought in 46.3 percent of their earnings. Second, the chart budgeted impossibly low figures for things like health insurance – at $20 a month (the average American pays $215 a month in premiums) – and food and gas, which weren’t budgeted for at all.

Assuming the employee make minimum wage, at a rate of $7.25 an hour (the wage McDonald’s starts employees at), he or she would need to work 72 hours a week to hit that benchmark.

With their “Practical Money Skills” handbook, McDonalds inadvertently showcased that they– like many of their compatriots in the service industry – do not pay a wage capable of sustaining an adult. And as over 88 percent of minimum wage earners are over 20,   

Senator Tom Harkin (D-IA) introduced the Fair Wage Minimum Act of 2013 to raise the federal minimum wage to $10.10 an hour by July 2015. An aide of his explained it this way: “Let’s say we had indexed minimum wage to inflation in 1968. The minimum wage would then be at $10.56 today. The fact we’re at $7.25 minimum wage shows it has lost almost a third of its real value.”

The $10.10 hourly wage wouldn’t even keep pace with the minimum wage’s peak value in 1968. Even getting to that benchmark is considered untenable. But a higher minimum wage would certainly raise those numbers quite a bit.  

So what would the McDonalds budget look like on $10.10 an hour?

A Remade Budget

Let’s assume that, since we can’t be sure what inflation will be like going forward, this $10.10 wage applies to 2013.

At $10.10 an hour, and according to the chart McDonalds supplies, the employee would be making $37,814 a year, which is certainly a comfortable wage. That’s three timers over the federal poverty line for a family of one, and fifty percent over the poverty line for a family of four.

But of course, that’s assuming the worker has two jobs and is clocking 72 hours a week. Quite a bit above the 40 hour work week that formed the backbone of the labor reforms instituted following the employee abuses of the Industrial Revolution.

A Remade, Remade Budget

Let’s go ahead and assume that the worker is only going to work 40 hours a week at one job. At $10.10 an hour, that’s $21,000 a year, before taxes. That’s under the poverty line for a family of four, but still good enough to keep an earner almost two times more than a one person household.

It’s still not up to the $24,720 a year the hypothetical McDonalds employee would make. So someone making $10.10 would have to trim $3,720 a year from their budget, or $310 a month.

McDonald’s plan calls for the employee to save $100 a month. Cutting that leaves $210 a month left. Since there’s no budget for gas, let’s go ahead and remove the car payment of $150 a month and assume the employee walks everywhere. From this, it’s not too much a stretch to assume this employee could lose $60 a month off the $750 a month for discretionary spending.

Of course, this leaves a person without a car, money for transportation, and less than $25 a day in discretionary spending.

As noted earlier, the original chart lacks some expenses many people find essential. What would it look like then if the spending chart reflected someone who more accurately resembled an average American? That is, spent $25 a day on discretionary items, paid the national average in health insurance, had a car, and had to pay to both maintain it and put gas in it?

A Remade, Remade, Remade Budget

The McDonalds chart doesn’t account for food and gas in its essential expenditures. According to the USDA’s May 2013 food plan, a “thrifty” male between the ages of 19-50 can maintain a nutritious diet at $182.20 a month, if they’re in a family of four. If they live alone, it’s 20 percent more, or $218.24, with all meals prepared at home. A “liberal” food plan according to the USDA is double that, but let’s go ahead and say this person is watching their money closely. They’re on a budget, after all.  It should be noted that women spend around 20 percent less than men on food, so let’s go ahead and use a figure of $180.

For cars, let’s talk averages. On July 30 the average price of gas was $3.62 a gallon. The average American adult male driver clocks around 18,000 miles a year (female drivers, around a third of that.) And the average mid-sized American car gets 24.6 miles to the gallon. That’s 666 gallons of gas a year. Let’s split the difference on genders and say the employee drives 14,000 miles a year. That’s $2,060 a year on gas, or about $171 a month.

Then there’s maintenance. AAA reports this at 4.47 cents a mile, or $560 a year. Add in the cent a mile in tire replacement costs, and you’re at exactly $700 a year, or $58 a month in car upkeep.

Comparing what “average Americans” pay for health insurance plans can be an apples to oranges scenario, so let’s just go with Washington Post writer’s analysis of plans in his hometown of Irvine, California, where he found the average plan was around $114. Even McDonald’s own cheapest plan offered to employees costs $728.74 a year, and only covers up to $2,000 in coverage. Their “Cadillac” plan, which caps benefits at $10,000, is $1,680 a year – or around $140 a month. Of course, Obamacare will affect these rates as well,and in the case of young healthy people will probably make that rate even higher.

For a Grand Total of….

Adding together gas, food, and the company’s own premium insurance plan – which is still less than stellar –and you can tack $549 a month in expenditures, which raises McDonald’s sample budget to $2,609 a month.

So what would a person working merely 40 hours a week have to make to cover that?

$15.05 an hour. Double the current minimum wage, and fifty percent more than what the Senate's liberal wing is proposing.

Even if you took out all car related expenses, and budgeted zero for transportation, and gave them the most basic catastrophic health plan, it’s still expenditures of $2,300 a month, requiring $13.20 an hour.

Critics argue that minimum wage jobs aren't intended to be kept forever. But the numbers show minimum wage isn't even half of what a single person needs to survive.

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions.


Liked What You Read? Join Equities.com and Connect With Your Favorite Financial Experts FOR FREE! Members of Equities.com gain access to our leading financial news and content, active social investment community, proprietary research tools including the 2014 Small-Cap Stars, E.V.A. reports and more.

Results for MCD
Ƀitcoin $tern
28 Aug 14 22:02:46
RT @MelissaLeeCNBC: Most overbought: $DIS $HD/ most oversold: $MCD $AXP RT "@bespokeinvest: A look at where Dow 30 trading: http://t.co/4UK…
Investors Hangout
28 Aug 14 21:50:36
$APC % Change http://t.co/gGq6v7rysD Also See: $CPRX $SLV $GWPH $MCD ~
Business News Now
28 Aug 14 21:32:18
$MCD: [$$] Russian Courts Close McDonald's Outlets http://t.co/4HlHeIilVR http://t.co/GVFCPgn9oE
Wall Street News
28 Aug 14 20:32:10
$MCD: Can McDonald's Corporation's Turn Its Fortunes Around? http://t.co/FEjuZ6opNr http://t.co/9BQC4X7YOs
RB Trader
28 Aug 14 20:20:30
Highest Value Trades Yesterday $YHOO JAN 2015 CALLS $7.6M $MGM JAN 2017 #CALLS $2.7M $MCD JAN 2016 CALLS $2.0M http://t.co/ImSoehqBPs
RB Tech Social
28 Aug 14 20:20:30
Highest Value Trades Yesterday $YHOO JAN 2015 CALLS $7.6M $MGM JAN 2017 #CALLS $2.7M $MCD JAN 2016 CALLS $2.0M http://t.co/UNlmtVj4xR
Lynn Halstead
28 Aug 14 19:57:12
@Lpylm @grassosteve The statement was made, why can't $MCD have gluten free. There is a worse chance of cross tam. than a place 100% focused
Tim Michael
28 Aug 14 19:54:31
RT @YahooFinance: McDonald's Faces 'Millennial' Challenge http://t.co/rqwMX6JRnG $MCD
Tim Michael
28 Aug 14 19:53:01
Chatter about whether or not $MCD should buy $CMG. It should be the other way around. Watch the panic & declining market share.
longyan
28 Aug 14 18:19:04
$mcd holds well, consider to buy Nov 95 calls around 1.7 if it is back
awolam
28 Aug 14 18:06:24
RT @SeekingAlpha: When A Higher Yield Leads To Lower Income http://t.co/DUMe0IMtDa $MCD $V $ED
Lilliam Alvarez
28 Aug 14 18:06:10
RT @BloombergTV: This @mcdonaldscorp in Norway is a former bank -- and the fifth-most unusual $MCD in the world http://t.co/AWfWi6UG7s http…
Seeking Alpha
28 Aug 14 18:00:49
When A Higher Yield Leads To Lower Income http://t.co/DUMe0IMtDa $MCD $V $ED
Evener Investment
28 Aug 14 17:36:37
RT @BloombergTV: This @mcdonaldscorp in Norway is a former bank -- and the fifth-most unusual $MCD in the world http://t.co/AWfWi6UG7s http…
Lucas Reloaded
28 Aug 14 17:34:23
RT @BloombergTV: This @mcdonaldscorp in Norway is a former bank -- and the fifth-most unusual $MCD in the world http://t.co/AWfWi6UG7s http…
Companies in News
28 Aug 14 17:32:14
$MCD: Why Russia Is Closing Down McDonald's Outlets http://t.co/F7Ufm3yqq9 http://t.co/41v49FozWY
Mrs W
28 Aug 14 17:31:40
RT @BloombergTV: This @mcdonaldscorp in Norway is a former bank -- and the fifth-most unusual $MCD in the world http://t.co/AWfWi6UG7s http…
Bloomberg TV
28 Aug 14 17:30:49
This @mcdonaldscorp in Norway is a former bank -- and the fifth-most unusual $MCD in the world http://t.co/AWfWi6UG7s http://t.co/XIIMITzIot
Investors Hangout
28 Aug 14 17:23:55
$ALXN Ask Size http://t.co/on7ffXLARQ Also See: $MCD $C $HAL $XLE ~
Nicholas
28 Aug 14 17:07:18
RT @The_Real_Fly: Once public, I will buy this stock every month for a year: SHAKE SHACK. The anti $mcd, the $aapl of burgers
OTPicks.com
28 Aug 14 16:48:11
http://t.co/hjgLwIcNgz DennyT: GTAT Industry $GTAT $VZ $REVI $MCD $AMBA Buy or: DennyT http://t.co/4OvSVRv2yt http://t.co/hjgLwIcNgz
OTPicks.com
28 Aug 14 16:48:09
http://t.co/QkCFZ8H3V8 DennyT: GTAT Industry $GTAT $VZ $REVI $MCD $AMBA Buy or: DennyT http://t.co/DsNkbbaQce http://t.co/QkCFZ8H3V8
taytay
28 Aug 14 16:35:17
RT @BloombergTV: This McDonald's in Norway is a former bank -- and 4 more of the most unusual $MCD restaurants http://t.co/AWfWi6UG7s http…
Stock Wire
28 Aug 14 16:29:45
McDonald's Corporation (MCD) Ex-Dividend Date Scheduled for August 28, 2014 $MCD http://t.co/IJZGVX78oe
DailyFinance
28 Aug 14 15:50:18
Do you really want McCafe in your Keurig? http://t.co/e0diEtmqoQ $MCD $GMCR
Stock News Guru
28 Aug 14 15:32:22
$MCD: [$$] McDonald's Could Reconsider Its Relationship With Supplier OSI in China http://t.co/pKmzfOOdjW http://t.co/eNBnxjbkQ4
Bidness Etc
28 Aug 14 15:28:30
Fast-Food Chains With Horrible Same-Store Sales http://t.co/FMbP6lpqTh $YUM $MCD $BKW
Mike Domenic
28 Aug 14 14:56:06
@grassosteve Sir, Because they're $MCD, not $CMG or $DPZ *shrugs*
Ryan
28 Aug 14 14:54:12
@grassosteve As GF myself, you have a bigger issue than GF buns eating at $MCD, pinkslime??
Mae
28 Aug 14 14:53:15
RT @grassosteve: How is it possible that $MCD doesn't have a gluten free bun ?
Jody Sanchez, Prez
28 Aug 14 14:52:22
RT @grassosteve: How is it possible that $MCD doesn't have a gluten free bun ?
CNBC's Fast Money
28 Aug 14 14:52:01
RT @grassosteve: How is it possible that $MCD doesn't have a gluten free bun ?
Steve Grasso
28 Aug 14 14:51:32
How is it possible that $MCD doesn't have a gluten free bun ?
James Damon
28 Aug 14 14:48:42
@CNBCFastMoney it's not about technology, it's about the fact the food is vile. $MCD #Sell
True Contrarian
28 Aug 14 14:28:00
RT @SeekingAlpha: McDonald's: Recent Price Weakness May Present A Buying Opportunity http://t.co/vUNGBLHrti $MCD
awolam
28 Aug 14 14:21:36
RT @SeekingAlpha: McDonald's: Recent Price Weakness May Present A Buying Opportunity http://t.co/vUNGBLHrti $MCD
Evener Investment
28 Aug 14 14:17:51
RT @SeekingAlpha: McDonald's: Recent Price Weakness May Present A Buying Opportunity http://t.co/vUNGBLHrti $MCD
Seeking Alpha
28 Aug 14 14:13:22
McDonald's: Recent Price Weakness May Present A Buying Opportunity http://t.co/vUNGBLHrti $MCD
Equities.com
28 Aug 14 13:32:45
Home Depot Inc. (HD) Tops DJIA Gainers for August 28 $MCD $DD $HD http://t.co/tqhEy1JpFb
Business Updates
28 Aug 14 13:32:14
$MCD: McDonald's Corporation (MCD) Needs to Balance Speed, Quality in Wake of ... http://t.co/w36xt1gPib http://t.co/AZjJ9dQWZT
John Michael
28 Aug 14 13:18:11
RT @SeekingAlpha: Procter & Gamble Valuation Shortcuts http://t.co/GhLMflBtfH $MCD $PG
steve stratton
28 Aug 14 13:17:31
RT @BloombergTV: This McDonald's in Norway is a former bank -- and 4 more of the most unusual $MCD restaurants http://t.co/AWfWi6UG7s http…
Evener Investment
28 Aug 14 13:15:53
RT @SeekingAlpha: Procter & Gamble Valuation Shortcuts http://t.co/GhLMflBtfH $MCD $PG
Seeking Alpha
28 Aug 14 13:12:29
Procter & Gamble Valuation Shortcuts http://t.co/GhLMflBtfH $MCD $PG
Sofia Garcia
28 Aug 14 13:07:27
RT @BloombergTV: This McDonald's in Norway is a former bank -- and 4 more of the most unusual $MCD restaurants http://t.co/AWfWi6UG7s http…
Lifestyle Special
28 Aug 14 13:03:53
RT @BloombergTV: This McDonald's in Norway is a former bank -- and 4 more of the most unusual $MCD restaurants http://t.co/AWfWi6UG7s http…
McDonald's
28 Aug 14 13:03:02
RT @BloombergTV: This McDonald's in Norway is a former bank -- and 4 more of the most unusual $MCD restaurants http://t.co/AWfWi6UG7s http…
Ryan Mallory
28 Aug 14 12:58:24
That is a monster double top forming there on $MCD over the past year. As well as a short-term bear flag.
Vincent
28 Aug 14 12:37:35
$MCD watching the Sep20 95.00 Calls
Mitchell Warren
28 Aug 14 12:29:56
RT @TraderPlanet: Implied Volatility Is Soaring In McDonald’s http://t.co/b8UJLYZJ3f $MCD $DIA $BKW $THI $BAC $DJIA via @MitchellKWarren
				
				
  +Follow December 26, 2013 9:20AM
Share:

Comments

 

blog comments powered by Disqus

About us

Equities.com is the most advanced interactive online social ecosystem for the financial industry, serving as a resource center and next-generation communication platform that connects self-directed investors with public issuers, market experts, and professional service providers and vendors. Registered members can leverage our exclusive proprietary research tools such as the Small-Cap Stars, which outperformed 90% of all small-cap mutual funds, and robust do-it-yourself E.V.A. research reports. The Equities.com Issuer Dashboard is the ideal tool to communicate and manage investor awareness campaigns to the investment community, as well as to access valuable resources to help your company grow.

Market Data powered by QuoteMedia.
Copyright © QuoteMedia. Data delayed 15 minutes unless otherwise indicated. Terms of Use.