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
Patrick
15 Sep 14 19:00:12
#SENTISHIFTUP $MSFT $HE $AIG $TAX $MCD $DE $LNG $DNDN $LMT $CPRX #quantheta
Stock Wire
15 Sep 14 18:23:29
McDonald's Corporation Is In Big Trouble And It Could Get Even Worse [(NYSE ... $MCD http://t.co/TYGAH4xV8G
Investors Hangout
15 Sep 14 18:21:26
$HFCO Current Price Click Here: http://t.co/DadHfH3vWi Also See: $RIG $NSAV $MYEC $MCD ~
Ron DeLegge
15 Sep 14 18:10:25
@ReformedBroker Can I interest you in our latest $IBM mainframe computer? It's called our "Big Mac" $MCD
Patrick
15 Sep 14 17:00:12
#SENTISHIFTUP $MSFT $HE $AIG $TAX $MCD $LNG $DE $DNDN $LMT $CPRX #quantheta
RB Tech Social
15 Sep 14 16:46:41
Largest Size trades $BHP OCT #Puts SLD 16,414 x $MCD OCT Calls BOT 8,193 x $DHI JAN '16 #Calls SLD 7,500 x http://t.co/CAmqSb2PNE
RB Trader
15 Sep 14 16:45:41
Largest Size trades $BHP OCT #Puts SLD 16,414 x $MCD OCT Calls BOT 8,193 x $DHI JAN '16 #Calls SLD 7,500 x http://t.co/K4xMqiaRc6
James Sweeney
15 Sep 14 16:15:11
McDonald's McReady to introduce a McBrunch ? Mickey D's McMoves to trademark term #McBrunch $MCD $YUM http://t.co/47ULFITRkK
JS3 Multimedia
15 Sep 14 16:15:10
McDonald's McReady to introduce a McBrunch ? Mickey D's McMoves to trademark term #McBrunch $MCD $YUM http://t.co/VbdehrS7D8
AskModernWallStreet
15 Sep 14 16:15:08
McDonald's McReady to introduce a McBrunch ? Mickey D's McMoves to trademark term #McBrunch $MCD $YUM http://t.co/djxjFOtSgL
12Stocks.com
15 Sep 14 16:01:51
S&P100 #Stocks Trend $MO $PFE $MS $WFC $FDX $GS $BAC $USB $CL $ABBV $RTN $PG $LMT $MCD $BK $ALL $GD $JNJ @ http://t.co/n4QZIDxy7w
12Stocks.com
15 Sep 14 16:01:18
Dow #Stocks Trend $PFE $GS $PG $MCD $JNJ $MMM $IBM $JPM $TRV $DD $DIS $V $GE $UTX $CVX $HD $CSCO $MSFT $NKE $XOM @ http://t.co/TvzJfd0RGT
Patrick
15 Sep 14 16:00:12
#SENTISHIFTUP $MSFT $HE $MCD $TAX $LNG $DE $DNDN $CPRX $TGTX $VZ #quantheta
Nadarra Sen
15 Sep 14 14:59:09
McDonald’s Considers Expanding Its Build-Your-Burger Test http://t.co/FKmNeoqsLW via @BloombergNews $MCD
Chris Kader
15 Sep 14 14:52:00
@wandy922 @talkequities Yeah $HYG put / short activity predicted this move weeks ago. Even tweeted about it. I'm long $ADSK $MCD $CBRL
Consestimate
15 Sep 14 14:50:14
Suddenly McDonald's & Wendy's may have competition. $MCD. http://t.co/WhHjebPaQp
J Mintzmyer
15 Sep 14 14:46:58
Thoughts on $MCD dividend raise? I think we might see a surprise boost to try to bolster the stock, maybe 90c?
Chasing Stars
15 Sep 14 14:32:25
$MCD Last Trade Click Here: http://t.co/1Pvp1l3EmY Also See: $EFA $AEM $NEM $XIV ~
Rosner Stocks
15 Sep 14 14:09:48
$MCD Day Low Click Here: http://t.co/JRMXCsAfEG Also See: $QLD $RWLK $SMH $TBT ~
Investors Hangout
15 Sep 14 14:07:48
$MCD Day High Click Here: http://t.co/BoLaawXCHg Also See: $SLV $DRYS $AAPL $TNA ~
Stock Forums
15 Sep 14 14:02:24
$MCD Stock Forum Click Here: http://t.co/KuVDFIZzBG Also See: $MRK $XLK $GRCU $NFLX ~
Investors Hangout
15 Sep 14 14:00:32
$MCD Bid Click Here: http://t.co/Rw45HoaozI Also See: $FSLR $XLY $SMH $GYST ~
Patrick
15 Sep 14 14:00:13
#SENTISHIFTUP $MSFT $MCD $TAX $DE $DNDN $IGN $JPM $VZ $PFE $TGTX #quantheta
JS3 Multimedia
15 Sep 14 13:41:15
McDonald's to introduce #McBrunch ? It just may McHappen as Mickey D's makes McMoves to trademark the term! $MCD $YUM http://t.co/t0eIlhgntS
James Sweeney
15 Sep 14 13:41:15
McDonald's to introduce #McBrunch ? It just may McHappen as Mickey D's makes McMoves to trademark the term! $MCD $YUM http://t.co/nTswY8ztpx
AskModernWallStreet
15 Sep 14 13:41:14
McDonald's to introduce #McBrunch ? It just may McHappen as Mickey D's makes McMoves to trademark the term! $MCD $YUM http://t.co/L14NvFBLPM
Johnny Who
15 Sep 14 13:41:04
Portfolio Trend Alerts (Part 2) $HIG $IBM $LNKD $MCD $MRK $PRU $KO $MGM $LOW $WMT $HD $DLTR #trading #options http://t.co/VoYY9GdchY
Benzinga.com
15 Sep 14 13:34:49
What People Are Saying About McDonald's #McBrunch $MCD http://t.co/9RbrY30eYS
FlashRatingsHOT
15 Sep 14 13:30:58
$MCD has 7 analyst ratings in the last 7 days. Median target: $97. View here: https://t.co/XpCl3sNlMx #MCD
Ahmed Azdour
15 Sep 14 13:28:28
McDonald's to give away free coffee for the next 2 weeks http://t.co/BrjhnyzvlU $MCD
12Stocks.com
15 Sep 14 12:59:30
S&P100 #Stocks Trend $MO $PFE $WFC $MS $FDX $GS $BAC $ALL $USB $CL $ABBV $RTN $PG $JNJ $V $MMM $MCD $BK $LMT @ http://t.co/n4QZIDxy7w
12Stocks.com
15 Sep 14 12:58:57
Dow #Stocks Trend $PFE $GS $PG $JNJ $V $MMM $MCD $DIS $IBM $TRV $DD $JPM $GE $UTX $CVX $CSCO $MSFT $NKE $HD $T @ http://t.co/TvzJfd0RGT
Shiraz Lakhi
15 Sep 14 12:43:19
Most OVERSOLD LARGECP #stocks BELOW 50 MA trading UP today on STRONG VOLUME REVERSAL (latest = click "Refresh") $MCD http://t.co/jjYQv0pCew
Dean Levi
15 Sep 14 12:36:03
#askfast what do you think about $MCD?
Dean Levi
15 Sep 14 12:35:05
@CNBCFastMoney @RiskReversal @karenfinerman What do you think about $MCD?
TheStreet Alerts
15 Sep 14 12:30:40
Will McDonald's $MCD Stock Be Helped By Build-Your-Burger? http://t.co/NS5sKIuHq4
Alfred Ip
15 Sep 14 12:26:53
$mcd putting up a nice bounce the past couple day
Keith McCullough
15 Sep 14 12:05:24
Good spot to sell more Mickey D $MCD says Howard @HedgeyeHWP
Patrick
15 Sep 14 12:00:12
#SENTISHIFTUP $MSFT $MCD $IGN $TAX $PFE $DNDN $VZ $DE $VRNG $COST #quantheta
US Banking News
15 Sep 14 11:58:28
McDonald's Co. Receives Neutral Rating from Citigroup Inc. $MCD http://t.co/UnLyI65sWj
Sleek Money
15 Sep 14 11:25:32
McDonald's Co. Receives Neutral Rating from Citigroup Inc. $MCD http://t.co/xiG4fp5wq5
Dividend Yield
15 Sep 14 11:22:02
An Overview Of The Safest Dividend Aristocrats - http://t.co/TvDMQBy3rl $PG $ED $MCD $ADM $HRL $ABT $KMB $CL $MKC
Analyst Ratings
15 Sep 14 11:21:21
McDonald 's Co.'s neutral rating reiterated at Citigroup Inc.. $98.00 PT. http://t.co/hH9e2ETMY3 $MCD #MCD
US Consumer News
15 Sep 14 11:19:46
McDonald 's Co.'s neutral rating reiterated at Citigroup Inc.. $98.00 PT. http://t.co/HhPXyOgHBr $MCD #MCD
TALENTEDBLONDE
15 Sep 14 10:46:23
@TheJReese: Give Me Free Food Challenge!! https://t.co/SId7l2puEy via @vineapp $MCD $CMG $YUM
Simon Waslander
15 Sep 14 10:39:36
RT @ForesightInvstr: How the divergence between the #stock return of #McDonald’s and #BurgerKing can be utilized to make money $MCD $BKW h…
Steve Sears
15 Sep 14 10:27:25
What do $MCD and Exchanges have in common? Slumping Sales http://t.co/zl65QzOgiV via @barronsonline $ICE $NDAQ $CME $CBOE
Buechel Stone
15 Sep 14 10:24:04
RT @FortuneMagazine: McDonald's to give away free coffee for the next 2 weeks http://t.co/RcuMidA9nq $MCD
sharesinplay
15 Sep 14 10:11:03
RT @LiquidPenny: ▶ Best Penny Stock - GRILLiT $GRLT Potential to go up 500% - YouTube - http://t.co/HIuaKgWL8D $CAKE $CEC $MCD
Amanda Jarrett
15 Sep 14 10:08:45
@AllysonBird !!!! "@FortuneMagazine: McDonald's to give away free coffee for the next 2 weeks http://t.co/xcPf9gZLt2 $MCD”
				
				
  +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.