In her book Pound Foolish: Exposing the Dark Side of the Personal Finance Industry, Helaine Olen writes about how the personal-finance industry, in arguing that we can solve our money problems if we just watch our pennies, has sold everyone a pipe dream.
The personal-finance complex (very much including the financial press) merely elides the real, and growing, money problems facing the middle- and working-class: Risk has been shifted onto individuals while pay has stagnated or fallen. Those problems are systemic and their solution is political.
McDonald’s and Visa give us a classic example of what she’s talking about with a personal-finance website aimed at helping the fast-food giant’s employees balance their meager budgets. In a pull-quote at the top of its Practical Money Skills Budget Journal it says this:
Knowing where your money goes and how to budget it is the key to your financial freedom.
Common sense, no? But it’s not actually true—not for many people. Because for that to be the case, you have to actually make enough money to pay your bills.
And so the real key to financial freedom for McDonald’s workers—and for so many others—is to make a lot more than seven or eight bucks an hour. Fifteen an hour sounds about right, but it’s worth remembering that even the lowest paid McDonald’s workers made, in real terms, $10.67 an hour in 1968. Since then government policies have allowed low-end wages to fall dramatically while giving most of the gains to the very richest.
As ThinkProgress writes, McDonald’s own sample budget “actually underscores exactly how hard it is for a low-paid fast food worker to get by.” Here it is
Note that the theoretical McDonald’s employee has two jobs. The first job nets her $1,105 and the second nets her $955. If she makes $8 an hour at both, she’d be working 70 hours a week. If she makes $9 an hour, she’d be working 62 hours. If she’s unfortunate enough to make $7.25 an hour, she’d be working 77 hours a week.
That’s how you make ends meet on a McJob—but only if you have extraordinarily low expenses.
As ThinkProgress’s Annie-Rose Strasser points out, McDonald’s assumes that its theoretical worker pays just $20 a month for health insurance and nothing for heat. It also assumes a rent payment of $600 a month. You can find that in the hinterlands, but the average apartment nationally goes for about $1,050. And good luck if you’re in a big city.
Noticeably missing from the budget list: The earned income tax credits, food stamps, housing subsidies, and the like that subsidize your $4 Extra Value Meal and pad the pockets of McDonald’s executives and shareholders.
It’s hard to imagine how this made it past the flacks at McDonald’s. Then again, maybe it’s not. These numbers are so tiny to the office drones making five or ten times them that amount that they’re almost unreal.
I lived in a top-15 metro area last year and paid around that price, $600/month, to rent a pretty good one-bedroom condo. Admittedly I found it on craigslist after some searching and got a good price, but it was fairly nice and too big for me, ie outside the highest-priced metros, $1050 isn't necessary. Indeed, that number from your linked article only includes the 80 largest metro areas and I wonder if it's for all apts or just one-bedrooms. If the former, cut the price further when you share an apt.
Outside the highest priced cities like NY or SF, $2k/month is fairly easy to live on for one person, assuming you are living moderately and not splurging or partying regularly. The big problem with the people you're worried about is not the money coming in, but the money going out, ie they spend far too much for their low income. That can't be blamed on some giant corporation, but on their own habits.
#1 Posted by Ajay, CJR on Tue 16 Jul 2013 at 07:49 PM
"fairly easy to live on for one person". good one Ajay.
#2 Posted by oneperson, CJR on Tue 16 Jul 2013 at 08:24 PM
@Jay...you are also assuming the car payment at $150 is realistic as well as the health insurance (not) this budget does not take into account any emergency situations (car repairs, health problems, medicine) which you are obviously going to need if you are working 60-70 hours a week. There's also no budget for gas for the car or for food and household items. In short it's ludicrous.
#3 Posted by Gabrielle, CJR on Wed 17 Jul 2013 at 09:18 AM
oneperson, I lived on less than that, found it difficult to spend more than $1800/month, even though my monthly salary was a multiple of that. Admittedly, I'm unusual and don't splurge on the usual stuff that most spend on. But this was with splurging on food, spending $500+ on eating out a fair amount, which I could have cut drastically if I wanted to. I had spent many months when trying to conserve cash paying $150-200 for food, and still eating fairly well though not out, so I could have cut back to that if needed.
Gabrielle, $150 for a car is perfectly realistic. I was paying $350 for a lease on a brand new mid-range car, you could get a used car for half that. Health insurance prices vary a lot, but I think they're talking about for somebody young and without a "Cadillac" plan. Emergency situations are by definition rare, but you could save enough for those on that salary. Gas cost me something like $50/month for the daily three-mile drive to work.
Not sure what world you are living in where $2k/month is "ludicrously" low, that's a fair amount of money in most places in the US today. Yes, if you want to live it up, that's nothing, but if you are reasonable, you can still save money on that. The problem is that many have ridiculous expectations of how they "deserve" to live, as you apparently do.
#4 Posted by Ajay, CJR on Wed 17 Jul 2013 at 11:41 AM
The last time I priced it, catastrophic-only health coverage for a young, healthy, single male was approximately $80 per month. A $20 premium a month plan doesn't exist, unless it's subsidized heavily by an employer, which, if you're working part-time, is unlikely to be true.
As someone pointed out on another blog, this theoretical person would be able to save up a 3-month emergency fund in 62 months. Let's just hope they never have to visit a doctor, or need to have any work done on their vehicle, or develop a toothache, etc..
#5 Posted by B, CJR on Thu 18 Jul 2013 at 01:07 PM
Not only is there no food budget attached here, there's no clothing budget. (And I'm sorry, Ajay - but you must dine at exceptionally low-end restaurants. Alone.) There's no room in this budget for even one misstep - or one blown tire (where's the allocation for car repair, etc.) And I defy you to find a major city in which your electrical expenses are less than $100 a month. You're looking at an annual salary of around $24,000 - before taxes. Don't forget - there are state and local taxes to pay, even if you pay a minimal amount in federal taxes. Furthermore, I'd love to see that "pretty good condo in a top-15 city" for $600 a month. PS - so you had a 3-mile drive to work? Where'd you park? Oh - your employer had a lot! Not in most big cities, pal!
#6 Posted by Patricia Boardman, CJR on Fri 19 Jul 2013 at 04:18 PM
Clothing and footware is a negligible part of most people's budget. I didn't dine in restaurants, lots of $7-10 sandwiches or pizza, which is about what someone working at McDonalds should expect. Of course I'm talking about what I spent on myself "alone," we're talking about one person. I gave my numbers, please provide your own estimate for food, if you think mine are off.
At $24k, you're getting subsidized by the govt through taxes, you're not paying anything out. My condo was built in the '70s and refurbished a couple years back, seemed pretty nice and like I said, I got a good deal, partially because it wasn't a great neighborhood, though not horrible (my neighbor said he caught a guy trying to drive off with his truck once). I parked in the large parking lot next to the very large office complex where the company I worked for rented out a handful of rooms. I paid $60/month for a covered spot right next to the office, others paid nothing and parked in uncovered spots farther away.
#7 Posted by Ajay, CJR on Fri 19 Jul 2013 at 04:55 PM