Everyone has likely had a minimum wage job. It's usually the first couple of jobs you get, and part-time. If you're a teenager, it usually pays for a car payment, or the requisite insurance, or the extras in life (certain clothes, expensive shoes, game systems, etc.) that your parents have deemed you old enough to provide for yourself. But it is usually a transition to better jobs with a little bit better pay, as you gain experience and skills. McDonald's has always been the launching pad for teens 14 years old and up to have a job and learn some skills. If those teens continue into college and earn degrees, they usually move out of McDonald's and into much higher paying jobs/careers. If they stay at McDonald's, they can move up into management ranks and beyond. McDonald's, if nothing else, has long had a reputation for promoting from within, and helping the beginners make careers out of the company.
Recently, there has been a push to increase the minimum wage again, preferably with a tie to the cost of living. It has been estimated that, if the MW had been tied to inflation, it would be roughly $10.40/hr now. If it had been tied to the cost of living, it would be $12 and change. Opponents of a MW hike have claimed that it would cost people jobs. Those in favor have claimed that unemployment is high because people can't afford to purchase things, and THAT is what drives unemployment. They are both right.
McDonald's, as one of the major national employers of MW workers (as well as all other restaurant companies, WalMart, etc), is resisting this MW hike. In partnership with VISA, they issued a response, in the form of a living budget:
Okay, most people have seen this. It lays out estimated costs for various bills, and calculates what they believe to be the average person's cost of living. But this is where McDonald's goes off the rails, obviously out of touch with reality. Right from the start, they ASSUME a second job. Right there is the big red flag: If you want to be able to pay bills, DO NOT count on us. The second job also implies that you will likely never get better than part-time hours at McDonald's. Look, most people can do the MW thing if they get their hours, but they'd like it to be at one place, if at all possible. That's clearly not possible here. For anyone with children, holding down two jobs is tough, especially when the children are younger. This estimate also appears to disregard payroll and Social Security taxes, which would lower the overall income estimate. But of all the things wrong in this budget, taxes are but a blip.
Another area where they falter is in the area of health insurance. First, the main reason they keep people as part-time status is to not have to provide benefits. Many restaurants don't provide health insurance at all, except for full-time management. Second, as laid out in a September 2010 article in Forbes, $20 a month for the people who do get insurance isn't even in the ball park of realistic. In 2010, they were paying an average of $14 per WEEK. Imagine that cost now, since the last several premium hikes over the past few years - it's more likely in the $125-150 range, if not more. And, as the article points out, the health coverage they have been getting is atrocious in quality. They are better off rejecting coverage and funding a health care savings plan, or finding something on their own - which will undoubtedly cost much more than $20 per month.
This budget also underestimates the cost of heat. Anyone living up north knows there's no such thing as a $50 heating bill, especially during the peak months of December to February, where the heat costs can be up to triple that amount or more, depending on the type of housing you live in. See, the poor usually live in older apartment buildings and homes that have poor insulation. So it's not unusual to have the heat running 24-7 in the dead of winter, jacking up heating bills. It also underestimates electric, especially in the south, where air conditioning is often run 24-7, especially in the peak May-September heat months. And in Florida, where I am from, gas is rare. Almost all homes are run on electricity, save for the individual home owner who plants a gas tank in his yard and supplies it himself. So there's no such thing as a $90 electric bill.
And this budget also simply disregards things like, well... groceries. Or gasoline for the car. Or clothing expenses. And it obviously assumes no children, which is a big miss when you are talking about the average worker and their average 2.5 kids per family household. But maybe McDonald's thinks that all falls into the $750 in spending money left over after putting $100 in savings. Or maybe they think their poor workers will be on food stamps. They would be wrong, by the way, in a two person household. Their estimated monthly income would make them ineligible to receive benefits. The chances increase with a child, as the minimum requirement goes up for every household member, but that is a huge assumption to make.
McDonald's, in this attempt to teach poor people how to be fiscally efficient with their poorness, generally shot itself in the foot. Then they shot it again when they decided to try forcing employees to take their paycheck in the form of a re-loadable VISA debit card, neglecting to tell them that VISA charges fees for virtually everything - getting cash at an ATM, basic withdrawals, balance inquiries, online bill paying, etc. They also neglected to mention that McDonald's corporate gets a hefty payment from VISA to implement these cards, as most companies do for the business they provide to VISA.
McDonald's, in this attempt to teach poor people how to be fiscally efficient with their poorness, generally shot itself in the foot. Then they shot it again when they decided to try forcing employees to take their paycheck in the form of a re-loadable VISA debit card, neglecting to tell them that VISA charges fees for virtually everything - getting cash at an ATM, basic withdrawals, balance inquiries, online bill paying, etc. They also neglected to mention that McDonald's corporate gets a hefty payment from VISA to implement these cards, as most companies do for the business they provide to VISA.
Minimum wage opponents are correct that raising the MW would cost some jobs. Many employers are not willing to wait out the short term effect of higher payroll, for the long term effect that MW advocates are also correct about: if people can generally make more money, they will spend more on average, revenues will climb, and employment will subsequently rise. Generally, it's the conservatives who are opposing the MW hike, because they would rather keep their money in the short term, even if they have to cut payroll to do it - so feel free to raise the wage. But keeping their costs low is the priority, even if they short-sightedly cost themselves revenues from the lack of purchasing power of the average consumer. Advocates are largely from the liberals and civil rights groups who advocate for the poor. There is a genuine concern for the welfare of the lower income families in this faction, but there's also a political and fiscal underbelly to it, in the form of union advocates, who are major pushers for the hike. Why? Because wages in union collective bargaining agreements are often tied to the MW. Raise the MW by $3-5 per hour, and the well-paid union worker gets a raise too. So the politiking surrounding a MW increase very often tosses aside the people most affected by it - the working poor, who need the ability to provide a living for themselves and their families. For all the good qualities that McDonald's has, they've faltered in a pretty important area, and it highlights just how hard the working poor have it. And considering that adding the cost of a hike to consumer prices causes only a minimal increase in overall spending costs per consumer (1.2% on average), it should be given serious consideration. We are falling behind in so many areas - this should not be one of them. Let people have a living wage, the rest of the economy may just follow suit.
