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D&T.com: McDonalds’ suggested budget for employees shows just how impossible it is to get by on minimum wage


Kindred

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All makes sense. As I've stated, I'm not against raising the minimum wage, but also fear that personal accountability is sometimes non-existent in these cases.

 

Agreed, and it should be. However, we are talking about a budget that requires one to work 60 hours a week. So in that case I don't think personal accountability is an issue. If a person is motivated to work 60 hours a week, then they are also motivated to find a better job where they only have to work 40 hours a week. To do that though, as we have discussed, they need access to a bunch of resources and right now the minimum wage denies them that access. Raising minimum wage to $10/hr would allow that access, but wouldn't be enough for someone to live off of for just 1 job on their own, they'd still have to be motivated to improve, and with a better min. wage they could work more and improve.

 

If we raised it to just $9/hr, that is $1.25 more per employee. If that employee works an 8 hour shift, the employer would have to pay them just $12 more each day. But for the employee that $12 extra each day, at 60 hours would be $18 extra each day, for 1 month would be $360 extra to work with. Now take the tight budget we were discussing prior and add $360 to it. Much more possibilities and even though they are working 60 hours they would have chances to improve and then personal accountability factors in because improving their life would be back in their control.

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Not sure if this has been posted, but saw a recent article about Walmart's pay here: http://money.msn.com/now/post.aspx?post=96788602-ad1c-46a7-b7f5-23416977b75e

 

If the study holds true nationwide, Walmart costs taxpayers $8.4 billion yearly to raise their wages to a living standard.  When a company makes $17 billion in profits, wouldn't it makes sense to lower their profits by $8.4 billion instead of having the government dole out the difference?  Then, likewise, be able to lower taxes on said employer because the government isn't required to pick up the tab.  It does make me wonder how much Walmart pays in taxes.

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All makes sense. As I've stated, I'm not against raising the minimum wage, but also fear that personal accountability is sometimes non-existent in these cases.

 

Agreed, and it should be. However, we are talking about a budget that requires one to work 60 hours a week. So in that case I don't think personal accountability is an issue. If a person is motivated to work 60 hours a week, then they are also motivated to find a better job where they only have to work 40 hours a week. To do that though, as we have discussed, they need access to a bunch of resources and right now the minimum wage denies them that access. Raising minimum wage to $10/hr would allow that access, but wouldn't be enough for someone to live off of for just 1 job on their own, they'd still have to be motivated to improve, and with a better min. wage they could work more and improve.

 

If we raised it to just $9/hr, that is $1.25 more per employee. If that employee works an 8 hour shift, the employer would have to pay them just $12 more each day. But for the employee that $12 extra each day, at 60 hours would be $18 extra each day, for 1 month would be $360 extra to work with. Now take the tight budget we were discussing prior and add $360 to it. Much more possibilities and even though they are working 60 hours they would have chances to improve and then personal accountability factors in because improving their life would be back in their control.

That doesn't seem to bad until you look at the owners perspective. If they have 20 employees that comes out to 7200 per month of extra expenses. That's a lot of loss for a small business owner. 

 

The more I think about it the more it could work IF there was a reduction in things such as welfare and a reduction in corresponding business taxes. I could get behind these extra costs if it led to a reduction in welfare and the size of government which could in turn cut taxes for all involved. 

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Not sure if this has been posted, but saw a recent article about Walmart's pay here: http://money.msn.com/now/post.aspx?post=96788602-ad1c-46a7-b7f5-23416977b75e

 

If the study holds true nationwide, Walmart costs taxpayers $8.4 billion yearly to raise their wages to a living standard.  When a company makes $17 billion in profits, wouldn't it makes sense to lower their profits by $8.4 billion instead of having the government dole out the difference?  Then, likewise, be able to lower taxes on said employer because the government isn't required to pick up the tab.  It does make me wonder how much Walmart pays in taxes.

It makes a great deal of sense to us, but not to the kids of Sam Walton.  They make more money with the status quo, and that's all they care about.  Their father believed in selling all US-made goods.  They believe cheap Chinese crap is the way to go, which took our manufacturing jobs away. :angry:  

My mom & I get into this "debate" every time I go home to visit.  I can't believe she shops there, knowing personally the people who have lost their small businesses because of it.  These are 3rd & 4th generation businesses that went belly-up because of Walmart. 

I have, however, turned her on to Family Dollar, as there is one nearby.  Same name-brand trash cans, bags, TP, etc...all without enabling the Waltons to give American families & taxpayers the finger.  (I actually saw the lightbulb come on over her head...but it was an old one, not the super-efficient one...I still have work to do. :lol: )   

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When a company makes $17 billion in profits, wouldn't it makes sense to lower their profits by $8.4 billion instead of having the government dole out the difference?

Not necessarily. One of the problems with the minimum wage is that while it can improve the income in a targeted group (in this case, the employed poor), there are also a variety of distortions to the market that can create negative effects, such as disemployment in the very people you're trying to help (though recent research seems to show that the effect is less than we might expect), price increases, and other issues. In short, not all of the help goes where we want it, there are some negative unintended consequences, and perhaps most importantly, if the goal is to help people, it's a round-about and inefficient way of doing it.

Programs like the earned income tax credit, though, go directly to those we want to help.

Christina Romer (economics professor at UC Berkeley, and former chairwoman of the Council of Economic Advisors for President Obama) wrote an Op-Ed in the New York Times: The Business of the Minimum Wage where she addresses this. Here's the intro:

RAISING the minimum wage, as President Obama proposed in his State of the Union address, tends to be more popular with the general public than with economists. I don’t believe that’s because economists care less about the plight of the poor — many economists are perfectly nice people who care deeply about poverty and income inequality. Rather, economic analysis raises questions about whether a higher minimum wage will achieve better outcomes for the economy and reduce poverty.

and here's the conclusion:

SO where does all of this leave us? The economics of the minimum wage are complicated, and it’s far from obvious what an increase would accomplish. If a higher minimum wage were the only anti-poverty initiative available, I would support it. It helps some low-income workers, and the costs in terms of employment and inefficiency are likely small.

But we could do so much better if we were willing to spend some money. A more generous earned-income tax credit would provide more support for the working poor and would be pro-business at the same time. And pre-kindergarten education, which the president proposes to make universal, has been shown in rigorous studies to strengthen families and reduce poverty and crime. Why settle for half-measures when such truly first-rate policies are well understood and ready to go?

In between she touches on some of the issues such as unintended negative effects, her take on the economic stimulus argument made in this very thread, and so on.

This would tend to be my favored approach. I am very leery about fiddling with the markets, and the unintended (and perhaps unexpected) consequences such an action can risk. If the issue is poverty, I think it makes more sense to address it directly.

This, of course, means that we can't turn around and villify businesses for paying low (market set) wages and having their employees using the support we provide.

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Personally, i like the EITC ...a LOT.. and am not a huge fan of a national minimum wage (it is really really HARD to try to conceive of a  minwage that is simultaneusly useful in mississippi and manhattan... you could probably get by just fine on the current minwage in rural alabama... but you couold tripple the minwage and poor people would still be screwed in san francisco.) .... but... i can EASILY see why politicians that want to help the poor push the minwage harder than the eitc.

 

 

Min wage OR EITC is not usually the choice presented.  given the choice between the on-budget EITC, and the off-budget min-wage... most would pick the EITC, i think.   However, the same people that hate the minimum wage hate the EITC, and fight against both.  But since the EITC is on-budget...this means it actually has to be "paid for" (on budget), which means you have to raise taxes, or remove some other beloved project, or whatever...   on the other hand, the minimum wage is just a decree.  We all only pay for it indirectly, so it is much MUCH more politically palatable.

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Personally, i like the EITC ...a LOT.. and am not a huge fan of a national minimum wage (it is really really HARD to try to conceive of a  minwage that is simultaneusly useful in mississippi and manhattan... you could probably get by just fine on the current minwage in rural alabama... but you couold tripple the minwage and poor people would still be screwed in san francisco.) .... but... i can EASILY see why politicians that want to help the poor push the minwage harder than the eitc.

 

 

Min wage OR EITC is not usually the choice presented.  given the choice between the on-budget EITC, and the off-budget min-wage... most would pick the EITC, i think.   However, the same people that hate the minimum wage hate the EITC, and fight against both.  But since the EITC is on-budget...this means it actually has to be "paid for" (on budget), which means you have to raise taxes, or remove some other beloved project, or whatever...   on the other hand, the minimum wage is just a decree.  We all only pay for it indirectly, so it is much MUCH more politically palatable.

 

And too, I wonder how circular this all is.  Increase minimum wage, increase prices on products companies produce, reduce government spending on welfare, reduce taxes on consumers and businesses, reduce prices on products companies produce.  Realistically it is all just a redistribution of a set amount of wealth, people think minimum wage increases automatically mean increased prices and unemployment, but don't account for the effect of reduced government spending and thus reduced taxation.  Of course, this is assuming that the government responds to such measures in a reasonable way instead of maintaining tax rates and simultaneously reducing welfare.

 

Also, costco sells at prices that rival sams club and walmart, yet pay their employees much higher wages.  I think that alone puts to rest any doubts on the consequences of higher wages.

 

Another poster called these wages market set, which I believe to be untrue.  The market would clearly set the wages lower if it could because poor people must work to survive and the rich love higher profits.  Is it skillful labor?  Not at all.  Does it make massive profits for a corporation?  You betcha.

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Also this issue becomes more complex because not all minimum wages are created equal as far as what the workers themselves produce in sales or revenue for a company.

 

The diverse variety of minimum or near minimum wage jobs out there is pretty huge.

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  • 2 weeks later...

So I just finished reading this whole thread.  I'm not going to post all of my thoughts and experiences because I don't have time to stay for a debate (you'll see why in a moment) and I hate people who post and run.  But here are a few thought:

 

One, top level executives and their greed are to blame I believe.  And no raise in minimum wage will fix that.  They will get their money.  And I honestly have no clue how to fix the mindset of these people.

 

Two, one of the collateral duties at my job is as a financial specialist.  I do a lot of teaching people how to live within their means.  And I would say about 90% of the budgets in this thread, including the OP, are horrible.

 

Three, why are so many assuming that if someone is working 40 or 60 hours a week they don't have time for classes, etc.  I average at least 80 hours a week.  I still find time to do at least 2 classes a semester.  My wife just graduated a few years ago.  She did college full time, had a full time and part time job, and still did her share of partying.  I make it work because it is important to me.  And that provides a lot motivation.

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  • 2 months later...

Interesting article, and its results come as exactly zero surprise. Huge companies that pay very low wages and don't provide health care are making an enormous profit off of tax payers. But of course they aren't the "takers" or "leeches" that poor people are...they're just being smart businesses!   :rolleyes:

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In 1994 it took me 15 minutes working at minimum wage to pay for a gallon of gas, today it takes 30 minutes.

Pay has not followed the cost of living, and the corporations have applauded themselves for being so business savvy for their cost cutting measures....oh wait those are their employees, you know "the backbone" of the business.

Then we will always have the corporate shills who will insist that anything a company can do to increase profit is to be praised.

These people will not be happy until the US matches the Third World,

But hey, we could always follow Michelle Bachmann who said that if the minimum wage was eliminated then companies could create more jobs! Yeah at 25 cents an hour.

Keep it classy American corporations! You're our real American heroes!

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In 1994 it took me 15 minutes working at minimum wage to pay for a gallon of gas, today it takes 30 minutes.

Pay has not followed the cost of living, and the corporations have applauded themselves for being so business savvy for their cost cutting measures....oh wait those are their employees, you know "the backbone" of the business.

Then we will always have the corporate shills who will insist that anything a company can do to increase profit is to be praised.

These people will not be happy until the US matches the Third World,

But hey, we could always follow Michelle Bachmann who said that if the minimum wage was eliminated then companies could create more jobs! Yeah at 25 cents an hour.

Keep it classy American corporations! You're our real American heroes!

 

From the yahoo article a few posts up, people on minimum wage are getting "earned income tax credit, SNAP benefits (also known as food stamps), Medicaid, the Children’s Health Insurance Program, and the Temporary Assistance for Needy Families program."  Their gas is probably free for them.

 

We can raise minimum wage, cut their government benefits, and the costs of burgers go up.  The workers' lifestyles stay the same, I pay less taxes but pay more for my burgers.  Looks like a wash for everyone, the corporations get to keep raking in billions of dollars.

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In 1994 it took me 15 minutes working at minimum wage to pay for a gallon of gas, today it takes 30 minutes.

 

I hear gas mileage has increased greatly since then and they say gas actually costs less now adjusted for inflation ect....probably just for the rich though

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I hear gas mileage has increased greatly since then and they say gas actually costs less now adjusted for inflation ect....probably just for the rich though

Costs less but still takes more work time to purchase. Oh....and minimum wage workers aren't buying the new cars with good gas mileage...they're buying cars that are old...remember because they're poor.

From the yahoo article a few posts up, people on minimum wage are getting "earned income tax credit, SNAP benefits (also known as food stamps), Medicaid, the Children’s Health Insurance Program, and the Temporary Assistance for Needy Families program." Their gas is probably free for them.

Because those things didn't exist back then? The point is that the cost of living goes up every year...minimum wage is not keeping pace.

We can raise minimum wage, cut their government benefits, and the costs of burgers go up. The workers' lifestyles stay the same, I pay less taxes but pay more for my burgers. Looks like a wash for everyone, the corporations get to keep raking in billions of dollars.

Take a second and look at the only group that got richer. What if...and I know this is insane, but what if these businesses decided to not pass the costs on to the consumer but instead accepted less profits by accepting that the wages they pay should keep pace with the cost of living?

Insane I know!

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Take a second and look at the only group that got richer. What if...and I know this is insane, but what if these businesses decided to not pass the costs on to the consumer but instead accepted less profits by accepting that the wages they pay should keep pace with the cost of living?

Insane I know!

Yes, it is.

You can rail about the fact that, for the last several decades, the government has deliberately shifted the labor-employer bargaining table in the employer's favor, and that the results have been exactly what the people pushing that agenda have wanted.

(The depression of wages is not the accidental side effect of nature or some such. It was the goal of numerous policies.)

And I'll enthusiastically agree with you. (I'm one of those bleeding hearts who thinks that the government should do what's best for the entire population, not for the top 0.1%)

BUT, wishing for some mythical world where employers decide to cut their own profits so they can pay their employees more? Ain't happening.

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I typically agree with that sentiment Larry.

But, in some cases sharing more of the pie benefits the business and the consumers.

 

And it only makes product prices go up when the wages are astronomical...take NFL tickets for example.

 

I read somewhere that the CEO of McDonalds made nearly 14M last year. He doesn't own McDonalds wholly or even majority.  

14M a year is insane money no matter who you are.

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Now, again: You want to complain that the table has tilted too far, and needs to come back some? I'm right there with you.

I will say, I'm not certain that $14M is too much for the CEO of McDonald's. It's a heck of a big company.

And I'm not certain it's too much for some other people, either.

For example, I'm not certain it's too much for RG3, or Peyton Manning. (And, in their case, assuming they're making that much, I even have support for that position. I can argue that they're making whatever they're making, because somebody else thinks they're worth that much, and it's his money.)

Now, when we're talking about CEOs or corporate owners or things like that? The "somebody else wants to pay them that much" argument kinda falls apart. Just pointing out that there are some people who make really big piles of money, working a job.

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I understand that McDonalds makes a lot of money.

That was my point of sharing the pie a little more. No reason to give it all up and not enjoy your work/benefits as the owner or CEO.

The company pays for all of the CEOs meals, travel, vehicle, gas, housing (at times), insurance, etc. The foundation of the business gets next to nothing.

 

The NFL with salaries and all that other jazz has out-priced the typical family. That part sucks to me, I can afford as many as I want...but if I had kids...I would just stay home and just watch on TV. TV experience ( besides tailgating ) is better sometimes also.

And it is not just the NFL, NBA tickets are priced insane also. Seats and a good team...a good team will make people spend the money for you to build the new stadium. I miss RFK.

 

That money that they are paying Manning, and others is nothing to the owners.

There was a comedian (can't recall who right now), that made the point..Shaq is rich, the guy that signs his check is wealthy (Not that he doesn't deserve to be).

 

I also understand that you want to own the business to make more money. But it doesn't have to be 14M compared to 16-17k.

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This is basically a labor written article. Take this nugget form their critique of Domino's:

 

 

According to NELP, the company could have raised employee wages rather than spend that money expanding aggressively overseas and investing heavily in technology aimed at easing the ordering and delivery process. 

The article is going to argue that the business should focus on raging employee wages instead of investing in technology? So Domino's should raise the wages of all workers to no less than $15/hour (living wage pushed by NELP) instead of investing in the ability for customers to order online and track their orders? That is a stupid argument. The employees are not improving Domino's bottom line (name the last time you ordered from Domino's because the person making the pizza was the best in their line of work or because the employees were just so damn friendly).

 

These are the same talking points pushed by the auto industry back in the day. And then when automation came around, you had workers earning 6 figures to place a screw that a robot would then tighten, or to place a bumper that the robot would attach to the frame. It is why our auto industry went under. You can't afford to compete in an open market when you know your vehicle will have to be 10 -15% more expensive based on labor & pension costs.

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I typically agree with that sentiment Larry.

But, in some cases sharing more of the pie benefits the business and the consumers.

 

And it only makes product prices go up when the wages are astronomical...take NFL tickets for example.

 

I read somewhere that the CEO of McDonalds made nearly 14M last year. He doesn't own McDonalds wholly or even majority.  

14M a year is insane money no matter who you are.

 

and, actually, its worse than that.

 

if you invest risk capital in a venture, you have potential downside and should be rewarded high equity returns if the venture succeeds.  Take risk, get rewards if the risks were well founded (and you get lucky).

 

 

the CEO of McDs is not an equity investor.  He is an employee.   THe risk/reward spectrum there is not at all evident to me.  It appears to me that his down side is a golden parachute today, and the upside is reeeediculous returns until an eventual golden parachute in the future.   (and the divide is much bigger in teh US than in other rich countries)

 

The "market" for upper management in american corporations is broken.  (and i use the term market very very loosly)

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it is the definition of a market failure.  there is a coordination problem (think back to "the prisoner's dilemna").   

 

if all firms moved from the current $2-400 million/year range of CEO salaries to a range of $1-15 million (both of those ranges are pulled out of my ass for illustrative purposes, but are in the ballpark of correct) then all firm would be better off, and their would also be a net gain to the US on the whole from a cost-competitiveness boost, as well as an efficiency boost from a more rational distribution of salaries.  However, individual firms are constrained from independently making that move, unless other firms also move.  (to be more specific, Boards of Directors, don't make those moves independently.. PARTICULARLY because Boards are mostly made up of CEOs from other firms, or individuals that are striving to be CEOs of other firms, and have absolutly zero incentive to constrain their own current or potential earning potential). 

 

as a result we are in a non-optimizing equilibrium.  (not "pareto optimal", in geekenomics terminology)

 

how you get there is a different question.  Obviously brute force measures like a salary cap limiting ceo compensation tend to have unanticipated adverse effects... but admitiing we have a problem should be the first order of business :) 

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