I stopped making minimum wage in 1991, when I was 20 years old. I was working for Donatos pizza at $4.25 per hour as "inside help", a position typically reserved for part-time highschool workers. My car was donated to me by my grandmother, as I couldn't afford a car payment, and she wanted to help me out. I shared an apartment with a friend from a previous job, Steve, and the two of us scraped by, kept our $435/month rent more or less paid on time, ate a lot of pizza at work to curb the grocery bill, and played a lot of Zelda in lieu of entertainment requiring cash.
I look back on that time fondly, but I was close to poverty, and wouldn't have been able to manage without the free car, living in a time where filling a car's gas tank cost just $10, and having a co-conspirator to share expenses with. If I'd have gotten sick, it would have been very problematic for both of us; I had no health insurance at all, and I couldn't afford to miss any work. If my car had broken down, I would have been running back to family for help to get back on my feet.
I was lucky, though, in that the pizza store noticed my quickly improving skills and work ethic, and offered me a position in management. A couple months after that, I leveraged the extra cash that position brought into my own apartment, (Steve ended up moving back to his hometown of Youngstown, settling affairs after his ex-wife died, and trying to build a good life for his son - that story deserves a better treatment, and provided Steve doesn't object, I'd like to tell it from my point of view some day) where I slowly accumulated furniture, a stereo, a set of books I'd been meaning to get to some day, and a modest cash reserve for car repairs, doctor bills and whatnot. The management job came with a 45 hour work week (minimum), a week of vacation, insurance, and a small monthly bonus if the store hit it's "numbers". Most of that is laughable by the standards of a software developer, but at the time I felt like I was living it large.
The hours and work took its toll on me, but the measly $25k-ish I was making at the time felt like luxurious living compared to where I had been just a few months before. My body was young and didn't object too much to >45 hours in a kitchen each week, but I was eventually put in a position where I was negotiating things that affected people's lives, which I was wholly unprepared for. I fired someone who was unreliable, and faced his desperate pleading for a second chance. Two different sets of people with petty conflicts with each other tried to recruit me to side with them over their perceived goatee Spock doppleganger. A 15 year old Muirfieldite kid got stupid high before coming to work to impress his friends, and I looked into his eyes and failed to hide the hate I felt for him and his kind - sons of blue-blood lineage working only because their parents wanted them to experience manual labor before shipping them off to Ivy League colleges. He played it cool, and I didn't fire him on the spot or make a scene, but no matter how justified I felt, I looked into a little kid's eyes like I thought he was a piece of shit, and I couldn't take it back. He didn't come back to work again after that, and most of his friends quit soon thereafter. The worst, though, was when I moved one of the Sri Lankan immigrants to another store against his will, which deserves a little sidebar.
In the 90s, Columbus had a sizeable Sri Lankan population, people who had fled their country's civil war (which lasted 25 years before the Tamil Tigers were finally defeated). The Sri Lankan Americans I knew all worked multiple working class jobs (Donatos and KFC being two common places they worked), and lived together in a single apartment. They were hard workers, but due to having to negotiate multiple jobs, had an inflexible schedule and could only work the morning shift at my store. They spoke English well enough for me and other non-bigots to understand them clearly, but not well enough to answer phones or interact with customers much at the front counter. The main problem was that our store couldn't afford all of them for day shifts, as we didn't have very busy lunches, and needed to have at least one good English speaker in addition to the manager to work the counter. One of them had to move to the night shift or leave the store. I chose the newest arrival, Siva.
Actually his given name was Thambamuthu, and I'm still unclear as to why his fellow expatriates called him Siva. Thinking I was being helpful by letting him keep the same hours, I negotiated with another store nearby who needed inside lunch help for Siva's transfer, and broke the news to him the same day I posted the following week's schedule, which he wasn't on. In reality, I was an ignorant 21 year old and handled the situation very indelicately. Siva was a judge in his home country, and the other Sri Lankans were very respectful to him - in fact he often barked orders to them during shifts where the usual reply was a submissive "Yes sir!" and hurrying to do whatever the task was. And I just stepped on his authority because he happened to be hired last. What an idiot I was.
Everything worked out well enough, though. Siva accepted the transfer, I believe he took his teenaged son with him, who was a nighttime delivery driver for the store, so he managed to save face somewhat by appearing to be bending over backwards to help a struggling store. But I realized what I had done, and it weighed on me. Soon afterwards I used an excuse of a bad store visit from an area supervisor to sabotage my position (the details aren't important to me any more - suffice to say I was asking for it), and accepted a demotion to driver at another store... where, surprisingly, I made about the same money for much less work, and much less that I could do wrong to affect people's lives. All I had to do was keep my car between the lines.
I did so well driving that my first desk job at the failing CompuServe online service, for $9.60/hr, more than double the minimum wage, was a substantial pay cut for me, and had I not previously taken a roommate, I would have been struggling again, as my life had taken on a car payment, the habit of eating out periodically, going to movies, buying books, and losing a chunk of my paycheck to insurance costs.
Why the trip down memory lane? McDonalds recently took a lot of flak for a sample budget purported to show how easy it is to manage a budget and succeed in life if you make minimum wage at McDonalds. The budget is unrealistic for a number or reasons. In case the document gets taken down, here is the gist of it:
Monthly Net Income Income (1st job) $ 1,105 Income (2nd job) $ 955 Other Income $ 0 Monthly Net Income Total $ 2,060 Monthly Expenses Savings $ 100 Mortgage/Rent $ 600 Car Payment $ 150 Car/Home Insurance $ 100 Health Insurance $ 20 Heating $ 50 Cable/Phone $ 100 Electric $ 90 Other $ 100 Monthly Expenses Total $ 1,310 Monthly Spending Money $ 750 Daily Spending Money Goal $ 25
The intent of this seems to be showing that working minimum wage can take care of all your expenses, plus give you $25 mad money every day. Except it doesn't mention groceries. Except it implies you can find adequate private insurance for $20 a month. Except the utopia they describe requires a second minimum wage job for 35 hours a week.
In reality, this shows quite simply that if you make double minimum wage, which I did as a probationary tech support guy at CompuServe, that you'll still be struggling to feed yourself and find insurance, which I would have been had I not advanced quickly, or didn't have a reliable roommate.
Let's take a more realistic look at what budget numbers would be like. In my hypothetical example, we have a newly married young couple, both currently only capable of making minimum wage for whatever reason (maybe they're fresh off the boat from Sri Lanka). And to their delight, they have a new baby in their lives. What sort of life would they have here in the land of opportunity? Can they live what most of us consider a "normal" life on the wages we set as the minimum needed to stay above poverty, or can they not exist without special help in the form of food stamps, public housing assistance, reduced electric rates, medicaid and the like?
First, they have to choose whether or not mom has to give the baby to a daycare so she can also work minimum wage, or if she gets to stay home and care for the baby herself.
Dad gets a job at McDonalds in my home city of Columbus Ohio, making the current minimum wage, $7.25 per hour. We'll start with him trying to be the sole breadwinner. Since he'll be the only one working, he doesn't think they can afford a car, so he'll take the bus to work. He needs good medical, dental, and vision insurance for the whole family, so I've used the monthly family rates for the most common plans used at my job:
Medical: Anthem Lumenos HRA Plan $ 308.32 Dental: Aetna Dental PPO $ 30.49 Vision: EyeMed Vision Plan $ 19.93
I'm only going to require him to work 40 hours per week, the work week length fought for so hard by labor unions, and which most of us take for granted. Here's what his gross monthly pay will look like:
Minimum wage Per hour $ 7.25 Per 40 hour week $ 290.00 Per 52 week year $ 15,080.00 Monthly $ 1,256.67
Here's what his monthly paycheck will look like:
Monthly Paycheck Formula Gross $ 1,256.67 Medical $ 308.32 Dental $ 30.49 Vision $ 19.93 Taxable $ 897.93 Gross - sum of insurances Medicare $ 13.02 1.45% of taxable Social Security $ 55.67 6.2 % of taxable Fed withholding $ 0.00 Exemptions* exceed salary, so no federal withholding Ohio withholding $ 6.73 Taxable - exemptions = 735.42, so 1.276% bracket.** Tax is $2.66 + 1.276% of ($735.42 - $416.67) Columbus tax $ 22.45 2.5% of Taxable Net pay $ 800.06 Taxable - taxes (or Gross - insurances - taxes)
There are 3 people in the family, so we'll say 3 exemptions to make things simple. Here are the 2013 exemption rates:
Annual Monthly Monthly x 3 Federal $ 3,900 $ 325 $ 975 State of Ohio $ 650 $ 54.17 $ 162.51
** 2013 Monthly payroll withholding tables
Federal (married filing jointly) Salary Minimum Base withholding Percent of excess $ 0.00 $ 0.00 0 $ 692.00 $ 0.00 10 $ 2,179.00 $ 148.70 15 $ 6,733.00 $ 831.80 25 $ 12,892.00 $ 2,371.55 28 $ 19,279.00 $ 4,159.91 33 $ 33,888.00 $ 8,980.88 35 $ 38,192.00 $ 10,487.28 39.6 State of Ohio Salary Minimum Base withholding % of excess $ 0.00 $ 0.00 0.638 $ 416.67 $ 2.66 1.276 $ 833.33 $ 7.98 2.552 $ 1,250.00 $ 18.61 3.190 $ 1,666.67 $ 31.90 3.828 $ 3,333.33 $ 95.70 4.466 $ 6,666.67 $ 244.57 5.103 $ 8,333.33 $ 329.62 6.379
So, what can our family do with their $800.06 per month? Let's look at a budget:
Monthly budget, mom stays home with infant Item Amount Running total Net pay $ 800.06 $ 800.06 Rent $ 695.001 $ 105.06 Bus fare $ 62.002 $ 43.06 Utilities $ 52.163 -$ 9.10
Average Columbus 1 bedroom apartment rate. Source: apartmentratings.com
According to cota.com, the best public transport option seems to be the 31 day pass for $62, which will let dad run to the grocery store on the weekends, or do other solo errands.
Average Columbus utility bill for 2 people. Source: columbus.gov
Before they've bought any food they're already $9 in the hole. So mom doesn't get to stay home with the baby. She has to get a job, which also means finding a day care. Since the family must be able to pick the baby up from daycare at a moment's notice, and coordinating 2 people getting to and from work is logistically harder, they'll need to procure a car instead of relying on public transport.
Mom's paycheck is a little better than dad's, since she can skip the insurance:
Mom's Paycheck Gross $ 1,256.67 Insurances $ 0.00 Taxable $ 1,256.67 Medicare $ 18.22 Social Security $ 77.91 Fed withholding $ 0.00 Ohio withholding $ 13.64 Columbus tax $ 31.42 Net pay $ 1,115.48
And here is their new budget:
Budget, both parents work, baby in daycare Item Amount Running total Combined Net pay $ 1,915.54 $ 1,915.54 Rent $ 695.00 $ 1,220.54 Gas $ 42.001 $ 1,178.54 Utilities $ 52.16 $ 1,126.38 Daycare $ 650.002 $ 476.38 Car payment $ 141.103 $ 335.28 Car insurance $ 54.004 $ 281.28 Groceries $ 215.005 $ 66.28 Everything else $ 66.28
The best small car averages $500 annual fuel cost. Source: fueleconomy.gov (Of course, the car is a 2013 Scion iQ EV, which would be out of their price range, but let's use the number anyway, and say they're very conservative in their amount of driving.)
Average monthly cost of infant daycare in Ohio source: naccrra.org
Cheapest local car on Carmax: 2006 Chevy Aveo, $7998. Let's assume no money down, amoritized over 6 years at 4%, giving $141.10 per month.
Average Ohio car insurance cost (2011). Source: columbusinsurancemarket.com
I'm taking a SWAG here, and saying $50 per week, x 52 weeks / 12 months = $215 per month
A babysitter, dinner, and a movie one night per month
A doctor's visit plus medicine
A day off work to care for a sick baby
A birthday present
One concert ticket
A mobile phone bill, or a month of Internet, or cable TV.
Toddler clothes when baby gets bigger
My point is simple: Minimum wage is not enough. My hypothetical couple would live in cheap housing, would probably skip insurance altogether, would use food stamps and other public assistance, and at least one of them would take a second job. A number of counter arguments are obvious: You should have to work hard to build a good life. Quality workers quickly advance to make more money. This is what you get for not being educated. Entertainment and luxury purchases aren't a right, they're a privilege.
To hell with all that. I don't want an honest, hardworking, smart man like Siva to have to live with 5 of his fellows and work two jobs in order to build the lifestyle I take for granted. I want us to pay him enough at whatever job he gets to live like I do. He deserves it as a fellow human being.