It isn’t the McDonald’s budget that’s out of touch; it’s the media
This is actually not a terribly common scenario, as most minimum wage workers aren’t primary breadwinners. Given those assumptions, the pamphlet then guides the employee through monthly and daily spending targets, all in effort to provide the basics on budgeting and saving.
About 30 million U.S. households do live on less than the allotted $24,000 in annual income assumed in McDonald’s theoretical budget, whether they work in factories or fast food or other service industries. So the question is, for those who are in this situation, will this budget work? It turns out the budget pretty accurately reflects the decisions faced by low-income households every day.
We’ll start with the biggest fixed cost, the one commentators have had the most fun mocking — monthly rent. As several commentators note, average rent in America is more than $1,100. But the average rent isn’t what matters; median rent is. It turns out, according to City-Data.com, median rent in many states falls between $600 and $800. So budgeting rent at $600 may work. After all, no one expects families subsisting on minimum wage employment to be paying more than the median rent given the definition of “median.” If you switch to Zillow.com, which has more recent data, 22 states had a median rent index under $1,000 in May 2013.
The other costs, as Timothy Lee notes in Wonkblog, are fairly realistic as well. The utilities are around the national average, as are the phone and cable services, car payments, and the car insurance estimate. The toughest portion is health care, which the family would have to do without assuming they choose the same eating and clothing habits as the average American. It’s worth noting that cable and a portion of the food and entertainment budget could, and probably should, be reallocated toward health care (free videos from the library, anyone?). That may sound harsh, but that’s the point of analyzing a budget like this, to realize the tradeoffs many people unfortunately have to make.
So is it possible to live on the McDonald’s budget? Certainly. It mirrors the tough choices made by those living in poverty or close to the poverty line every day. It shouldn’t be rejected as out-of-touch. On the contrary, it acknowledges harsh realities while offering basic instruction in important budgeting skills.
We don’t like to admit that, often, poor people can’t and probably shouldn’t enjoy the same levels of food, clothing and entertainment that others consume. Or that they buy minimum liability car insurance, choose to live far from work to find lower rents, or may be going without health coverage. But we can’t wish these realities away with snarky dismissiveness. Instead we should be thinking of more creative ways to make such conditions as temporary as possible with better-targeted assistance.
Through this lens, the McDonald’s budget isn’t misguided or insulting. It’s an important service which seeks to develop often-overlooked skills. It’s important to note that the first thing McDonald’s budgeted (the entire purpose of the exercise) is savings. If our outrage stems from the tradeoffs low incomes force a family to make, we should want to move these people up the ladder to a different station in life.
For individuals stuck with a low-wage job at a company like McDonald’s, savings is one important way out. It gives one the freedom and flexibility needed to take charge, and we should be grateful to McDonald’s for providing helpful tools toward that goal. None of the detractors mentioned McDonald’s particularly generous 401(k) match, one of the most important ways employers can incentivize savings.
And beyond McDonald’s corporate effort, viewing the choices of the poor so transparently gives clues for how we as a society can best help. We can’t simply raise the minimum wage, as it’s a sloppy way to target these people (and may in fact reduce their employment options). But we can figure out how to offer temporary relief and a path out. We can assume their situation is at least partly due to lack of other marketable skills, so better access to jobs training programs could help. Or if we want to pad these individuals’ savings, we could consider more targeted strategies, such as increasing the Earned Income Tax Credit.
We could go further and ask how these people ended up here in the first place, eking by on minimum-wage employment. There, the policy options are endless, from education reform to examining our criminal justice system to early childhood intervention. But whatever we do, the point should be to work together — corporations, nonprofits, and government employees alike — to tackle the problems from our unique vantage. As an employer, McDonald’s has done just that.