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Joel Ohman is the CEO of a private equity-backed digital media company. He is a CERTIFIED FINANCIAL PLANNER™, author, angel investor, and serial entrepreneur who loves creating new things, whether books or businesses. He has also previously served as the founder and resident CFP® of a national insurance agency, Real Time Health Quotes. He also has an MBA from the University of South Florida. ...

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Reviewed by Joel Ohman
Founder, CFP® Joel Ohman

UPDATED: Feb 8, 2021

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Paying his bills on time and staying on a budget was always difficult for Terrance Collins, but now it is practically impossible.

Working for minimum wage is not enough to provide for the 27-year-old or his two kids. He knows this, yet a recent budgetary plan by his employer only helped to worsen his outlook even further.

Last week, McDonald’s released a budgetary guideline for their employees. Critics slammed the budget for its inaccurate budgetary predictions, such as a $20 health insurance bill and a $600 rental or mortgage bill.

It was supposed to be a positive public relations move, illuminating that a job at the fast food restaurant could financially support a worker, but it failed miserably. One of the reasons is the requirement to work a second full-time job.

Nationwide, McDonald’s employs roughly 1.8 million people. Collins is one of the many employees that were exposed to the budgetary guidelines that the restaurant chain provided last week.

The budget angered employees more than it helped. Collins said it was a “real stupid move” and “selfish.”

He said that McDonald’s knew that a position at their restaurants would be insufficient.

“They know at the end of the day … it’s not going to be enough,” Collins said.

Disillusion About Auto Loan Costs

Beyond the staggering low, and nationally inaccurate, rental costs, McDonald’s also failed to predict the real cost of transportation via auto loan costs and bus passes. The restaurant chain reported that $150 would cover a monthly auto loan payment. This estimate is staggeringly lower than the national average.

Experian Automotive found that the average monthly payment for a new vehicle financed during Q1 2013 was $459. The average loan amount for a new financed vehicle during the financial quarter was $26,020.

Although many minimum wage workers shy away from a new car payment, even used car payments cost a significant amount of money. For used vehicles, Experian reports an average loan amount of $17,532.

McDonald’s auto loan budget is off by hundreds of dollars, and this makes a big impact on their employees. If the $150 budget cannot cover a used vehicle auto loan payment, then workers are either forced to ride the bus, walk, or get a ride from a friend. All of these alternatives become difficult for a full-time employee.

Collins said he takes the bus to work, but it runs late sometimes. He is then forced to decide between spending $23 for one-way ride in a cab (almost three hours worth of work) or arrive late and risk losing his job.

He goes the safe, but costly route. His monthly transportation costs run around $90 per month.

Jim Miller, accountant and author, said if he earned minimum wage, he would live in a city where he could take a train or a bus.

But that is not always an option.

Some employees are forced into the minimum wage positions because they lost a job elsewhere or because other forms of employment are impossible. Moving to an area with better public transportation can be costly, and most likely, more expensive.

McDonald’s restaurants are scattered nationwide, from small towns to large cities. Many smaller cities lack formal public transportation, and larger cities with a formal system lack the structure and timing needed to make it useful.

Planning for Today, Betting on Tomorrow

Although blaringly insufficient, the McDonald’s budget at least shows what a full-time position will yield for employees.

Miller said this is enough to project them further along in their career.

“By highlighting their lack of income, the sample budget could certainly help those making minimum wage want to earn more, become more qualified or seek other opportunities,” he said.

But greater opportunities are not always available.

Collins was making slightly over minimum wage, $7.35, as a manager but has since been demoted in the past two weeks. He is still waiting for his first check at this new position and expects it will lower.

The minimal hours he receives, four to six hour shifts, twice a week, are not enough to pay for everything. He is now looking for another job.

The idea of moving up in ranks at a chain such as McDonald’s is more an illusion than reality. Despite being told that with enough work and dedication they could move up to managerial positions, the vast majority of minimum and low-wage workers are never offered these opportunities.

A July report by the National Employment Law Project (NELP) found that front-line occupations comprise 89.1 percent of all jobs in the fast food industry. The median hourly wage is $8.94 per hour.

First-line supervisors make up 8.7 percent. The remaining 2.2 percent is comprised of managerial, professional, and technical occupations.

Unlike other industries which are more balanced, the fast food industry is run mainly by low-paid workers that face little promotion opportunity, despite being told that it is possible. The NELP report authors label this idea as a “Mobility Myth.”

Minimum Wages and Lowered Life Quality

Despite the harsh critique, McDonald’s is not the only one to blame. Corporations and local stores across the country fail their employees daily when they pay them the minimally required amount.

Miller said the real problem is not the corporations; it is the national minimum wage.

“If minimum wage were higher, then McDonald’s sample budget could certainly have more room for expenses beyond life’s most critical needs,” he said.

Miller said that employees technically can survive from a minimum wage job, but the outcome is a “very low quality of life.”

This low quality life forces consumers to choose between healthcare and food, between paying the rent and paying for heat. When these choices are compared, it is easier to see why the cost of transportation and an auto loan fall in importance.

“Low minimum wages fall short of allowing someone to have their basic needs met in a 40-hour work week,” Miller said.

Despite his support for budget plans at each income level, Miller finds fault with the fact that one minimum wage job is simply not enough for an employee to survive. In addition, if the employee has a child or someone to support, they will likely need public assistance which eventually costs taxpayers more.

“People are going to pay for this margin whether it’s through increased minimum wage and paying more for our Big Mac’s and $5 foot longs or through taxes that get allocated to welfare,” he said.

The tab will always get picked up, either by the customer buying the meal, or the taxpayer paying for benefits.

“Everything should be done to help people earn a wage that can sustain a decent life and the sample budget would then be a little more appetizing too,” Miller said.