August 5, 2013

McJobs Malaise: McDonald’s Budgeting Tool Highlights Low-Wage Woes

A board member of NAPFA calls the tool a ‘silly exercise’ lacking budgeting items in the ‘real world’

The McDonald's “Practical Money Skills for Life” siteAn online McDonald’s budgeting tool set up to help its employees actually highlights the difficulty of living on McJob wages.

The McDonald’s sample monthly budget plan for its lowest-paid workers looks like this: $1,105 in income from a first job and $955 in income from a second job. On the expenses side, the first item listed is savings, at $100, followed by $600 for mortgage or rent, $150 for a car payment, $100 for car and home insurance, $20 for health insurance and $50 for heating.

McDonald’s “Practical Money Skills for Life” site also offers employees a pay card and calculators along with a 27-page budget journal PDF that includes the sample monthly budget (see chart below).

On the face of it, McDonald’s appears to be offering its employees a thoughtfully prepared package of financial planning tools. But according to Anthony Ogorek, a Buffalo, N.Y.-based certified financial planner and fee-only advisor, the McDonald’s monthly budget is completely unrealistic for American life in the 21st century.

“It’s actually sort of a silly exercise,” said Ogorek, who serves as director of the national board of the National Association of Personal Financial Advisors (NAPFA). “When you look at monthly expenses in the real world, one of the greatest expenses is food. There’s no food line item here, just monthly spending money. It’s silly that the No. 1 item is savings. A car payment of $150 is minuscule. We would all love to pay health insurance for $20, but I don’t know where that happens. In Buffalo, we would love to pay $50 a month for heat.”

McDonald’s Offers a Monthly Budget Plan for Workers

McDonald's sample monthly budget (click to expand)

The McDonald’s monthly budget plan (left), which includes income from a second job, reflects a serious problem in the U.S.: many American workers aren’t earning enough to be the sort of consumers who can drive the economy forward. Indeed, Friday’s employment report shows that U.S. job growth may be on the upswing, but it also underlines a disturbing trend: most of the new jobs created these days are McJobs.

Friday’s good news was that the U.S. added 162,000 jobs in July and brought the unemployment rate down to 7.4% from 7.6% in June, according to the Department of Labor. The bad news was that 85,000 of those new jobs came from retail trade, food services and drinking places, which usually pay by the hour.

Glassdoor.com, which offers an inside look at McDonald’s wages posted anonymously by employees, reports average hourly salaries as low as $7.68 per hour for crew members and as high as $10.44 per hour for assistant managers as of July 30. In comparison, Friday’s Department of Labor report shows that average earnings for hourly workers currently total $23.98. (The federal minimum wage has been $7.25 per hour since July 24, 2009, according to the DOL.)

That means that a McDonald’s crew member who works 40 hours a week for 50 weeks would earn an annual salary of $15,360, or $1,280 per month. U.S. Department of Health and Human Services guidelines set the poverty level for 2012 at $23,050 in total yearly income for a family of four. With those kinds of wages on offer, it’s perhaps no surprise that thousands of fast-food workers in seven cities including New York and Chicago last week went on strike to demand a pay raise to $15 an hour.

To be sure, low-paying service jobs make planning a monthly budget look like a near impossibility, and never mind planning for big purchases or retirement investments.

Anthony Ogorek, Ogorek Wealth Management

NAPFA’s Ogorek (left) didn’t see how a family of four could live on McDonald’s wages, and he added that even the many teenagers and college students the company employs would be hard pressed to make the numbers work. Rather, Ogorek said that the company’s motivation for offering the “Practical Money Skills for Life” site had more to do with marketing than with true financial planning.

“There are a raft of web sites out there about financial planning that can help you do a better job than this, so my sense is that this is just a throwaway to fill out their website,” Ogorek said. “I think this is a co-branding strategy between two mega-corporations rather than an attempt to provide financial education to young people. Visa is pitching their paycheck payroll card. If you look at the photos on the McDonald’s web page, everyone is very young, so what I believe they’re trying to do is establish brand recognition and establish a relationship with young people who will be consumers for a half century or more. People don’t know what Comerica is, but they sure do know what Visa and McDonald’s are.”

McDonald’s officials didn’t return a request for comment on the sample monthly budget by publication time. But a McDonald’s spokesperson provided a statement to ThinkProgress.org, a progressive website that criticized the company for underscoring “exactly how hard it is for a low-paid fast food worker to get by.”

“In an effort to provide free, comprehensive money management tools, McDonald’s first used the Wealth Watchers International budgeting journal when this financial literacy program launched in 2008,” the statement said. “The samples that are on this site are generic examples and are intended to help provide a general outline of what an individual budget may look like.”

Company Costs for Raised Wages

Conservative news outlet FoxBusiness also took McDonald’s to task for its financial advice website and planning tool.

“In an attempt to help its workers, McDonald’s may have just hurt its own brand…[and] it may have inadvertently hinted its employee pay isn’t adequate,” Kate Rogers reported for FoxBusiness, pointing to the sample monthly budget’s wages from two jobs. “Some say the tool may have implied McDonald’s workers need a second job in order to make ends meet.”

If McDonald’s does indeed raise worker pay to $15 an hour, the higher wages would cost the McDonald’s corporation and franchises $8 billion in added payroll costs, according to 24/7 Wall Street. And as for the price of a Big Mac, ABC News published an estimate predicting it would rise 68 cents to $4.67 to $3.99.

At year-end 2012, McDonald’s (MCD) reported a 2% rise in earnings, at $5.36 per share versus $5.27 in 2011, on a 2% rise in revenues totaling $27.6 billion. The company returned $5.5 billion to shareholders through dividends and share repurchases.

Read Tepid Job Growth Spreading to Developing Economies at ThinkAdvisor.

Page 1 of 2
Single page view Reprints Discuss this story
This is where the comments go.