Over at Forbes, I referenced a Washington Post column claiming that it is super-inappropriate to expect that anyone can reasonably manage their financial affairs without debt because of all of the injustice in the world, and cited a congressional hearing in which Rep. Katie Porter (D-Calif.) “grilled” (his word choice) the CEO of JPMorgan Chase, Jamie Dimon, about the wages of its entry-level employees. Now, quite unrelatedly, a The Hill article on this hearing crossed my path, with more detail, and I’m not sure what to make of it. Did they really summon CEOs to complain about starting wages of $16.50, that is, twice the minimum wage, for a job that requires no more than a GED?
Now, I’ll throw in a caveat here: there’s a reason why this is a “Jane the Actuary” article and not a follow-up Forbes article, and that’s (largely) that I neither have all the facts at my command nor am I doing the necessary journalist-y research to acquire them. But lots for discussion here, I think.
To begin with, Porter sounds like an unpleasant person. Is this really what Congress does? — call business heads in to “testify” and, instead of asking substantive questions, harangue them? It’s nonsense. The Hill article shows a picture she took of herself and posted on twitter, of the hypothetical budget of a single mom being paid $16.50 per hour, earning $35,070 per year, or $29,100 after tax, of which she pays:
$1600 for a 1 bedroom apartment shared with a 6 year old,
$100 for utilities
$250 for a car payment for a 2008 car
$150 for gas
$402 for food (the USDA “low cost” food budget)
$40 for a phone
and $450 for afterschool childcare.
Does this budget make sense? The taxes paid seem way too high, to start with; I calculated (with a combination of online calculators and actual calculator-math) $1700 in federal tax, less $838 in EITC and a child tax credit of $2000 (of which $1,400 is refundable) for a net refund of $1138. FICA would be $2348, so she’s at a net $1,210 in taxes. State taxes are another $532. That’s far less than the $6,000, even if my math is a bit approximative. At first I thought this was explainable as a combination of taxes plus all other payroll deductions (health insurance premiums and other benefit costs plus maybe even a 401(k) contribution) but then the article says that this is not a real person sharing real expenses but a hypothetical composite worker, so that it seems that someone did some (bad) math.
Does a $250 car payment for an 11 year old car make sense? Not to me, but I suppose the staffer who constructed this hypothetical budget might have found what a car costs, off a used-car lot, with the high interest rate someone with bad credit would get. As to the $1600 in rent, well, it is beginning to be acknowledged by Californians that their restrictive zoning is driving up the cost of housing. They haven’t quite gotten to the point of permitting more construction, but, if I’m not mistaken, they are at least having that debate in a way that wasn’t the case not long ago — though unfortunately, some of them are coming to the conclusion that the answer is rent control, which won’t help with housing supply at all.
But beyond nit-picking the budget itself, here’s what’s missing: child support.
This is, after all, a hypothetical single mother of a 6 year old child, beginning an entry-level job which nonetheless expects a professional demeanor. (Tangentially, according to the Chase website, they seem to hire their tellers on a part-time-only basis; that is, the only listings shown are for part-timers. Are the full-timers promoted from within? Do they hire part-timers in order to balance their workflow? To avoid costs associated with full-time employees? A 2011 document found online says that health insurance is available to all employees working more than 20 hours per week, but with no details on level of subsidy. In any case, it’s therefore not even clear whether Porter’s office talked to people who actually worked as full-time bank tellers at Chase.)
Porter asks, how is this hypothetical worker supposed to make ends meet when she has a $500 budget gap every month? But that hypothetical worker ought to be receiving child support.
Is she a former housewife, newly divorced and re-entering the workforce? She should be receiving child support.
Is she a teen mom, finally ready for the workforce for the first time? She should be receiving child support.
Does she fall into that category of women that one reads about, who say, “I didn’t want to have anything to do with the father”? That’s a problem. Children should not be denied the child support that is due them (and should not be denied the opportunity for a relationship with their father) because their mothers wished not to be bound by this relationship.
Is the father, on the other hand, failing to pay child support because he’s a gangbanger, a “NEET” as they’re called these days, the numbers of which are distressingly high in places such as Chicago? Then we need to talk about this, rather than treating these men as disposable, so that all that matters is ensuring that the women with whom they have fathered children have sufficient funds from statutory minimum wages or from government support programs, so that their children need fathers for neither financial nor emotional reasons.
But let’s leave this behind — how much, then, should a bank teller be paid? Remember, however much JPMorgan Chase earns in profits companywide, they’re still not going to be keen on subsidizing unprofitable local bank branches, and, whenever such a bank isn’t being called on the carpet for their low teller salaries, they’re being criticized for the fees they charge their customers for low-balance checking accounts, overdrafts, and the like. Do their critics want to have their cake and eat it too, by expecting fee-free or low-fee banking with high-paid entry-level employees?
So, readers, what do you think?