Author Topic: The Minimum wage mental block  (Read 8960 times)

The Money Monk

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The Minimum wage mental block
« on: January 03, 2013, 12:13:52 PM »
I have seen a lot of people mention that certain things aren't 'worth it' if they discover the amount of money they get from it per hour is less than minimum wage.

I just wrote an article on the subject at my blog (shameless plug - http://themoney-monk.blogspot.com ), but to summarize, my thoughts are that until McDonald's lets you come in whenever you have free time and work for minimum wage, there is no way to automatically convert your free hours into min wage, so it's an arbitrary self-imposed limitation. So if you DO have a way to convert free time into money, I would take advantage of it, even if it 'pays' less than minimum wage.

If you have something else you can be doing that would get you more, then by all means do that instead. But not doing something simply because a job would pay more, IF you were working there for that hour, seems myopic to me.

Its better to spend an hour doing something that will make you $5 than watching TV, right?

In my mind its about opportunity costs, not the arbitrary benchmark of minimum wage.

Although some people just can't seem to stomach doing something for less than minimum wage.

What do you guys think?

tooqk4u22

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Re: The Minimum wage mental block
« Reply #1 on: January 03, 2013, 12:30:56 PM »
I agree with you, but a more practical question would be"

"Is there really anything that you can do that would pay less than minimum wage?"

I think the answer is no. 

One example - I iron my own dress shirts and takes me about 5-10 minutes per shirt.  Cost to have laundered is $1.50-2.00.  So I am ONLY saving $1.50, which at 10 minutes is $9/hour. 

I think there are very few things that could be done yourself that are less than minimum wage. 

The Money Monk

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Re: The Minimum wage mental block
« Reply #2 on: January 03, 2013, 12:47:03 PM »
Yeah probably right that it doesn't come up that often, but it does come up occasionally.


tooqk4u22

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Re: The Minimum wage mental block
« Reply #3 on: January 03, 2013, 01:24:36 PM »
I am sure it does come up from people, but what I mean is that I don't think they are really thinking it through. 

To be honest if I have a free hour and have the choice to make $5 or not - it really depends on what it is.  Is making $5 better than watching TV, how about reading a book, etc. - maybe, but then again maybe not.

I am more curious if you or anyone else can come up with an example where doing something yourself would be worth less than minimum wage. I really don't think there are any.

The Money Monk

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Re: The Minimum wage mental block
« Reply #4 on: January 03, 2013, 05:48:02 PM »
one example I an think of off the top of my head was somebody talking about 'extreme' couponing. Some soccer mom was supposedly saving like 100 bucks a week but spending 20 hours total collecting coupons, researching, etc. So all in all it came out to less than minimum wage.

More often though are examples similar to the one you gave, with household activities. Something like hang-drying clothes vs running the dryer. or washing your own car vs paying 5 bucks to have it done, etc.


Richard3

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Re: The Minimum wage mental block
« Reply #5 on: January 03, 2013, 06:08:57 PM »
It is all about opportunity cost - but not really a financial one. The opportunity cost is of Time.

I have 40 years left on this planet (let's say, maybe more since my grandparents stuck around a while). I can spend one of them ironing my shirts or I can spend 45 minutes reading a novel and then 15 minutes working to pay someone else to iron my shirts. Now, this isn't entirely accurate since ironing my own shirts now creates future income which reduces my need to work to pay for things so maybe I'd only have to work 14 minutes in future and 1 minute of free time would be produced by my investments. But it's close enough.

The minimum wage aspect of this argument is just mental / verbal shorthand I think.

KGZotU

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Re: The Minimum wage mental block
« Reply #6 on: January 03, 2013, 06:59:11 PM »
I have 40 years left on this planet (let's say, maybe more since my grandparents stuck around a while). I can spend one of them ironing my shirts or I can spend 45 minutes reading a novel and then 15 minutes working to pay someone else to iron my shirts. Now, this isn't entirely accurate since ironing my own shirts now creates future income which reduces my need to work to pay for things so maybe I'd only have to work 14 minutes in future and 1 minute of free time would be produced by my investments. But it's close enough.
There's a lot of overhead in going to the dry cleaner, dropping off, returning, picking up, etc. And some people get enjoyment out of ironing their shirts.

Richard3

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Re: The Minimum wage mental block
« Reply #7 on: January 03, 2013, 07:20:53 PM »
Those people can iron my shirts too :) you can substitute whatever tasks you want into my example, it was mostly to try and point out that TIME is the important thing and that time is swapped for money (in both directions).

Where I used to live had an ironing pickup and delivery service that was pretty cheap according to the guys who used it. Personally I just wore wrinkled shirts (or did a half assed ironing job when I was just switched off and watching TV). I was lucky in that I was the designated eccentric and had very little contact with non-technical people.

Now I work from home and I count it as a victory if I get out of my pajamas before leaving the house :)

The Money Monk

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Re: The Minimum wage mental block
« Reply #8 on: January 03, 2013, 07:31:05 PM »
You're right that it is about opportunity cost of time vs money. And I totally get that. If I was a billionaire I would outsource everything to have more time to myself.

My point is that, even assuming the activity is enjoyable, people seem to balk at the arbitrary threshold of minimum wage.


KGZotU

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Re: The Minimum wage mental block
« Reply #9 on: January 03, 2013, 07:34:48 PM »
Those people can iron my shirts too :) you can substitute whatever tasks you want into my example, it was mostly to try and point out that TIME is the important thing and that time is swapped for money (in both directions).
Points well taken. :P

I guess I've run into this when talking about building my own house. People say their time is better spent working their job and paying a tradesman to work, and I always wonder that they wouldn't count doing the actual work as a reward rather than a cost. I'm not saying that they should; it shows my own bias.

Richard3

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Re: The Minimum wage mental block
« Reply #10 on: January 04, 2013, 07:09:33 AM »
People like to think they can make minimum wage. That's the minimum someone's time is worth by law after all.

arebelspy

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Re: The Minimum wage mental block
« Reply #11 on: January 04, 2013, 09:15:52 AM »
I've never heard it compared to minimum wage, but always your true hourly rate.

Regardless, it's a completely valid point. Most people have hours beyond work where they are earning zero, and any money earned is an increase, regardless of if it's lower than your true hourly rate, minimum wage, or whatever. Only you can determine what is or isn't "worth your time."
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James

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Re: The Minimum wage mental block
« Reply #12 on: January 04, 2013, 10:32:32 AM »
I would absolutely agree that using your time to save money, even at less than minimum wage rates, isn't a waste.  The key is to consciously spend out time on our priorities, whatever they are based on our finances and situations.  I think high income earners are especially tempted to belittle the small amounts saved per hour, and that attitude slowly spreads over more and more of their lives.

meadow lark

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Re: The Minimum wage mental block
« Reply #13 on: January 04, 2013, 10:37:40 AM »
   I see it differently.  I am often urging my wife to pay to have things done that she is capable of doing, but doesn't want to.  For instance, our sink is leaking where the garbage disposal is, so we want to get rid of the garbage disposal and have the sink re-caulked.  Not a big project, something she is perfectly able to do, but she doesn't want to do it.  As a matter of fact, it fills her with dread and anxiety, and she will make a 30 min project take 3 days, b/c she so doesn't want to do it.  I am estimating it will cost $80 if I call my plumber.  Yes, I could also do it myself.  However, that would involve a fight, because I don't know how, I would end up asking for her help because some connection would leak, she'd be mad at me for asking for help because she is going to take care of it "later", I'd be mad at her for being mad at me, my kid would misbehave b/c that is how he reacts to us fighting, the dogs would get anxious and start barking, my kid would yell at the dogs, I'd yell at my kid for his lack of empathy...  Just pay the damn $80.
  And yes, if my wife or I wanted to wander in and work an extra 4, 8, or 12 hours we would get time and a half and  a thank you note sent to the house from our manager (literally.  Nice managers.)

dragoncar

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Re: The Minimum wage mental block
« Reply #14 on: January 04, 2013, 10:42:32 AM »
The machine does a much better job on my shirts than I can myself (they are really quite badass: http://www.youtube.com/watch?v=TkUgxG1YctQ)

You have to factor in the time/cost to do laundry, as well.

There are a lot of things I can do that return less than minimum wage.  For example, my 40 minute walk to work saves me a $2 bus fare.  I don't do it for the cash, though.

A guy I work with irons a shirt every night for the next day.  He finds it to be a relaxing ritual.  If he had stayed an extra 10 minutes at work that evening, however, he would earn around $20 before tax (yes, this dude is paid well).

The Money Monk

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Re: The Minimum wage mental block
« Reply #15 on: January 04, 2013, 11:52:21 AM »
I've never heard it compared to minimum wage, but always your true hourly rate.

Regardless, it's a completely valid point. Most people have hours beyond work where they are earning zero, and any money earned is an increase, regardless of if it's lower than your true hourly rate, minimum wage, or whatever. Only you can determine what is or isn't "worth your time."

Exactly.

Also, most people have no idea how low the their true hourly rate actually is, once accounting for all the actual costs associated with their job.

The Money Monk

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Re: The Minimum wage mental block
« Reply #16 on: January 04, 2013, 11:56:34 AM »
   I see it differently.  I am often urging my wife to pay to have things done that she is capable of doing, but doesn't want to.  For instance, our sink is leaking where the garbage disposal is, so we want to get rid of the garbage disposal and have the sink re-caulked.  Not a big project, something she is perfectly able to do, but she doesn't want to do it.  As a matter of fact, it fills her with dread and anxiety, and she will make a 30 min project take 3 days, b/c she so doesn't want to do it.  I am estimating it will cost $80 if I call my plumber.  Yes, I could also do it myself.  However, that would involve a fight, because I don't know how, I would end up asking for her help because some connection would leak, she'd be mad at me for asking for help because she is going to take care of it "later", I'd be mad at her for being mad at me, my kid would misbehave b/c that is how he reacts to us fighting, the dogs would get anxious and start barking, my kid would yell at the dogs, I'd yell at my kid for his lack of empathy...  Just pay the damn $80.
  And yes, if my wife or I wanted to wander in and work an extra 4, 8, or 12 hours we would get time and a half and  a thank you note sent to the house from our manager (literally.  Nice managers.)

I would rather be able to just pay to get something done than have to take time to do it myself, and I don't think there is some moral imperative to insource anything, as long as you actually HAVE the money. For your sink, if you have the money, and it would lower your quality of life more to experience the hassle than to pay the money, I say go for it. Enjoying life is the end game after all. The problem is people who are in debt or otherwise badly struggling with money still opting to pay for things they could do themselves.

Only the financially independent can CHOOSE to be frugal; everyone has it thrust upon them.

chucklesmcgee

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Re: The Minimum wage mental block
« Reply #17 on: January 04, 2013, 12:39:25 PM »
The true value of people's time is not equal to their current wage, it's lower than that. One because most people would generally be willing to work for less if they took a pay cut. Second is because people often can't work more hours to earn more money at their job, salaried individuals don't make more and employers of wage-earners are disincentivized from offering more hours as it would require paying more benefits or overtime- so an hour spent doing some savings activity isn't actually an hour that could be spent elsewhere.

As my income has increased, I've begun to value my time more and I think it's somewhere about 1/4 to 1/3rd of my hourly rate. But that's really the whole point of saving money and financial independence, it's power and freedom. When you aren't owned by anyone, aren't indebted to anyone, don't rely on anyone's approval for continued wages or livelihood to maintain your lifestyle, that's self-sufficiency. Power over yourself.  If most people started spending more or saving less they'd be in a lot more trouble. At some point though that's irrelevant.

cbr shadow

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Re: The Minimum wage mental block
« Reply #18 on: January 04, 2013, 02:15:56 PM »
I agree with the OP's thoughts.  I make roughtly $25/hr at work but I'm paid a salary and can't work more hours for more pay.  A couple weeks ago I was watching TV w/ some friends and also doing some online survey's while we sat there, since I was a little bored with the show.  I explained to the friend that I make roughly $5/hr doing the surveys.  His response was "You could make more than that at McDonalds!".  True, but then I would work at McDonalds..  Instead I'm laying on my couch watching TV with friends.

Even if the jobs were comparable (flipping burgers = laying on couch) the difference in pay isn't THAT far off since I'd have to change into my Mcdonalds uniform, drive there, then drive home afterwards and shower, etc.

I think I just talked myself into doing a few surveys here real quick..

tooqk4u22

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Re: The Minimum wage mental block
« Reply #19 on: January 04, 2013, 03:20:54 PM »
   I see it differently.  I am often urging my wife to pay to have things done that she is capable of doing, but doesn't want to.  For instance, our sink is leaking where the garbage disposal is, so we want to get rid of the garbage disposal and have the sink re-caulked.  Not a big project, something she is perfectly able to do, but she doesn't want to do it.  As a matter of fact, it fills her with dread and anxiety, and she will make a 30 min project take 3 days, b/c she so doesn't want to do it.  I am estimating it will cost $80 if I call my plumber.  Yes, I could also do it myself.  However, that would involve a fight, because I don't know how, I would end up asking for her help because some connection would leak, she'd be mad at me for asking for help because she is going to take care of it "later", I'd be mad at her for being mad at me, my kid would misbehave b/c that is how he reacts to us fighting, the dogs would get anxious and start barking, my kid would yell at the dogs, I'd yell at my kid for his lack of empathy...  Just pay the damn $80.
  And yes, if my wife or I wanted to wander in and work an extra 4, 8, or 12 hours we would get time and a half and  a thank you note sent to the house from our manager (literally.  Nice managers.)

I get it, but pulling a disposal off and recaulking (probably a washer or clamp) would take all of 15 minutes - that equates to a real high hourly rate based on an $80 visit.

I agree with the OP's thoughts.  I make roughtly $25/hr at work but I'm paid a salary and can't work more hours for more pay.  A couple weeks ago I was watching TV w/ some friends and also doing some online survey's while we sat there, since I was a little bored with the show.  I explained to the friend that I make roughly $5/hr doing the surveys.  His response was "You could make more than that at McDonalds!".  True, but then I would work at McDonalds..  Instead I'm laying on my couch watching TV with friends.

Even if the jobs were comparable (flipping burgers = laying on couch) the difference in pay isn't THAT far off since I'd have to change into my Mcdonalds uniform, drive there, then drive home afterwards and shower, etc.

I think I just talked myself into doing a few surveys here real quick..

This is the best argument because you are literally making extra while doing exactly what you would have done anyway with almost no additional effort required.  This is completely different than paying someone to cut your lawn or not, unless of course you would be cutting your lawn even if you didn't have to at that time.


sheepstache

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Re: The Minimum wage mental block
« Reply #20 on: January 04, 2013, 04:44:20 PM »
Arg, I have this argument with the spouse a lot.  Not the minimum wage thing, but the opportunity cost thing.  Anything I suggest doing to save money he calculates that it would be below his hourly wage so it "wouldn't be worth it" and decides that he's clever.  I point out that a) he doesn't like his job and b) he doesn't work hourly so he doesn't have the option to actually earn that money and c) it would actually have to be less than 85% of his hourly wage because of taxes.  Plus most people would prefer variety of work to more time spent at a job.

The Money Monk

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Re: The Minimum wage mental block
« Reply #21 on: January 05, 2013, 10:50:38 PM »
Is he using his actual net hourly wage? Or just dividing his take home pay by the hours he works?

TO calculate your actual hourly wage you have to include ALL the costs that are directly related to having the job (gas and transportation, work clothes, dry cleaning, any work meals, etc) as well as include all time spent driving to work, any work at home, and anything that you have to do as a result of having the job.

My guess is his actual hourly net wage is a lot lower than he thinks it is.

The Money Monk

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Re: The Minimum wage mental block
« Reply #22 on: January 05, 2013, 10:57:02 PM »
I agree with the OP's thoughts.  I make roughtly $25/hr at work but I'm paid a salary and can't work more hours for more pay.  A couple weeks ago I was watching TV w/ some friends and also doing some online survey's while we sat there, since I was a little bored with the show.  I explained to the friend that I make roughly $5/hr doing the surveys.  His response was "You could make more than that at McDonalds!".  True, but then I would work at McDonalds..  Instead I'm laying on my couch watching TV with friends.

Even if the jobs were comparable (flipping burgers = laying on couch) the difference in pay isn't THAT far off since I'd have to change into my Mcdonalds uniform, drive there, then drive home afterwards and shower, etc.

I think I just talked myself into doing a few surveys here real quick..


yeah this pretty much encapsulates my thoughts pretty well. Although even those who ARE hourly and not salaried almost never have the option to just work extra hours here and there when they feel like it, so what you earn hourly at work has little bearing on what your time is 'worth' outside of work.


Something is worth what you can get for it. And what can you get for your 2 hours of free time on a saturday afternoon?

sheepstache

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Re: The Minimum wage mental block
« Reply #23 on: January 05, 2013, 11:23:51 PM »
Is he using his actual net hourly wage? Or just dividing his take home pay by the hours he works?

TO calculate your actual hourly wage you have to include ALL the costs that are directly related to having the job (gas and transportation, work clothes, dry cleaning, any work meals, etc) as well as include all time spent driving to work, any work at home, and anything that you have to do as a result of having the job.

My guess is his actual hourly net wage is a lot lower than he thinks it is.

This would be a good exercise though preliminary attempts to explain to him why the $4 he spends on public transit (we're in walking distance of work) or the $10 he spends on lunch each day are in fact significant have not met with much success.  Because he, you know, uses the 'but I make x/hour and taking the subway saves me 10 minutes so that's worth x/6' argument.  Maybe if I get the jump on the recursive 'but x is actually worth...' argument that will do the trick.