Sociology 1201: Groups--"Low Wage Budget"

Develop a minimally adequate budget for a family of three (a mother, age 26; a 4-year-old girl; and a 2-year-old boy). Make your estimate based on what you see as the family's needs. Don't work backwards from available income. Use the categories specified below, and develop your budget on a per month basis, including an explanation of how you got your numbers. I'll provide some estimates on a lot of the costs, but feel free to depart from my figures if your experience tells you differently.
This mother has a year of college (UMD, but she has no specialized skills. Her former husband turned out to be controlling and abusive, but it took her quite a few years to actually break away. He says he'll never pay a cent of support, and as best she can tell, he has been unemployed since their separation. She wouldn't want to pursue child support anyway, as she remains very frightened of him.

1. Housing, furniture and utlities. Let's assume she rents; few low-income single mothers of that age have the resources to make a down-payment on a home. Include items like renter's insurance; utilities (but not heat, which is often included with the rent); electricity, water, garbage, telephone (cell phone?), furniture. I'll tell you in advance that she probably can't afford a three bedroom apartment, so let's put her in a two bedroom apartment for which she pays $650/month, including heat, unless you are aware of places where she might get a better deal. (In the longer run, she may be able to get Section 8 housing assistance. The income limit in Duluth is $26,500, and the current waiting list in Duluth is about a year. If her rent isn't too high--and hers qualifies, though just barely-- she pays 30% of her income or about $360 per month, and the government pays the rest. She's still got to pay utilities).

2. Food. Estimate the cost of food per week for this family of three, and then multiply by 4.35 to get a monthly figure. Let's include items like laundry soap, paper products, light bulbs, and personal toiletries in this category. Someone who could avoid all junk food and impulse buying might get by on less, but my estimate is t $100/week You may want to go higher; food inflation has been very dramatic so far this year (2008). Can this often exhausted single parent get by without any happy meals at McDonald's? If they don't eat out at all, you can figure $435/month.

3. Transportation. Assume that this mother is working a low-wage job, as is true for the majority of poor families in the United States, and establish a budget for an automobile and/or public transportation expenses. If you go the car route, don't forget insurance, license, gas, and repairs. If you go the public transportation route, allow for the cost of taxis for when buses aren't running or don't go where the family needs to go. A monthly DTA pas for the mother would be $28 and the children could ride for free (4 and under is free). Realize that she'll also need extra money in childcare if she relies on a bus, and extra time in her work day, unless she can find a childcare provider in her neighborhood.

4. Clothing. Include shoes and don't forget winter clothes (this is a family in St. Louis County, where winters are cold).

5. Family services. Include childcare expenses; don't assume this woman has a relative who will take care of her kids for free. In fact, her parents were also divorced; she hasn't seen her father in many years and her mother, who lives in Minneapolis, is just scraping by. Include babysitting if she is ever going out. . If you have this woman getting around by bus, allow at least nine hours a day for childcare (and even that may be optimistic). Really good childcare is expensive. At UMD children's place, the cost for the younger child, 5 days a week, would be $170; for the older child, $165. If they miss a day for any reason, they still get charged. This woman obviously can't afford childcare of that quality, but I doubt if she can find anything below $2 an hour. Include the cost of entertainment (I don't think any American families can live without some entertainment costs, but you may disagree.) This is also the place for any gifts--for the kids, for her nieces and nephews, etc. . Low wage jobs generally do not include medical insurance, but here we have some good news; this family definitely qualifies for Minnesota Care, which will include all medical expenses up to $5000, and also pays for items like glasses, dental care, and prescription drugs. This is one of the best low-income medical assistance programs in the country, so we're lucky she lives in Minnesota. Let's hope no one in the family runs into major health expenses; any kind of hospitalization will quickly exceed $5000. Cost of Minnesota Care will be $60 a month.

Have I forgotten anything? Where else do you spend money, and can she get along without those things?

6. Total up the monthly costs.

7. Income Let's assume she makes $7.00 an hour and works 40 hours a week (this is about the median wage for the bottom 20% of the American work force). The assumption of 40 hours a week is probably too optimistic; the woman is apt to miss some days for illness--her own or her children's--and many low-wage jobs do not include a provision for sick days. Do not assume she can get overtime; many low-wage employers are careful not to let that happen. 6.2% of her income goes to pay her share of social security withholding taxes, but assume she will not owe any other state or federal income taxes. Do not assume any child support payments from the father of her children; many fathers do not make such payments and this is especially true of low-income fathers. What's more her ex-husband seems like someone who will go to great lengths to avoid court-ordered child support. She will qualify for what is undoubtedly the best anti-poverty program in the United States for working Americans, the Earned Income Tax Credit. With two kids and her level of income, she will qualify for $1648 spread through the year with her paychecks, and another $2650 from the IRS after her tax returns are filed (about $4300 in all). Her income from work comes to $1142/month and adding the monthly EITC credit brings it to $1279. She can probably get the $2650 in January or early February if she goes to someone like H&R Block to do her taxes, but she'll have to pay an exorbitant interest rate (20% plus).Assume she won't owe Minnesota income tax.

8. Making Ends Meet. How do her expenses and income fit together? If her income is less than her expenses, what can she realistically do to fill the gap? What would you do in her circumstances? Think about what might be best both in the short-term and the long-term.

9. IF YOU HAVE TIME.What if she loses her job? MFIP : Minnesota's version of Temporary Assistance to Needy Families, termed the Minnesota Family Investment Program (MFIP), provides a monthly grant of $852 to a mother with two children. MFIP is available for a maximum of 60 months in a lifetime (except for special waivers relating to disability). MFIP can be combined with short-term job training, but cannot be used to support participation in a 2-year or 4-year degree program, and participants in MFIP are required to carry out and document an intensive job search.