According to reviewer Megan McArdle, In CHEAP We Trust author Lauren Weber is so intent on saving money that she will walk 30 minutes to avoid paying a $1.50 ATM fee.
I infer from this fact that Weber supports a huge reduction in the federal minimum-wage. After all, to walk for a half-hour in order to save $1.50 is to work for a half-hour in exchange for $1.50. That is, it is to work for $3.00 per hour. This paltry sum is less than half of the federal minimum-wage. If Uncle Sam justifiably prevents Americans from working for less than $7.25 per hour, surely Uncle Sam should stop persons such as Lauren Weber and other tight-wads from spending their time saving money whenever the amounts saved are less than $7.25 per hour.
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Be careful what you wish for, before you know it the nanny state will regulate how we choose to spend our time for things like this. How dare we use our free will to choose to do something that benefits us for less that $7.25 an hour.
Those in power aren’t smart enough to figure this out. Usually, they aren’t intelligent enough to understand it when it’s presented to them filleted and garnished on a plate, as Don has done here. They’re in politics because they couldn’t handle a real job.
A friend tried to convince of the need for a minimum wage to protect greedy business people from taking advantage workers. One of the points I made was that people find ways around the law anyway.
He turned out to be a great example. He owns a small businees. I asked how he paid his employees. “They’re not employees, they’re independent contractors. They make a percentage of their sales.”
I think this is an important point. Anybody can work for as little as they like. Indeed, entrepreneurs often work for negative amounts for years.
You just can’t be employed by someone else for less than the minimum wage.
I’ve worked for others for below minimum wage. Not only below minimum wage, but I think my employers were breaking some child labor and tax laws to boot. It was boring sitting around the house watching Leave it to Beaver re-runs in the summer. I was glad for the opportunity to earn money assembling bikes, mow lawns, painting garages, raking leaves and delivering papers. In some of these ventures I figured out how to earn above minimum wage, it wasn’t guaranteed. I was amazed at how much work my buddy and I could find by simply knocking on doors and asking.
I once had an idea so incredibly devious and horrid I couldn’t speak it for fear that, once voiced, it might someday be whispered in the ear of a politician. Being a politician, and therefore with a natural affinity for devious and horrid ideas, it would undoubtedly have been put it in practice forthwith.
With this one you are verging perilously close to similar horrors, Mr Boudreaux.
Don, I appreciate your point, but you ignore taxes. $7.25 an hour, for most folks, only nets about $3 after all taxes. The real lesson from Ms. Weber’s silly endeavor is that taxes take so much. If that ATM savings were taxable, the walk would have bee twice as long!
People who earn $7.25 per hour do NOT pay over 50% in taxes. In fact, on net, they don’t pay taxes.
piefarmer slightly overstates the case, but not by much. How much would Ms. Weber need to earn to clear $3 after taxes? Assume that she’s a moderately successful, self-employed single woman living in NY City (which appears to be the case). Her marginal tax rate is about 53.5% (15.3% self employment, 28% federal, 7% state, 3.2% city), so she’d have to earn an additional $6.45 to keep $3 post-tax.
Oddly, the more she makes (and hence the greater her marginal tax rate) the greater her incentive to save, since savings aren’t (yet) taxed.
“Assume that she’s a moderately successful, self-employed single woman living in NY City (which appears to be the case). Her marginal tax rate is about 53.5%”
In that case she presumably is not making minimum wage, no?
No, she’s not making minimum wage. In fact, my assumptions include that she’s earning around $100K/year.
But she is making $6.45/hr (pre-tax) when she saves $3.00 (post-tax) which is pretty close to minimum wage. And being the cheap person that she is (that’s the point of her book, right?) she’s happy to earn that amount.
Blackadder makes a good point.
Nobody making $7+ per hour pays income taxes.
She takes an annual standard deduction which is proportionately much higher since her income is below average. She may qualify for earned income credit and she is able to take advantage of every single deduction available – from mortgage to childcare. If she lives in NYC, she also qualifies for other generous transfer payments. On net, she pays no income tax and she probably draws an income from the state in the form of in kind payments.
If your point is that NYC is a tax nightmare, I agree with you. Unlike this woman, I actually paid close to 50% in taxes even with deductions. So, I left.
Would it be impolite to consider the non-financial reasons someone might walk 30 minutes to save a $1.50 ATM fee? It could be that it is not a purely economic decision. I can imagine someone simply objecting to the fee and deriving satisfaction by depriving the bank of the fee.
Well, now maybe this actually is an economic decision. We pay good money all the time for mental satisfaction, in the form of movie, opera and football tickets just to name a few. We pursue our individual preferences in deciding what brings us satisfaction and how much we are willing to pay for it. One person may gain as much satisfaction by depriving a bank of an ATM fee as another gets from spending that time watching the Phillies thump the Rockies. The former is not merely a weirdo, her satisfaction costs her less and she is getting some exercise to boot.
Good review–yours an McArdle’s. But what does this mean at the end:
“But once things are priced properly, there’s nothing particularly admirable in refusing to spend money you can spare.”
????
Who, or what, is going to determine if things are “priced properly”? Given a world of unlimited wants competing for scarce resources, one could argue that no price is “proper.”
Each of us makes that determination. I took the line you quoted as a rebuff of the notion that not spending money, even when prudent, is inherently moral.
This gets great leverage with the automobile.
Some time ago I showed it was against federal law for me to drive under 80 mph, based on fuel efficiency, cost of gasoline, and wind drag…
$100K is not financially “successful” in NYC. Sadly.
I see your point, though.