Childcare

Do you pay to work? We saw last time that it costs a lot to go to work. The major expenses of working that we discussed are transportation and childcare. In 2019 the IRS estimated the cost of driving at 58 cents per mile (source). This includes gas, depreciation of car, and maintenance. According to ChildCare Aware of America, “The average cost of center-based daycare in the United States is $11,896 per year ($991 a month) for infants and $10,158 per year ($847 a month) for toddlers.” So let’s look at two scenarios where working may actually earn you a negative paycheck.

Delivery Drivers

What if you are a delivery driver for a pizza place or fast food joint? Most of them drive their own cars for deliveries. Legally employers are required to compensate drivers for their mileage, but they’re not obligated to pay delivery drivers the full 58 cents/mile that would make them break even. Most businesses use the IRS’s standard rate, but restaurants often do not. On top of that, delivery drivers are often paid below minimum wage because they get tips. Depending on how unscrupulous your employer is, this can mean drivers end up getting negative pay.

Say a driver makes the minimum tip wage of $2.13/hour. They drive about 100 miles a day and their employer compensates them $0.30/miles (For reference Dominoes paid $0.25/mile in 2017). After an 8-hour shift they walk out with $47.04. That comes out to $5.88/hour. Less than minimum wage! Since the cost of driving your car is $0.58/mile it ended up costing them $58 to work an 8-hour shift, for a net loss of $10.96! That’s paying to work!

$2.13/hour * 8 hours = $17.04
$0.30/miles * 100 miles = $30
$17.04 + $30.00 - $58.00 = -$10.96

Of course that’s assuming you get paid below minimum wage and don’t get tipped, which is illegal. Your employer has to compensate you if you end up making below the federal minimum wage. Let’s run this calculation again with the delivery driver making minimum wage of $7.25/hour. After an 8-hour shift and driving compensation they would walk away with $88. It still cost them $58 to work that shift, so his net gain would be only $30! $30 for an 8-hour shift is not a very good salary, $3.75/hour.

$7.25/hour * 8 hours = $58.00
$0.30/miles * 100 miles = $30
$58.00 + $30.00 - $58.00 = $30.00

Again these calculations are making assumptions like the fact that the IRS estimated 58 cents per mile applies to delivery drivers. If you’ve ever seen a pizza guy’s car, he’s probably not spending 58 cents/mile to drive it (look forward to a post on how to lower cost of driving), but driving is almost always more expensive than we’re led to believe. All this to say if you’re driving for your job make sure you look into the true costs and compensation.

Working Mothers

The cost of commuting is huge, and if you have to drive a long distance to work it might make sense to look for a house closer to work. But even more stupidly expensive than driving is childcare. Childcare is so expensive that for families with two working parents in many cases it would be more worthwhile for one parent to stay home and take care of the kids than it would be for both parents to work outside the home. Let’s look at the numbers again, basing it off of what we spoke about in the last article.

16 miles/trip * 2 trips/day * $0.58/mile = $18.56/day
$18.56/day * 5days/week * 50 weeks/year = $4,640/year
Cost of driving: $4,640/year per parent

$10,158/year * 2 kids = $20,316/year
Cost of childcare for 2 kids: $20,316/year

$33/day * 3 days/week * 50 weeks/year = $5,000/year
Cost of eating out 3 times week because of lack of time to cook dinner: $5,000/year

Final total: $4,640 + $4,640 + $20,316 + $5,000 = $34,956/year
Total cost of working: $34,956/year

This comes out to $34,596/year for both parents to work outside the home. Now if we let one parent stay home to take care of kids, they will save $29,956 /year just by not working! If we account for taxes, we find that making anything less than $39,941 means that this family is actually losing money by having both parents work.

According to Catalyst women in America earned a median salary of $47,299 in 2019. That means in a typical dual-income family the mom spends almost 85% of her salary just going to work. I don’t know about you, I like my job, but I would never pay to work it. But that’s what people are doing! Working moms are paying to work.

I know a family with two kids and both parents work. The wife’s commute is 26 miles each way. They spend about $1200/month in childcare. Her salary is somewhere around $35,000. At 58 cents/mile her commute costs $7,540/year. Childcare costs $14,400/year and let’s just use the $5,000/year figure for eating out. That comes out to $26,940. She pays 77% of her paycheck just to keep going to work. Her net take home pay is the equivalent of $4.03/hour. That’s only $0.28/hour more than the pizza delivery guy. A skilled worker making a real salary of less than minimum wage.

So… at the risk of sounding like a bigot, my recommendation is for working moms to stay home and take care of their kids. Not only is it a very high and rewarding calling, it also makes much more sense financially.

Why not have the dad stay home? At the risk of sounding even more like a bigot, men make more money on average than women do. If that’s what he wants to do and it works for them, fine, but the odds are the best fiscal decision will be for the mom to stay home.

Conclusion

Again, these are just examples using typical statistics and averages. Like always I want you to apply these principles to your own situations and determine what’s best for you. And what’s best may not always be the best choice money-wise.

What do you think? Did you have to drive for a part-time job? Are you a dual-income family? Do you have kids? Am I a total bigot? Let us know in the comments below!

You go to work to get paid, but how much are you paying just to go to work? The average American drives 16 miles each way to work. That comes out to be about an hour in the car per day. And over 3 million people travel at least 50 miles each way to work, for 100 miles a day! 23.4 percent of children under the age of five are in some form of organized childcare. When you start to add up the costs of your commute, childcare, food, and even just wasted time, the cost of working can come as a real shock!

Cost of Commuting

30 minutes is considered a reasonable commute. This flawed thinking about commuting to work might be the biggest thing keeping Americans from retirement. In this article I will be speaking about commutes in the terms of driving yourself, since public transit is virtually non-existent or just plain won’t work for you in the sprawling cities of the Midwest.

In 2019 the IRS estimated the cost of driving at 58 cents per mile (source). This includes gas, depreciation of car, and maintenance. Gas prices were great in 2020 with OPEC flooding supply and the pandemic driving demand to near zero. But recently they have skyrocketed at an increase of almost 100%. This combined with the fact that the average new car now costs over $40,000, and the fact that cars are increasingly difficult to maintain and repair, suggests that this cost of driving will continue to increase.

Let’s look at cost of commuting using this estimate. The average American drives 16 miles each way to work so:

16 miles * 2 * $0.58 = $18.56

It costs nearly $20 a day just to drive to work! If you multiply that by 5 days/week and 50 weeks/year (assuming 2 weeks of vacation to make the math easier) that comes out to $4,640/year. Over $4,600 a year just to drive to work! That’s more than the cost of a family of 4 going to Disneyworld!

The 2020 Bureau of Labor Statistics found that of married couple families with children 59.8% had both spouses working. Almost 60% of families have two working parents. So multiply $4,640 by 2 for a cost of $9,280.

Cost of Wasted Time

That’s not including the value of the time spent driving to work. One hour/day times 5 days/week times 50 weeks/year equals 250 hours of driving per year. If you make $25/hour that’s the equivalent of $6,250 wasted (if working more hours made you more money). Note: You may not make $25/hour or you may be on salary so more time doesn’t necessarily equal more money so because of that I won’t be figuring this into the total amount. I know that you may not necessarily be able to make money if you had that “wasted” hour back. But still, your time isn’t free and an extra hour of time every day could be used for more productive things than sitting in a car.

Cost of Childcare

Since 60% of families have two working parents, another cost is, of course, childcare. Childcare is stupidly expensive and early child care is even worse. According to the Economic Policy Institute, infant care is more expensive than college.

In Kansas, where I live, The EPI found that on average the cost of infant care in Kansas is $11,201 a year. For a 4-year-old childcare costs $7,951 per year. Compare that to the average cost of in-state public college tuition in Kansas: $7,387 per year. According to ChildCare Aware of America, “The average cost of center-based daycare in the United States is $11,896 per year ($991 a month) for infants and $10,158 per year ($847 a month) for toddlers.”

The average American family has two kids with the Midwest being on the higher end of that average so if we multiply the cost of childcare ($10,158) by 2 we get $20,316. So if we add that together with the driving expense we get $29,596. Almost $30,000/year spent on working. That’s more than the salary of 40% of the country!

Cost of Food

More than half of Americans skip breakfast once a week and nearly ¼ skip breakfast every day because they don’t have enough time before work. This is unhealthy and can lead to health problems down the road. Also after a long day of work and an hour of commuting the last thing you want to do it spend an hour preparing dinner for your family. A good dinner, even one that not a Thanksgiving feast, can take up to two hours to prepare. No one who’s just spent ten hours away from home wants to then spend 1-2 hours slaving over a hot stove.

The solution to that, unfortunately, is that most Americans go out to eat a lot. According to the CDC 36% of Adult Americans eat fast food on a given day. Further 56% eat out at least 2 to 3 times per week, 10% said they eat out 4 to 6 times a week, and 6% said they eat out every day. It is not healthy to eat fast food several times a day and if you opt for a healthier option sit-down restaurant it comes with a hefty price tag.

Even a trip to a cheap restaurant like McDonald’s will set a family of 4 back $30. At 3 times per week that’s almost $100 spent on eating out because both parents are working. That’s another $5,000/year.

And that’s only the monetary costs of working

The monetary costs of working are exorbitant, but those aren’t the only costs. Other costs include time, health, freedom, peace of mind etc. Remember we’re not figuring the cost of time into that number. If this couple were paid hourly and working more hours meant more money, they would be missing out on thousands more in lost wages. But that lost time also hurts in other ways.

As we already mentioned, the more than half of Americans eat out 2 to 3 times per week, and skip breakfast at least once a week. Not only can this be costly monetarily, it is costly for your health. Fast food is not good for your body no matter how you slice it. And skipping a meal can really affect how your metabolism works, potentially leading to weight gain, headaches, and lethargy (source).

Our discussion of commutes didn’t even mention the carbon dioxide put out by cars. According to the EPA the average passenger vehicle emits about 411 grams of CO₂ per mile. At 32 miles per commute per person, that equates to 6,576 kg of CO2 per year.

Conclusion

Work is necessary for life. You have to make money to clothe, house, and feed yourself and your family. Nobody is arguing that, at least not on this blog. But as always, you need to be making informed decisions. When you think about the job you want to take, whether or not both parents should work, and what kind of car to buy to help with the cost of commute, all of this needs to factor in when determining your cost of working.

What do you think? Did we make you feel like working isn’t worth it and we should all live in a van down by the river? Did we miss anything? Let us know in the comments below.