On taxes, wages, and eating your own labor

2017 January 13
by Daniel Lakeland

In Los Angeles, a middle class family of 4 can eat out at a restaurant for around $50 (likely a little more if you are eating only relatively healthy food).

In a month eating out every meal, you would spend: $50x3x30 = $4500/mo

Now, shopping for groceries for a family of 4 costs about $900/mo. Cooking for a family of 4 takes about 3 hours a day including washing up. This is an hourly "after tax wage" of $(4500-900)/(3*30) = $40/hr, and a monthly "after tax earnings" of 4500-900 = $3600/mo.

A family with one wage earner with an upper middle class job (8 hour days + commute and earning $75,000/yr before taxes), and one stay at home parent has a marginal tax rate (in LA) of about 25% federal + 9% SS&Medicare + 6% CA state = 40%, this could go up to around 50% for upper-middle class incomes. (let's not forget the employer part of the SS&M but it doesn't enter this calculation)

So, to earn $3600/mo take-home the second worker in the family needs before tax income of $3600/(1-.4) = $6000, or $72,000/yr. How many jobs are there where you can work 3 hours a day and earn $72,000/yr ? The GDP/capita is $56,000, and median household income is also about $56,000 and most wage earners give up more than 8 hours a day (esp. including commute, and for those earning $75k as salaried workers let's face it, 8 hr days are the minimum).

And this is just comparing cooking your own food to eating out at restaurants. Hiring someone to come and do laundry and clean a house twice a week costs easily $500/mo, which before taxes would be 500/.6 = $833/mo or $10k/yr. So, cooking and cleaning for a family of 4 for say 4 hours a day vs 8-10 hour days with a salary of $82,000  and by the way you'll wind up financially breaking even?

Hmmmmm, and people wonder why there's so much economic anxiety and so many Men Without Work? As more women get career jobs, it will become more and more common for husbands to stay home, why would they go to work when that would mean losing both time and money?

 

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