Are You Paying to Work?
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But today, a tax return crossed my desk that just amazed me at the lack of attention being paid to their financial lives:
The couple is a dual-income two-kid family with a fairly middling combined income (for the area) of just over $35,000. (You big city folks can quit gasping now - you can live fairly well around here for substantially less than it takes just to survive where you’re at… :)) He makes the majority of the income, but she also works at a local small business for, apparently, ridiculously low wages - her W-2 reveals gross income of all of $8,900. I thought perhaps she was working for their insurance. But no, his employer provides their insurance.
Within their stack of tax documents are a mass of receipts for day care expenses. To the tune of $11,800. In other words, they are paying $2,900 for the privilege of letting her go to work. Oh, sure, they’ll get a tax credit of $1,440 on those expenses, but that’s still $1,460 in the hole for the pleasure of working a crappy minimum wage job. And that’s before taxes. Or the cost of a vehicle to take you to work. Or clothes for the job. Or a lot of costs that escape me at the moment (Caleb at Hail to Pitt has a nice writeup of the various expenses he’d encounter reentering the work force and what he’d really make returning to work instead of remaining a SAHD). Or, for that matter, the non-financial cost of having your children raised by someone else.
I often see very marginal returns on the second income earner, especially around here, with the second job yielding a dollar an hour or some similarly atrocious time-for-money trade after the various costs are taken into account. But the obviousness of how financially costly this second earner’s job is just amazed me.
Lazy Man and Money said,
Wrote on February 7, 2007 @ 2:57 pm
What about the satisfaction of a job well done or from a financial perspective the growth opportunities at her work?
EMS said,
Wrote on February 7, 2007 @ 3:49 pm
Considering that the job pays so little, I can’t imagine that there are much growth opportunities from it. Maybe she just can’t stand staying at home all the time with toddlers! That can be quite the challenge in itself.
Sean said,
Wrote on February 7, 2007 @ 4:03 pm
Oh, satisfaction from a job well done is all fine and dandy, but I wouldn’t be paying $1,460+ out of pocket a year to get it. And, in my opinion, I would be doing a serious disservice to my family if I decided to do so, especially at the income level of this couple.
As far as job growth opportunities, I suppose anything is theoretically possible. But the specifics of the job don’t appear to have a whole lot of opportunity to me. This is a very small business, with a hierarchy two levels deep: the owner, and everyone else…
Sean said,
Wrote on February 7, 2007 @ 4:53 pm
Oh, that’s definitely a challenge. We have a two-year-old, my wife stays at home, and I am under no illusions - she works ridiculously harder than I do day in and day out!
Cari said,
Wrote on February 8, 2007 @ 9:35 am
Maybe she’s worried she’ll have a hard time reentering the workforce later if she leaves entirely. When you look at her job prospects down the road, perhaps a part time job now is not such a costly idea after all.
Visa Services said,
Wrote on October 1, 2008 @ 11:30 pm
Tax returns can be a pain when not done right. I think its important to make sure you are in the right job. Or else its a waste of money and time.