THE HIGH COST OF A TWO-INCOME HOUSEHOLD

If there was anything that should have been learned from the Great Recession, it was that it’s not a good idea to keep up with the Joneses. The race to have everything that your peers have, if not have it better than they do, drove Americans to buy things (like houses) they couldn’t afford and, in turn, rack up reams of debt. The collective accumulation of this drove our economy, and countless families, to the brink of destruction.

Despite such a near-Armageddon, Americans have gone back to the old ways of doing things. This is a mutation of the American Dream, one that emphasizes materialism and frivolity over frugality and family. The practice is promoted by pop culture, mass media and academia, who make it seem that every household must have two breadwinners while subtly implying that any family that doesn’t is socially unacceptable (even though stay-at-home parenting/homemaking is one of the most important jobs in the world). 

It’s a silly way to look at things, because if you step back and really take a look at finances of families, the second full-time income really doesn’t work for most of them. It’s only an allusion that it improves their lot in life.

According to the Bureau of labor Statistics, the average salary for an employed worker in the Western New York job market is $42,520.

Suppose you have 2 people from a household gainfully employed in full-time jobs. The second worker would lose approximately $6,500 to federal taxes and another $2,900 to state taxes. Suddenly, that second income is down to $33,120.

Then, there are costs completely unique to maintaining a second full-time job.

The largest, by far, is child care. With no one home to raise the child during the day, you have to pay someone to do it (day care). Once the kid does go to school you’ll have to pay someone to care for the child in the hours between when school lets out and the breadwinners’ evening commute comes to an end. Even while the kid is of school age, you still have to account for child care during the holidays and summer break. According to a report by Child Care Aware, the average annual cost for center-based care is $14,939.

The second largest cost unique to a two-income household, especially in areas like Upstate New York where public transit is lacking for most, is the second car. Does a family really need 2 vehicles? No; for most, car #2 is not a necessity (even though most driveways and garages in WNY will signal otherwise). But they do need it if both parents hold down jobs in completely different communities. The average American car payment ranges between $380 and $460 a month. Let’s pick a number in between ($420 or $5,040/year). Then, we need to add automotive insurance. According to Forbes, the average annual rate in New York is $1,369.  Don’t forget the gasoline ($1,600 per year assuming a 20-mile commute) and maintenance ($1,200).

After taking into consideration those costs that are specific only to possessing the second full time income, that person’s income in terms of actual revenue to the family has dropped all the way to $8,972. It lost 80% of its value!

Does that make the job worth the effort? At the start, it had a wage rate of $20.44. If you break down what the actual value is to the worker because of the ancillary costs to holding that job, that person’s wage works out to be $4.31 per hour ($8,972 divided by 2,080 hours per year).

So, what is a family to do? It’s a big decision to make, for even when looking at the costs and headaches, $8,972 is a lot of money.

Some families could choose to do without it and focus less on keeping up with the Joneses and more on keeping up with their kids. Others could make a very wise decision and abandon the second full-time job and instead pick up a part-time job, which would not require the day care and car care expenses. Doing so would see the worker’s physical paycheck shrink, but his or her family’s financial strength would actually be just as good if not better than it would with a full-time job. 



Gasport resident Bob Confer also writes for the New American at TheNewAmerican.com. Follow him on Twitter @bobconfer.

This column originally appeared in the 11 November 2013 Greater Niagara Newspapers