4 ms·

Yeah also it’s very difficult to make a comfortable life on one income.

by rdtwo 5y ago

bradleyjg 5y ago
During the years when childcare is needed the numbers often work out better with one income than two. Market labor is taxed and then post tax dollars have to be used to pay for professional childcare (which is then taxed again). However, the issue comes after the need is over. The employment market heavily penalizes a decade plus gap in work history. On a lifetime basis it can make sense to work and pay for childcare even if it comes out net negative on a year by year basis. Even more important than these financial considerations are cultural and social expectations.
- rtkwe 5y ago
  Seems like that should only be the case if the cost of childcare is greater than the post tax wage of the lowest earning parent.
  - bradleyjg 5y ago
    That’s the basic idea but you also need to include the net costs of working (clothes, commute, lunch, etc.) It’s more likely to work out that way with disparate earners and in high tax states.
    - owenversteeg 5y ago
      That's true. It's pretty rare to see people mention cost of working, but it is a very real cost. For many on HN working from home in a job without a dress code, clothes/commute/lunch aren't more than being unemployed, but there are other significant costs around flexibility. Not working gives you flexibility and time, which can save huge amounts of money. Travel, flights and hotels can get easily 3x cheaper in the off season. By going midday, midweek when everyone else is working, you can go to tons of things half price, from ski lifts to movie theaters. Americans spend $680B/yr on travel, so between the 122M households that's an average of $5600/year spent on travel - by having flexibility you can easily save quite a bit right there. Then keep in mind that a penny saved isn't just a penny earned - for most people it's around 1.6-2 pennies earned after taxes and benefits: https://news.ycombinator.com/item?id=25382210 https://news.ycombinator.com/item?id=25382210 That said, there are also costs to being unemployed. The big one of course is what to do with your time - whatever you do with those extra 40 hours a week will probably not be 100% free. Then there are potential risks: if you're unemployed and not on unemployment, and a pandemic strikes, then you might be stuck without any income for far longer than you expected, all while everyone else that got laid off gets unemployment. There are also career costs: a years-long gap may seriously hurt your career prospects when you return to the workforce and dent your lifetime earnings. Then there are the commonly forgotten benefits to working, such as building up Social Security (both for retirement, and disability.) The max SSDI, which you will get if you're making around $100k for some years, is around $3000/month. If you become disabled and haven't been working, you get far less. Obviously being unemployed makes lending money far harder (credit cards, personal loans, car loans) so you better have some cash set aside. Naturally you won't be able to buy a house, and renting a new place will be very difficult with no job. But there are other options: maybe you already own a place, maybe you can live with your parents, maybe you do van life. ---------- If you add everything up, you may be surprised to see unemployment win out. This is, of course, the exact discussion taking place for millions of Americans in poorly paid service jobs, and the reason for the current labor shortage. It's not that young people are being lazy: they're being smart. If you're working a poorly paid job, the cost of working is disproportionately high to your income. $7.25/hr x 40hr/wk is $1160/mo, minus taxes somewhere around $1000/mo, and then you have to pay for a car to drive to work, gas, etc etc. On an income like that, you're basically just surviving, barely keeping your head above water if that. Sure, if you quit your McDonalds job you can't afford rent, but rent's so high you probably had a pretty crappy place anyway, so why not move back in with your parents, like 52% of Americans aged 18-30 do? [0] On top of that, many of those costs to being unemployed don't really factor in if you're in one of these poorly paid jobs. Gap on a resume doesn't matter for fast food. Social security - how many young people believe it'll be around in 40 years? It's pretty much a no-brainer, if I was working a poorly paid job I'd also quit and opt out of "the system" like millions of my fellow Americans. [0] https://www.pewresearch.org/fact-tank/2020/09/04/a-majority-of-young-adults-in-the-u-s-live-with-their-parents-for-the-first-time-since-the-great-depression/ https://www.pewresearch.org/fact-tank/2020/09/04/a-majority-...
  - sokoloff 5y ago
    We went down to one income for a period of time when we had two kids pre-school-age. Even with the lower income being substantial [white collar professional], the effect after taxes (this income would be taxed entirely at our highest marginal rate, of course) would be "working for no net cash every month, missing the kids' youngest years, having dramatically reduced household flexibility, and the only benefits being gap-less employment and retirement account contributions". That seemed like a terrible trade, so we opted out. Opting out was by far the best decision for our family. I might have to work one extra year to fill in the gap of the “missed” retirement contributions. Or maybe I won’t, if we scale back our retirement lifestyle aspirations or are willing to take slightly more risk/leave less inheritance, any of which are still better for the kids.
    - rtkwe 5y ago
      > this income would be taxed entirely at our highest marginal rate So your one income alone was large enough to put your in the top marginal rate for a couple alone? That's going to be a pretty rare situation. I wish more people could afford for one person to stay home and for the reaction to a guy taking paternity leave wasn't so stigmatized.
      - sokoloff 5y ago
        Sorry, the top of whatever our bracket was was my point (that this is a marginal income decision, meaning marginal bracket analysis applies). It was the 33% bracket federally, which wasn’t the top bracket overall, except perhaps in years with exceptionally good capital gains.
stevekemp 5y ago
Hopefully if there were more choices for childcare the costs would fall. I know that childcare in many parts of America, and the UK, can eat up a whole parent's salary. Here in Finland we pay €250/month for Monday-Friday daycare 7:30-4:30. That's affordable, and means two parents can easily continue to work. If you pay $1500/month for child-care it becomes a tougher choice to send your child/children there. I know people in the UK where lesser-earning parent has been persuaded to quit their job, because it was "cheaper" than paying for childcare.
- bradleyjg 5y ago
  There must be some kind of subsidization involved at that price, right? I don’t see how a business owner could possibly make the numbers work charging that little.
  - stevekemp 5y ago
    The city council runs them, and there are income based subsidies.
  - the_lonely_road 5y ago
    Very high taxes. Works out great if you have children. Does not work out so great if you don't have children. The state should use taxes to subsidize the behavior it wants its citizens to engage in. Population growth is generally considered 'very important' (and historically it unquestionably was #1, but today its questionable). The U.S. attempts to do the same thing through its tax code with lots of additional subsidies for parents. Keep in mind that a large portion of childcare expenses are directly reimbursed on those parents tax returns so the $1500 in America weighed against the $250 in Europe needs to be adjusted for the very high tax in Europe (as high as 59% I think, but am no expert in the EU) and the large reimbursement in America in order to get a truly comparable price point. Of course reality is much more complicated than that and there will cohorts of 'winners' and 'losers' under both systems. You need to take into account the various cohorts if you want to know which system is better for an individual scenario (ie the lived experience we all see the world through): Poor/Rich No children, 1 child, 5 children etc. Grandparents living next door, Grandparents living across the country. And many other factors.

Yeah also it’s very difficult to make a comfortable life on one income.

by rdtwo 5y ago

Yeah also it’s very difficult to make a comfortable life on one income.

During the years when childcare is needed the numbers often work out better with one income than two. Market labor is taxed and then post tax dollars have to be used to pay for professional childcare (which is then taxed again). However, the issue comes after the need is over. The employment market heavily penalizes a decade plus gap in work history. On a lifetime basis it can make sense to work and pay for childcare even if it comes out net negative on a year by year basis. Even more important than these financial considerations are cultural and social expectations.

rtkwe 5y ago
Seems like that should only be the case if the cost of childcare is greater than the post tax wage of the lowest earning parent.
- bradleyjg 5y ago
  That’s the basic idea but you also need to include the net costs of working (clothes, commute, lunch, etc.) It’s more likely to work out that way with disparate earners and in high tax states.
  - owenversteeg 5y ago
    That's true. It's pretty rare to see people mention cost of working, but it is a very real cost. For many on HN working from home in a job without a dress code, clothes/commute/lunch aren't more than being unemployed, but there are other significant costs around flexibility. Not working gives you flexibility and time, which can save huge amounts of money. Travel, flights and hotels can get easily 3x cheaper in the off season. By going midday, midweek when everyone else is working, you can go to tons of things half price, from ski lifts to movie theaters. Americans spend $680B/yr on travel, so between the 122M households that's an average of $5600/year spent on travel - by having flexibility you can easily save quite a bit right there. Then keep in mind that a penny saved isn't just a penny earned - for most people it's around 1.6-2 pennies earned after taxes and benefits: https://news.ycombinator.com/item?id=25382210 https://news.ycombinator.com/item?id=25382210 That said, there are also costs to being unemployed. The big one of course is what to do with your time - whatever you do with those extra 40 hours a week will probably not be 100% free. Then there are potential risks: if you're unemployed and not on unemployment, and a pandemic strikes, then you might be stuck without any income for far longer than you expected, all while everyone else that got laid off gets unemployment. There are also career costs: a years-long gap may seriously hurt your career prospects when you return to the workforce and dent your lifetime earnings. Then there are the commonly forgotten benefits to working, such as building up Social Security (both for retirement, and disability.) The max SSDI, which you will get if you're making around $100k for some years, is around $3000/month. If you become disabled and haven't been working, you get far less. Obviously being unemployed makes lending money far harder (credit cards, personal loans, car loans) so you better have some cash set aside. Naturally you won't be able to buy a house, and renting a new place will be very difficult with no job. But there are other options: maybe you already own a place, maybe you can live with your parents, maybe you do van life. ---------- If you add everything up, you may be surprised to see unemployment win out. This is, of course, the exact discussion taking place for millions of Americans in poorly paid service jobs, and the reason for the current labor shortage. It's not that young people are being lazy: they're being smart. If you're working a poorly paid job, the cost of working is disproportionately high to your income. $7.25/hr x 40hr/wk is $1160/mo, minus taxes somewhere around $1000/mo, and then you have to pay for a car to drive to work, gas, etc etc. On an income like that, you're basically just surviving, barely keeping your head above water if that. Sure, if you quit your McDonalds job you can't afford rent, but rent's so high you probably had a pretty crappy place anyway, so why not move back in with your parents, like 52% of Americans aged 18-30 do? [0] On top of that, many of those costs to being unemployed don't really factor in if you're in one of these poorly paid jobs. Gap on a resume doesn't matter for fast food. Social security - how many young people believe it'll be around in 40 years? It's pretty much a no-brainer, if I was working a poorly paid job I'd also quit and opt out of "the system" like millions of my fellow Americans. [0] https://www.pewresearch.org/fact-tank/2020/09/04/a-majority-of-young-adults-in-the-u-s-live-with-their-parents-for-the-first-time-since-the-great-depression/ https://www.pewresearch.org/fact-tank/2020/09/04/a-majority-...
- sokoloff 5y ago
  We went down to one income for a period of time when we had two kids pre-school-age. Even with the lower income being substantial [white collar professional], the effect after taxes (this income would be taxed entirely at our highest marginal rate, of course) would be "working for no net cash every month, missing the kids' youngest years, having dramatically reduced household flexibility, and the only benefits being gap-less employment and retirement account contributions". That seemed like a terrible trade, so we opted out. Opting out was by far the best decision for our family. I might have to work one extra year to fill in the gap of the “missed” retirement contributions. Or maybe I won’t, if we scale back our retirement lifestyle aspirations or are willing to take slightly more risk/leave less inheritance, any of which are still better for the kids.
  - rtkwe 5y ago
    > this income would be taxed entirely at our highest marginal rate So your one income alone was large enough to put your in the top marginal rate for a couple alone? That's going to be a pretty rare situation. I wish more people could afford for one person to stay home and for the reaction to a guy taking paternity leave wasn't so stigmatized.
    - sokoloff 5y ago
      Sorry, the top of whatever our bracket was was my point (that this is a marginal income decision, meaning marginal bracket analysis applies). It was the 33% bracket federally, which wasn’t the top bracket overall, except perhaps in years with exceptionally good capital gains.

stevekemp 5y ago

Hopefully if there were more choices for childcare the costs would fall. I know that childcare in many parts of America, and the UK, can eat up a whole parent's salary. Here in Finland we pay €250/month for Monday-Friday daycare 7:30-4:30. That's affordable, and means two parents can easily continue to work. If you pay $1500/month for child-care it becomes a tougher choice to send your child/children there. I know people in the UK where lesser-earning parent has been persuaded to quit their job, because it was "cheaper" than paying for childcare.

bradleyjg 5y ago
There must be some kind of subsidization involved at that price, right? I don’t see how a business owner could possibly make the numbers work charging that little.
- stevekemp 5y ago
  The city council runs them, and there are income based subsidies.
- the_lonely_road 5y ago
  Very high taxes. Works out great if you have children. Does not work out so great if you don't have children. The state should use taxes to subsidize the behavior it wants its citizens to engage in. Population growth is generally considered 'very important' (and historically it unquestionably was #1, but today its questionable). The U.S. attempts to do the same thing through its tax code with lots of additional subsidies for parents. Keep in mind that a large portion of childcare expenses are directly reimbursed on those parents tax returns so the $1500 in America weighed against the $250 in Europe needs to be adjusted for the very high tax in Europe (as high as 59% I think, but am no expert in the EU) and the large reimbursement in America in order to get a truly comparable price point. Of course reality is much more complicated than that and there will cohorts of 'winners' and 'losers' under both systems. You need to take into account the various cohorts if you want to know which system is better for an individual scenario (ie the lived experience we all see the world through): Poor/Rich No children, 1 child, 5 children etc. Grandparents living next door, Grandparents living across the country. And many other factors.