Your Real Wage
April 30, 2009 4 Comments
When someone asks you how old you are, the answer is simple. All you need to do is figure out how long you have been alive. You may have heard of the website Real Age where you can calculate “the biological age of your body, based on how well you’ve maintained it.” Based on this information, your body may actually be younger or older. It is an interesting idea to the concept of age and it makes a lot of sense. If you’ve ever seen someone who doesn’t take care of themselves, it is clear how time can weather a person.
What about when you are asked how much you earn? Your default answer may be your gross annual wage, but is this an accurate representation of your real wage? I have been reading a book by the title of “Your Money or Your Life” and it is in this book where I originally encountered the concept of real wage.
By considering what the authors of “Your Money or Your Life” say about real wage, I’ve decided that it isn’t so simple as stating your annual or hourly wage. There are countless factors which need to be considered. When calculating real wage, we need to consider the following:
The first deduction from our earnings comes in the form of taxes. We have state taxes, Federal taxes, and FICA taxes. These taxes represent a large portion of your earnings. Just how large of a portion? To help emphasize this point, in 2009 the average American worker will have to work until April 13 in order to pay their tax burden. That’s right. All the money you’ve earned for the past 4 1/2 months belongs to Uncle Sam. You are working for free. Isn’t that a wonderful thought?
Aside from taxes, something most people don’t consider is how much time is spent outside of work for work related activities. How much time is spent preparing for work and commuting? We brush our teeth, take a shower, comb our hair, put on make-up, get dressed, take the children to daycare. We accept these things as being a regular part of life, but is that the reality? Obviously we must maintain basic hygiene, but ask yourself, “Do you spend just as much time preparing for the day on the weekends?”
What about commuting? How much time do you spend going to and from work? Many people have significant commutes and may travel an hour or more to and from work. Maybe you fight rush hour traffic. This is time spent directly towards work, which you aren’t getting paid for. This time needs to be considered when you are figuring your real wage.
Time isn’t the only thing which should be considered. We must consider all of the “insignificant” expenses that are directly related to our work. Here are some things to consider when figuring out the out of pocket costs directly related to your work:
How much money do you spend on gasoline and oil changes for your car? How much wear and tear to your vehicle is a result of your commuting to and from work?
Do you need to follow a certain dress code which requires you to purchase office clothes? How much money do you spend maintaining a wardrobe which is primarily worn at work?
Do you purchase beverages while on your break? Do you go out for lunch at the deli down the street?
Do you spend money on child care expenses so that you can work?
Have you ever been obligated to contribute money for a co-worker who is having a baby even though you’ve never had a conversation with her outside of the office?
Obviously calculating your real age can be complex. There are many factors and variables that must be considered. I encourage you to figure out how much time you spend preparing for work and commuting as well as the expenses associated with your employment. You might be surprised by the results.
I’m all for looking at your real wage, but remember you wouldn’t have the roads you need to get to work or public schools to send your kids to if you didn’t pay taxes! You’re working for those privileges. Not saying it’s a perfect system, but you’re not working for free.
That said, claim as many deductions and score as many tax breaks as legally possible ;)
I absolutely agree, our taxes are being used to fund important aspects of our infrastructure such as highways, bridges, police as well as other public programs which benefit our society as a whole. I’m not arguing for or against that aspect of our wage, and if I were to pick a side, I’d have to argue for taxes as I feel they are a necessary part of what makes our country function efficiently (how efficiently could be argued).
The message I am trying to convey is that if our hourly gross wage is, for example, $10 an hour, we aren’t exactly putting that much money into our pockets. It is more likely that we end up with $8.50 an hour after federal taxes alone. If we also take into consideration state taxes and FICA taxes that $8.50 would shrink even more. Of course, we also need to consider our expenses directly linked to holding our $10 an hour position such as transportation costs, appropriate work attire, and all of the other expenses that come with our job.
We also should consider that our 8 hour workday may not actually BE an 8 hour workday when we factor in the time it takes for us to prepare for work, commute to work and back home, and then our wind-down time to de-stress from the day. That could be anywhere from 30 an hour a day to 2+ hours each day.
And yes, absolutely take as many deductions as possible in order to put more money in your pocket. No sense in giving Uncle Sam an interest free loan for a year when you could be putting that money to much better use. Thanks for the comment!
I have used this calculator many times when trying to convince a woman that “staying home with the kids” is meaningful work.
http://www.justmommies.com/articles/hourly_wage.shtml
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