|
|
|
|
| The Basics | What's a homemaker worth? The shocking truth
|
The value of a stay-at-home spouse is priceless in many ways, but don't kid yourself: In economic terms, running a household is worth far less than we've been told.
By Liz Pulliam Weston
We all know that a stay-at-home spouse can be invaluable, and the wide-ranging estimates of the real value of the arrangement reflect that knowledge.
Whether the figure is $90,000 or $125,000 or even $500,000, the numbers are meant to show how important is the unpaid work performed by a homemaker.
Unfortunately, the statistics are codswallop.
The economic value of a stay-at-home spouse is closer to $30,000 a year. Our society doesnt place a high dollar value on a homemaker's work, and those who choose to stay home do so at their own economic peril.
No glamorous awards ceremony
How I wish this werent true. If it were up to me, the job of stay-at-home parent would come with retirement and health benefits, annual paid vacations and an award ceremony each spring to rival the Oscars.
Since youve yet to elect me Queen of the World, however, were stuck with the economic system weve got, and it does not work in favor of unpaid domestics.
The numbers that purport to show otherwise are flights of the authors fancy. Theyre typically constructed from the U.S. Bureau of Labor Statistics' average pay figures for a variety of occupations including:
- Child-care worker, $8.91 an hour
- Maid, $8.02 an hour
- Food preparation supervisor, $11.70 an hour
- Bookkeeper, $11.94 an hour
- Chauffeur, $8.67 an hour
The formula is simple. Figure out how many hours, on average, a homemaker performs each task, multiply those hours by the appropriate wage and come up with an impressive and completely overblown annual figure.
Economics and the real world
Sometimes they dont even bother to determine working hours. Talk show host and investment adviser Ric Edelman decided that because mothers are constantly on call and perform all these functions, the appropriate figure was one that reflected the hourly rate for each of 17 occupations, performed simultaneously, 24 hours a day, seven days a week. Thats how he came up with an annual worth figure of more than $500,000.
Thats not the way the value of homemaker is determined in the real world, however. The economists who make these calculations -- for wrongful death suits, airplane crash settlements and insurance purposes -- recognize that while homemaking has economic value, its nowhere near the six-figure range.
The reality is that many homemakers dont have the skills of, say, a professional bookkeeper, a licensed chauffeur or a recreational director, says economist Evan Schouten, vice president of the economic consulting firm Charles River Associates in Boston and an expert witness in many wrongful death trials.
Painful truth about payouts
And families who lose a stay-at-home spouse typically do not rush out to hire 17 professionals to take his or her place, let alone employ them 24/7. They may hire one or two people, usually for 50 hours a week or less, and pay them an hourly wage of $10 to $15.
Thats why the economic payout is typically less in wrongful death and other lawsuits when the victim is a stay-at-home spouse than when the victim is employed. The lifetime economic value of a female homemaker who dies at age 30 is currently about $300,000, Schouten said, based on statistics from a seminal study in this area, The Dollar Value of Household Work.
Compare that to a 30-year-old who makes the average white-collar wage of $19.86 an hour.
The present value of her lost after-tax compensation, Schouten said, using conservative assumptions, likely exceeds $1 million.
Insurance coverage takes a holiday
If you doubt the veracity of all this, just try to buy life or disability insurance on a stay-at-home spouse.
If you use the most inflated statistics as a guide, and multiply the annual figure by the 10 years of care until the kids are grown, you could come up with an insurance need of $5 million. But unless your insurance agent has extraordinary pull, youre not going to get that coverage.
Thats because life insurers dont want you taking out policies that have no economic basis. Their theory is that it becomes way too tempting to snuff an overinsured spouse.
(Interestingly, a high-income family with can generally justify a larger policy on a work-at-home spouse than a family with lower income, even though neither homemaker makes any money. Insurers presume those wealthier families will pay more for various replacement services, such as employing a nanny rather than using group day care.)
Getting disability insurance -- in any amount -- is just as tough. Without an income, disability insurers wont write a policy, no matter how much a family would have to shell out to replace the unpaid services it would lose.
And if that weren't enough . . .
There are other significant costs to being a homemaker:
- Employment prospects decline. Your job skills become dated by the day, making it harder for you to re-enter the working world. Yes, raising children and running a household take a variety of skills but no, those skills dont typically translate into high-paying jobs outside the home.
- Retirement savings stagnate. If youre at home, youre also not contributing to a workplace retirement plan or earning credit toward a pension plan or Social Security. That leaves you economically vulnerable if you ever divorce.
- Economic vulnerability increases. Two-income families also have a built-in safety net should they encounter layoffs or other economic setbacks.
Obviously, theres far more to the decision to stay home than mere economics. Stay-at-home parents provide invaluable services and benefits to their families. Many women think the monetary and economic sacrifices are well worth it, which is one reason why the Bureau of Labor Statistics finds that 40% of mothers with children under 6 stay home. (Overall, 13% of the nations households include a stay-at-home spouse.)
Go forth and get your ducks in order
You should understand just what youre giving up, though, in order to make a rational decision about whether to stay at home and for how long. You also should do what you can to make sure your finances, both short- and long-term, remain sound:
Disaster-proof your finances. Pay off debt, contribute as much as possible to retirement funds and keep a hefty emergency fund. Single-income families typically should have at least six months living expenses in a safe, liquid account.
Get insured. You almost certainly wont be able to buy disability insurance for a stay-at-home spouse, but you should be able to get life insurance coverage -- and if you have children, you almost certainly need some. The younger your children are, says former insurance agent Catherine Gretta, corporate vice president for New York Life Insurance, the more insurance you need to cover their care. To determine how much insurance you should have, you can talk to an agent or use MSN Moneys Life Insurance Needs Estimator; increase the estimate of your current living expenses by the amount your family would need to pay for child care and housekeeping services.
Make sure you have retirement savings in your own name. Your spouse can contribute up to $3,000 a year to an Individual Retirement Account for you. (You also can claim half your spouses Social Security benefit if youre married for at least 10 years, and may be able claim a portion of his or her workplace retirement plans as well.)
Consider working at least part-time once your children reach school age. You may lose much of your wages to the costs of working -- taxes, child care, commuting costs. (For more views on this subject, read " Second incomes: twice the work, half the return," and "Cost of being a stay-at-home mom: $1 million," on MSN Money. And try MSN Money's Second Income Calculator. ) Those losses, however, could be offset by other benefits, such as keeping your job skills current and being able to contribute to a retirement fund or earn pension credits.
|
|
|
|
