22 January, 2006

Proceeding under the delusion of self-sufficiency, apparently

I confess that I do not make an income that would inspire most people to pursue a career as a professor of mathematics. Nevertheless, I imagined that I was doing reasonably well until the North Carolina Justice Center came along to inform me that I was not. They have obligingly organized the "necessary expenses" of life into the following categories: food, housing, health care, child care, transportation, and miscellaneous expenses. Calling this "a conservative measure", the researchers note that they make no allowance for debt payments, meals purchased outside the home, cell phones, or cable TV.

The numbers strike me as a little funny, but not necessarily unusual for an average across the state. The researchers were decent enough to observe that rural areas have different costs than urban areas. Even so, some of the costs strike me a ridiculously low; for example, $389 a month for health care. I pay about one and a half times that much merely for the insurance premiums, and that's less than half the cost of my insurance. (My employer is generous enough to make up the rest; otherwise I'd be on a high-deductible plan.) If you throw in the actual costs of co-payments and the like, then it rises even more. I pay a small amount more for housing than the $471 listed for housing.

The real trick, though, appears to be the costs that I don't have to cover. My transportation costs are nowhere near $445 a month, even if one accounts for higher gas prices and the car insurance premiums. How can anyone spend that much on transportation anyway? (Remember that this comes from a fellow whose American-made, 1996 model car manages 42mpg on the highway. Don't whine about gas prices when you had the option and didn't take it.)

I have no child care costs to speak of; my wife is willing to sacrifice a lot of comfort in exchange for staying home. Nevertheless, $420 a month per child for child care? That's a number that makes my head spin. Do they really think that people have to pay that much? How on earth does someone arrive at such a number? It strikes me as silly to assume that an infant will receive care in a "licensed, daycare home." My brother and his wife both work; I'm reasonably sure that each of them earns more (or nearly as much) as I, yet they don't place their infant son in a licensed, daycare home; they place him with a babysitter who charges an awful lot less than $420 per month.

As far as federal taxes go, I only have to pay the Medicare and Social Security taxes. I pay ZERO federal income tax at my income level, given my savings credit, child tax credit, and deductions for the size of my family. I'm not sure where they get the figure $306, but I personally paid over $1000 into Medicare and Social Security. Bizarre.

I'm not sure what all this means. I am fully in favor of a living wage; however, people who conduct such studies have to be very, very careful with their numbers. People have many sources of income, and not all of it goes reported. For example, I made a mighty effort to keep track of my tutoring income two years ago, I reported it as income, which meant I had to pay the state of North Carolina several hundred dollars in tax money it had not received. (There is, after all, no withholding for private tutoring.) I know for a fact that a number of my fellow grad students do not report their tutoring income.

In addition, people have creative ways of dealing with expenses. Child care can often be taken care of by relatives, and in fact it often is. Some employers provide child care, although not as many as used to. Many employers provide health insurance, as well, and despite the bad rap it has acquired among the world's poverty busybodies, Wal-Mart is one of these. It provided health insurance and a raise to a friend of my youngest brother's, whose previous employer (a nationally-prominent grocery chain) had given him neither, despite ten years of good, honest work.

I believe that the NC Justice Center was careful with their numbers, but it's clear that they weren't nearly careful enough. I have a wife and a son; I am the sole wage-earner, and I am paying down debt at a rate of $500 per month. Comparing my income and expenses with their data, I should be sinking slightly, and I probably would if I had those kinds of transportation and child-care expenses.

Lately, however, my wife and I have found that in addition to the 10% of my income that's being saved in a 403(b) retirement plan, and in addition to the 6% or 7% that we're putting into savings for our children's education, and in addition to the roughly 20% of my income that we're using to eliminate our debt (mostly my debt, really), we're somehow clearing $200 a month, some of which we're saving, the rest of which we're using to buy some furniture that (until now) we couldn't afford. Let's not forget that I had to pay over $700 late last year for their immigration forms, because I'm honest enough to bring my immigrant family into the country legally.

Ah, I see the difference. Did I mention that our "miscellaneous expenses" are lower than theirs? Living frugally has its merits.

3 comments:

qkl said...

I think that the "Justice Center" wants to tell people to be shocked and frustrated of their situation so they can go see the governement and ask for help and increase taxes so they can make a living on the back of low income households. They sound like vulture to me. But I am a right wing in economics so maybe I see bad faith where there is none.

jack perry said...

I think that the "Justice Center" wants to tell people to be shocked and frustrated of their situation so they can go see the governement and ask for help and increase taxes...

I agree that they want people to be shocked and frustrated. I'm not sure about increasing taxes, though; they actually state that want the tax code to be restructured. According to their analysis, the state tax burden in North Carolina today falls more heavily on poorer North Carolinians than on wealthier ones, and many companies pay even less than wealthy North Carolinians.

Having done taxes several years now in North Carolina, and having done them previously in Virginia and Arizona, I'm inclined to agree with the center on that score. North Carolina levies a heavy tax burden, and I'm not sure that that her citizens receive much more out of it than do the citizens of Virginia or Arizona.

But I haven't looked closely at what the report said on taxes, and given the difficulties I have with the rest of their analysis, I'm wondering about that, too.

Alessandra said...

Depending on your urban infra-structure, you can live quite well and still do it quite frugally.

I'm thinking here of culture, leisure, outdoors, sports, socializing, and other strictly non-work activities which are very important and which can cost a lot of money (or not) depending on what you choose. But unless you are really cornered or with no time/money whatsoever, there is a lot to be taken advantage of that can fit in a small budget.

Obviously serious expenditures, such as health, law, safety, whatever, can vary tremendously, and quite often you really don't have so much choice -- either you dole out some hefty quantity of money or you don't get the service you need.