Happy Voodoo Economics Day, Mom

Steven Dutch, Natural and Applied Sciences, University of Wisconsin - Green Bay
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Ellen Goodman, a columnist I sometimes disagree with but always respect, wrote this on May 11, 2007.

It's become a Mother's Day tradition on a par with candy, flowers, and guilt. While advertisers wax poetically about the priceless work of motherhood, economists tally up the paycheck for the services she performs.

This year, salary.com estimates the annual value of a full-time mom at $138,095, up 3 percent from last year. The monetary value of a second-shift mom is $85,939, on top of her day job.

Well. A consultant in geology can charge $300 an hour, so that makes me worth about $600,000 a year. Add to that another $100,000 as a writer and Web page creator, and it comes to a cool $700K. There are only a few wee problems with this analysis. Nobody is offering to hire me for those jobs at those salaries. Anyway, the reason consultants charge so much is they have dead time in between jobs, they have to pay rent on office space, maybe salaries for an office assistant plus fringe, accountants, attorneys, tax preparers, training to stay competitive, and so on. Deduct all that and the final take-home is a lot less than $600K. Thirty years ago an optometrist friend of mine who was just opening a practice told me he had to gross $100 an hour to make a profit. That was in 1976. Double or triple that now.

Assume a full-time mother works 80 hours a week, or 4160 hours a year. That salary of $138,095 a year works out to $33.19 per hour. Check the want ads to see how many jobs there are in child care, cleaning, or domestic service at that salary. Like my hypothetical $700,000 a year, if nobody is actually offering you jobs at that rate, in what sense can you say you are "worth" that much money?

One way of cross checking the validity of these salary estimates is to ask whether single males are willing to pay that sort of money to obtain those services. When you recover your breath from laughing and wipe the splatter off the computer screen, continue reading. In the words of the inimitable Rita Rudner, "Men don't live like women. In fact, they don't even live like people. They live like bears, with furniture. There's nothing on the walls - but food." Single males are notorious for their willingness to live without domestic services. Whole sitcom industries have been built around that fact. And is it really fair to assess one partner for services that are valued mostly by the other partner? A more ruthless test is to ask whether divorced women see a sudden surge in their standard of living. After all, those $138,095 of services, formerly shared with a spouse, are now entirely her own. Of course, everyone knows that the standard of living of divorced women generally plummets dramatically. I could only imagine what Ellen Goodman would say if a judge issued a divorce settlement on the assumption that the wife was getting an extra $138,095 a year out of the deal.

It turns out that salary.com fluffs out the estimate substantially by adding in Facilities Manager ($38.29 an hour), psychologist ($36.41 an hour) and Chief Executive Officer ($170.69 an hour). When I tossed out those artificially inflated job titles and put in a profile based on the usual range of mundane household tasks, I got a figure of $32,000 a year. So what about someone who actually is a Chief Executive Officer and Facilities Manager? Say a senior retail store manager? Such a person does a lot more in the way of executive and managerial responsibilities than any housewife, yet salary.com is a little less rosy about this job. The middle salary range for this job in my area is $43,000 to $53,000 a year.

The whole methodology is ridiculous. Most jobs, most of the time, task people below their maximum level and most jobs occasionally require performance above the normal level. People don't jump from task to task at differing salary rates. A psychologist is a psychologist all the time; she doesn't drop down to janitorial pay every time she mops up a spill with a paper towel. A cook doesn't move up to facility manager just because the boss runs an errand for half an hour and leaves him in charge. A CEO doesn't drop down to secretarial pay just because he makes a few copies at the copy machine. The CEO salary is particularly ridiculous - everybody is CEO of their own life 168 hours a week but they don't get $170 an hour for it.

Salary.com also offers an estimate for the value of a father's services (interesting how this never gets into the news), based on the same list of occupations as for a mother. A working father comes out worth less than a full time mother, mostly because of a smaller number of hours worked. However, conspicuously missing from the estimate of a father's value are things like auto mechanic, carpenter, plumber, electrician, tax preparer, systems administrator or financial planner. (And of course, in households where the wife assumes any of these tasks, they should count on the wife's side of the ledger. I had a female student once who had an automatic transmission disassembled on her kitchen table as she repaired it. I also know of one husband whose idea of fixing a stuck door was to nail it shut. And if you think you can tackle skilled tasks, and your spouse has the repair professionals on speed-dial, your contribution is negative.)

Still, it's interesting to take salary.com at face value. For my zip code, salary.com estimated the median value of a stay at home mom as $137,954 a year, assuming one pre-schooler and one school age child. A working mom was valued at $85,851. A working dad was estimated to contribute $71,088 a year in services (all these figures are a hair below the national median). So a stay at home mom contributes a net $66,866 in services. From that, since the husband is the sole money earner, we need to deduct rent or mortgage ($10,000 a year?), utilities ($5000 a year), food ($5000 a year), health care (easily $20,000 a year, paid by the husband's employer in all likelihood), Social Security (she'll get some of it even if the husband dies), half of all pension contributions, taxes, auto payments, gas, and half of anything that's left. And if we're going to follow the nickel and dime mentality of the "unpaid services" school, this is a fair approach. If we're going to charge the husband the cost of what he would have to pay for his wife's services, it's fair to charge her for what she would have to pay for living expenses if she were on her own. On the whole, it doesn't look like too much of a gross disparity, and it becomes a lot less if we toss out the pie in the sky contributions of CEO, psychologist and facilities manager. I'm assuming here a reasonably civilized partnership, not the nightmare scenarios where one partner does nothing at home or spends most of the income on personal gratification. Those cases need a counselor or divorce lawyer, not a salary wizard on a Web site.

For marriages where both parties work, the mother contributes $85,851 in services and the father contributes $71,088, leaving the mother contributing a net $14,763. The difference is due almost entirely to hours worked. How fair this actually is in practice will depend also on who contributes the most salary and fringe benefits, who has the physically and mentally most taxing job, whether the spouses work different numbers of hours, and whether one partner contributes high value skills at home, like carpentry, auto repair, interior decorating, or elaborate entertaining. It's not something an outsider can really judge and the real fairness is determined by the internal dynamics of the marriage and whether the relationship is perceived as fair. Civilized partnerships shift loads when one or the other partner is heavily burdened.

Attempts to show that some occupations are unjustly underpaid, whether they are housewives, day care workers, or teachers, typically parcel the job out into subtasks, calculate the salary for the subtasks, then total the result. By tossing in a few hours of some highly paid job title like CEO, you can always generate whatever figure you like. The sad reality is that your marketplace value is what the marketplace is willing to pay you, and not some theoretical figure generated by parceling out every microtask and pricing them individually. After all, a car would cost five times as much if you bought it a part at a time (seriously).

In many cases, marketplace value depends also on what the marketplace can pay you. Telling a husband his wife's services are worth $138,095 when he's only making $40,000 a year will probably provoke him into well justified anger. There is every reason to think a teacher is more valuable to the society in Nepal or El Salvador than the United States, but Nepal and El Salvador simply can't afford to pay teachers American salaries.

What about extreme cases like CEO's who earn $100 million a year? Are they worth that much? Well, I could probably go into a CEO's office and, after a few weeks of learning the company, do 90 per cent of what he does. I could do a lot of the day to day things. It's that other ten per cent. Could I persuade investors that I had the vision and skill to take a billion dollars of their money and earn a profit on it?  Could I convince another company to join with me on a cooperative venture where we both put a billion dollars at risk? In substantial part, the high salaries are a public expression of the company's confidence that the CEO is competent to deal with finances of that magnitude.

Your market value is what the market is willing to pay you. If you think the market unfairly underprices certain skills or occupations, go generate market forces to redress the inequity. If you think things should be rewarded for their value as God sees it, then we will unfortunately have to wait for God to deal out the rewards.

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Created 11 May 2007;  Last Update 02 June, 2010

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