Tuesday, February 22, 2011

"But I HAVE to work!!" - Part Three - Part-Time

This is Part Three of a four-part series:
Preschool      School-Age     Part-Time      Reality Check

PART THREE - This post is very specifically targeted at moms who are considering going to work part-time.  

Let's return to Jack and Jill one more time.  They are struggling because they still don't see a real financial benefit from the prospect of Jill going to work full-time, but they want to bring in more money to pay off their debts faster.  So they have decided to look at another option.  There is a small grocery store a few minutes away which is hiring for an assistant manager.  They need someone to work the evening shift, 6:00-10:00 four nights a week, plus a few hours on the weekend doing paperwork.  They are offering $12.00 per hour, they offer a 10% staff discount, and plus her kids can have free slushies if they come by while she's working.  ;o)  The children are now five and seven years old.  Technically speaking, the oldest being seven would bring about a reduction in some government benefits.  However I am leaving those calculations the same through all three scenarios just for the sake of simplicity in comparing the numbers.

Gross pay: $12.00 per hour, 20 hours per week
$240/week = $12480/year

CHILDCARE.   Jill's shift doesn't start until 6:00 pm.  Most nights Jack is home by then, so only occasionally will they need a sitter for an hour or two.  Jill hires a neighbor's 19-year-old daughter to come over on those nights and pays her $10.00 per visit.   Typically this will happen only once a week.
$10/week = $520/year

Next:  TRAVEL.   The store is only a few minutes away, so Jill decides to take the opportunity for some exercise and walks to work when the weather is decent.   Otherwise she takes the car because Jack is home from work already.  About twice a month she does need to call a taxi, at a fare of $10.00 each way.  Let's estimate the added gas costs at $10.00 per week.
$15/week = $780/year

FOOD.   Jill is home during the day so she is able to keep up her baking and is able to plan her meals and grocery shopping.  She does pick up a few more convenience foods for the kids' snacks, but she takes advantage of her staff discount at work, so her grocery expenses are maintained.   Some evenings she doesn't have supper quite in-hand in time for work and calls Jack to bring home takeout, but it's only about once a week so their eating out costs are only increasing by $25.00/week.
Eating Out increase: $25/week = $1300/year 

Let's don't forget about those payroll deductions.   I am optimistically assuming that tax rates have remained steady.  At her income level she'll have federal income tax deducted at the rate of 15%.   And provincial income tax of 10% (assume she lives in Alberta).  And EI.  And CPP.  Using CRA's online calculator and a gross weekly income of $630, Jill's deductions will be:
FED:  $0.64 ($33.28/yr)
PRV: $0.00
CPP: $8.55 ($444.60/yr)
EI: $4.27 ($222.04/yr)
Deductions = $13.46/week = $699.92/year

The store is a casual setting and provides her with an apron to wear while she is working.  So Jill doesn't need to make much of an investment in clothing.  She picks up a couple pairs of pants, a few tops and a good-quality pair of shoes which she sets aside as exclusively for work.  They will last her a year.
Total cost: $200 for the year.

Jill keeps her 'latte factor' spending quite low at this job.  She has been told that her kids can stop in for a free slushy during her shift, but also that she can have free coffee while she is working as well.  She does buy a snack here and there, and buys the occasional gift for a co-worker's or her boss' birthday, but it averages out to just about $5.00/week.
$5/week = $260/year

There's another side of the coin that must also be looked at here, and that is tax ramifications.  Now that Jill has an income, there will be an impact on benefits their family now receives.

CCTB : was $249.23/month, drops to $153.49.  Loss of $1148.88 per year
UCCB: remains the same as it is not income-dependent
GST/HST : already negligible amount due to Jack's income
WITB : already ineligible due to Jack's income

Finally there is the impact on Jack's income tax return.  With Jill having no reportable income, and two children at home, Jack received an income tax refund last year of $3767.06 (based on a net taxable income of $50,000).  This year, Jill is earning income but isn't much above the personal exemption level so they decide Jack should claim the kids.  His refund this year  is would have again been $3767.06 but is now reduced to $527.26 because of the loss of a spousal deduction.  However thanks to the kids, her childcare deduction and her low income level, she'll get a refund of $33.28, everything she paid in.   This results in a net loss of $3206.52.  That smarts.

Finally... and I put this last because it doesn't apply to everyone, but in practise it belongs in the first spot... if Jill's beliefs lead her to tithing from her paycheck, that will subtract another $1178.00.

Let's sum it up again, shall we?

Gross pay:  $12480/year
- Tithe $1178.00
- Deductions $699.92/year
- Childcare: $520/year
- Travel $780/year
- Eating Out $1300/year
- Clothing $200/year
- 'Latte Factor' $260/year
- Loss of CCTB $1148.88
- Loss on tax refund $3206.52
= Financial Gain of $3186.68

Again with this scenario, I think I have overall been pretty realistic. In this scenario, Jill is seeing a net financial benefit of $61.28 per week.  If it weren't for the dramatic impact on Jack's federal tax return, this would have been reasonably palatable.  But considering that... maybe not so much.   She could babysit two kids just one day a week and bring in the same amount of money!!

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