Tuesday, June 4, 2013

The Cost of Domestic Outsourcing

Some readers will be familiar with MMM's take on the insource/outsource question, but I am thinking here in slightly larger terms.  I pretty much agree that if you CAN do it, you SHOULD do it, and if you can't do it now but can LEARN to do it, then you should do that, too.  But let's zoom out a little bit, and take a flyby of a major American domestic outsourcing practice: child care.

In 2011, the US Census Bureau SIPP report examined American child care practices (PDF here).  Data have been collected since (at least) 1985 on this topic, so all data belong to the post-sexual-revolution modern era.  In that time, the percentage of kids under five being cared for by family (immediate or extended) has remained relatively constant around 47%.  The percentage of kids in daycares has increased (from 14% to 19%) while preschool has decreased (from 9% to 5%, or 6% if you count Head Start).  Nannying has held about steady, but in-non-relative-home care has fallen sharply (from 22% to 10%).  Long story short, it seems that childcare has become more professionalized in the last 25 years, even if the fraction of children in professional care has not necessarily increased much.

What does that mean?  The same report finds a pretty uniform cost of childcare across income and demographics at 7% of household income.  So, for an average family making $2667/mo (before tax), spending $186/mo (after tax) on childcare, they would need to have around $54000 invested to pay for this one service (using Jacob's 300x rule).  Also, there were roughly 20 million children under 5 in the US in 2011, and if roughly half of those kids were in child care at the average cost calculated above, the US expenditure on child care comes out around $22.3 billion.  I'm pretty sure the report does not include travel time and costs, or the food costs associated with easting away from home.  It sure doesn't account for the personal and societal costs of generations of children with very limited family time and consequently weakened family structure.

There are probably exceptional cases where a family does need to have professional child care*; it's dangerous to make categorical statements, after all.  But is it worth it for almost half of all children to have professional child care?  Assuming equal earning between parents, this means that about 20% of mom's paycheck goes back out the door just for childcare.  With an average one-way work commute of 16 miles, the true cost of mom's commute comes out to about $17/day using the IRS mileage rate (which neglects the value of time), adding $340/month (13% of household income), and if mom buys lunch at $6.50/day, there goes another 5% of household income, not to mention the higher cost of cooking dinners with short prep times, office wardrobe, the marginal tax rates on a second income, and reduced time for household chores (thus leading to more outsourcing); we're getting pretty close to eating up mom's paycheck just to support mom working.  NOTE: this argument can be rephrased with "dad" instead of "mom", I'm not trying to be gender-biased, I simply speak from the perspective of our own family.

So, when all the pundits say life is too expensive NOT to have a double-earner household, check their facts.  I think life is too beautiful to coop my wife and children up in professional institutions all day long.  If anybody has to sit in a gray cube with fluorescent lights, I'll mensch through that so my family doesn't have to.  It's also my goal to mensch through to where I don't have to do that anymore, and can insource even more of our household chores.

Long story short: outsourcing breeds more outsourcing.  It does NOT necessarily breed productivity.  Insourcing breeds more insourcing AND increases your household productivity, pleasure, and ultimately, wealth.

*If there are any single parents reading this, I am deeply sympathetic to your plight.  Either tragedy has struck or somebody has neglected his or her duty to you, and in either case, you have my sincerest concern and sympathy.  For you, there are more situations where child care might be purchased, but God has also given us families and His church, both of which can be excellent avenues for personal and loving child care for those in need.  If you are not close to or engaged with your family for one reason or another, perhaps that can change.  If you are not a part of God's church, that should change.  

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