Many of us choose to live in a world where we do as much as possible on our own.  We cook for ourselves, we do our own laundry, walk our own dogs, and maybe, just maybe, mow our own grass.  We choose to do these things partially because we want to, but mostly because we can’t afford to pay anyone else to do it.

But why then do we pay people to do more complicated/expensive tasks?  We pay someone to cut our hair (I don’t but you do), pay a contractor to put in new floors, and pay a mechanic to do that magical thing known as an “oil change”.  If we can’t afford to pay someone to walk our dogs how can we afford to pay someone to put in those new hardwoods your boxer is bound to scratch up?  The answer lies in time.  Often, we actually have time to DO these things, but we don’t have time to LEARN to do these things.  As a result, we pay someone to do it for us.

My good friend over at Free Money Finance turned me on to a story about outsourcing your chores.  It isn’t his post but in fact the something originally posted in US News.  It’s amazing how short-sighted this article actually is.  The article gives all the pros of outsourcing your chores without covering the whole story.  The argument is based on “how much money do you make an hour?  If you can pay someone less to do your chores then you should”.  So basically if you make $30/hour and can pay someone $10/hour to clean your house, then you should.  There are two related problems with this assumption:

1)      Who is going to pay YOU? The author assumes that by freeing up that hour you can continue to work, thus netting yourself $20/hour.  This works great for the self-employed like those featured in the article.  However having an extra hour to work doesn’t mean you have an extra $20 to net.  Most of us are confined to the 40 hour work week, this gives us plenty of time to take care of the chores.  My dad, a professor, could work 40 hours or 100 hours (it’s closer to 100 than 40) and he’s still going to make the same salary.  Every additional hour he works in fact dilutes his “hourly rate” because of this.  In order to work an additional hour due to reduced chores, you actually need to have someone willing to pay you for that extra hour, most of us don’t.

2)      You don’t actually make $30/hour.  It’s not even close to that in fact.  You make $30 for every hour you work, but you only work 40 hours a week.  There are 168 hours in a week.  So you actually make about $7.14/hour.  That’s $7.14 for every hour of every day.  $7.14 for sleep, for time with the kids, for watching TV, and doing chores.

You don’t think about $7.14/hour when you decide to do your chores instead of hiring someone.  But your subconscious is.  The deepest darkest part of your brain (somewhere near that lost memory from that one night from freshman year) is actually computing how much your time is really worth and seeing if they can hire someone to do it at that price.  Can you pay someone $7.14/hour to clean your house, mow your lawn, or walk your dog?  Unlikely, unless you hire someone willing to work for less than minimum wage in most states.  So your mind decides for you to do the chores instead of hiring someone.  This is the same reason we elect to pay someone to cut our hair, put down hardwoods, and change our oil.  We can’t pay someone $7.14/hour to teach us.  And since we won’t use these skills often enough to make a livelihood, we call it “convenient”.

So when we’re deciding what tasks we can and cannot do ourselves we again look at two things.

1)      I can do this myself, but can I pay someone to do it for me for less than my REAL hourly rate?

2)      If I can’t do this myself, can I pay someone less than my REAL hourly rate to teach me?

If the answer to #1 is “no” then you’ll likely elect to do it yourself.  If the answer is “yes” then it’s a tossup.  If the

answer to #2 is “no” then it makes the most sense to pay someone more just to do it.  If the answer happens to be “yes” then you have to decide whether to learn or to pay a convenience tax to have someone do it for you for more. What you have to ask yourself first is, what is my REAL hourly rate?

Those of us limited to either a fixed salary or fixed hours to work per week will find a very low REAL hourly rate.  If you’re self-employed, or can bill by the hour for extended periods of time, your REAL hourly rate will be much higher.  These people are unique

But those people are rare, and we call them exceptions.  And all US News was really reporting is that there are exceptions to accepted norms.  Wow, throw my Pulitzer over there with the others.

Non puppy photo: lindenbaum

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By The Weakonomist

The Weakonomist is the founder of Weakonomics. Clicking the picture of the puppy will tell you more about him. If you like what you're reading consider subscribing to the blog, following him on Twitter, and checking out the related posts below. Please consider a donation if you really enjoy Weakonomics. Also keep in mind that nothing I say can be construed as financial advice.

categories: economics, personal finance