What's your real hourly wage?
A few years ago I came across a book called Your money or your life written by Joe Dominguez and Vicki Robin. At first sight this seemed to be a basic book on personal finance for the beginner and a fairly easy weekend read. I devoured the book with much interest. In fact it was the first time I came across the phrase financial independence. Some argue that the book is too theoretical and the principles are too difficult to put into practice in the real world. The book contains a number of insights that are too often overlooked when it comes to financial planning and if you can get your hands on a copy then I’m sure you won’t be disappointed. I think it was Warren Buffett who said something about every book he reads gives him more knowledge. Even books that might seem simple can often get your mind thinking. One of the takeaways I got from this book was the definition of your real hourly wage.
Most people would consider their hourly wage to simply be their wage divided by the number of hours they worked. So for a person earning $600-a-week for a 40-hour week they would assume their hourly rate is $15-a-hour. The authors of the book decide to go much further than this and argue that this is not a true reflection of the life energy you are giving. Items such as the time and money you spending going and returning home from work each day, the cost of work related clothing (if you work in an office you probably don’t wear your suit at the weekends), the extra cost of at work meals, etc. The authors even go as far as including work related illnesses and retail therapy in their costings although I’m guessing most people won’t want to go this far.
So out of curiosity I kept a diary last week of my working life in order to calculate my real hourly rate. I should mention that I live and work in Bangkok as a teacher so my work schedule may seem a little strange.
Day 1
I left my condo at 11:45 and took a taxi to work. This isn’t the cheapest way to get to work but it does save time. I probably got to the office at 12:00 and the taxi cost 55 baht ($1.60). My meals at work tend to be no different from the meals I would have if I was not working so I don’t count the cost of these as being anything extra. I left the office at 7:40 and went to meet some colleagues for a few drinks. Again I don’t count this as a work expense as I sometimes go out for a few drinks in my free time too.
Time at work: 7:55, Work related costs: $1.60
Day 2
A bit more organized today so I took the bus for 11 baht ($0.30). Left my condo at 11:30. I don’t count the time I spend getting ready for work (showering, shaving, ironing my clothes, etc) as I would do these anyway. I guess if you are a woman who spends a lot of time and money on make-up that you only wear for work then you should include the time and costs of this in your calculation. I left the office at 6:10 to go home. I decided to walk home and as this is a form of exercise I don’t count the time I spent walking home (approx 40 mins) as work time.
Time at work: 6:40, Work related costs: $0.30
Day 3
I had an early lunch with a friend finishing at 12:50 when I took the subway to work. Arrived at work a bit earlier than usual as I had a meeting to attend. Finished at about 6:00 and took the bus home, arriving at my condo at 6:25. Total travel costs of bus and subway: 26 baht ($0.80)
Time at work: 5:35, Work related costs: $0.80
Day 4
Due to a large amount of admin and the meeting on Friday I was a bit behind on my work and went to the office early. Left my condo at 6:45 taking a taxi to work (50 baht / $1.50). Left the office at 5:45 and again walked home.
Time at work: 11:00, Work related costs: $1.50
Day 5
Another fairly long day. Left the condo at 7:20 and took a taxi. Taxi driver didn’t have any change so I paid 60 baht ($1.80) for the trip. Left the office at 3:55 and walked home again.
Time at work: 8:35, Work related costs: $1.60
From this you can see that I spent 39 hours and 45 minutes at work and travelling to and from work. As I mentioned I don’t count the time I spend walking home as work time as this is exercise that I might do if I wasn’t working. It also saves a nominal amount of money in travel costs (although I’m sure this wouldn’t cover the wear on my shoes). The total travel costs came to $5.80.
Now I need to estimate my work related clothing costs. Shoes probably set me back $60-a-year, work trousers $45, shirts $50. As it’s hot here I don’t work anything else to work. Underwear and socks I would wear anyway so I don’t count these as expenses for work. With the shirts I would say I wear some of them at the weekends too so I will count $25 for the work shirt costs.
After annual leave and public holidays and weekends I spend a total of 212 days a year at work. My travel costs based on the above week would come to about $246 and my clothing costs about $130 (yes, I’m pretty frugal). This gives me work related expenses of $376-a-year.
My salary after tax, including benefits is $26,650-a-year. Minus my expenses leaves me with $26,274. Based on the above week my annual working hours including travel look to be about 1,686 hours. This gives me a real hourly wage of $15.58.
So how does this compare? Well as I am originally from the UK I thought I would run a few figures to see what kind of salary I would need in London get the same hourly rate. If you live in London or have ever visited you will know that transport there is expensive. A zone 9 underground ticket costs £3,428-a-year ($4,380). Commuting in London takes time too. If you start work at 9am you probably leave your home at 7am. So that’s 4 hours a day or 20 hours a week commuting and this is unlikely to be productive time. So that’s a 60 hour week for a typical 9 to 5 job. Let’s say you work 228 days a year (8 public holidays, plus 25 annual leave, plus weekends) that gives you 2,736 hours a year. At $15.58-a-hour we are looking at a net salary of $42,626-a-year (£33,300). To get that much net you would need to earn about £45,000 or $58,000-a-year gross (before income tax and national insurance) which is about 65% above the average. Note for US readers: Average salaries in UK are about 21% below USA levels. The UK average salary is around £27,000 or $35,000 compared to the average American salary of around $44,000.
Clearly we are comparing apples with oranges here. The person in London is working 1,000 hours more a year. However they have much higher expenses. According to expatistan the cost of living in Bangkok is 52% lower than living in London and that doesn’t even take into consideration council tax. For me I enjoy the relatively short working hours here and the low taxes and low cost of living. I think it would take quite a high salary to tempt me back to the UK and to be honest I don’t think anyone could afford me or want me for that matter.