Don't overestimate the value of your leisure time

Amber Bellaire has written a blog post that justifies spending money on maid services. This is a convenient post in that offers one-stop shopping for a variety of naive fallacies used in such arguments.

The logic goes like this:

Combined, their weekly before-tax income is about $2,000. At this rate, each partner is making about $24 an hour.

If both partners together spend six hours every other Saturday cleaning, that’s 12 hours out of their combined free time being spent on cleaning every two weeks. Multiply that by 24 (because each person is worth $24 an hour), and the couple is spending almost $300 worth of their free time hours cleaning biweekly. That’s $600 a month, or $7,200 per year.

The most striking flaw in this reasoning is that their time is not worth $24/hour. It must be worth less than that, of course, or else they would not be so eager to give an hour of time to their employers in exchange $24. Consider: if their employers were to cut their pay to $23.50, would they quit? If their time was worth $24/hour, they should!

This kind of reasoning is really nothing more than elitism practiced by people with well-paying jobs: if I make $24/hour, and you make $12, then my leisure time is worth twice as much to me as yours is to you. If that's the case, we should all be working around the clock to make sure Bill Gates gets all the leisure time he can.

A second important flaw occurs just a few paragraphs later:

For four hours of cleaning at $22 an hour, you’d be spending $88 to have your house cleaned by the company – saving you $212 worth of your own hours spent on cleaning (300 – 88 = 212) biweekly. That’s a savings of $424 per month, or $5,088 per year.

Here is the common fallacy that spending money is a form of "saving". Saving money means not spending it. It doesn't mean you've spent less than you could have. It doesn't mean earning yourself something that's "worth" money. Saving money is the opposite of spending money. The only way for the couple in this scenario to save money is to use cheaper cleaning supplies.

The proper way to evaluate a maid service is, of course, to compare the alternatives available, just as in any other purchase decision. Using Ms Bellaire's figure of $88 biweekly, the couple in her example would be spending $2288/year on housecleaning services. Here are a few ways to reason about that amount:

• Using Ms Bellaire's figure of $24/hour, they would need to work an extra 8 hours overtime per month (or 5.3 hours at time-and-a-half) to pay for the maid service. If they're willing to do that, it may be worthwhile.
• Using opportunity cost, consider that $2288 buys a pretty nice little vacation every year for two people. If you're willing to give that up, the maid service may be worthwhile.
  
• Using investment opportunity cost, consider that $2288 spent on a maid this year could have been invested in stocks, where its real value could be expected to double each decade. If you have three decades until retirement, you've just spent over $18k of retirement money on the maid this year. To put this in perspective, note that amount would be greater than the couple's final RRSP contribution.
• Using the 4% rule, that amount is equivalent by the income produced by an investment of $57,200. If you could imagine saving up that amount, and then cheerfully handing it over to someone for a lifetime of maid service, then it's worthwhile. (The trouble with this argument is that I don't think it will be very convincing to anyone who doesn't happen to have $57k sitting around, because it's too easy to spend imaginary money.)

If you can look at all four of these lines of reasoning and still feel comfortable spending that money on a maid, then go for it.