Sunday, August 04, 2013

The Real Cost of Overtime - Border Guards

The Calgary Herald published an article with apparent outrage at the Canadian Border Guard situation today.

Part of their concern is that the government is paying overtime for border guards to work the long weekends, and that the border guards simply have to wave everyone through because there aren't enough to staff the borders.

The article feigns outrage that the guards are making double time, and it's costing the Canadian tax payer millions of dollars, when that cost would be alleviated if there were more border guards.

WRONG! WRONG! WRONG!

More border guards equals more cost.

Long weekends require maximum border guards, the traffic increases, I don't know, tenfold, a hundredfold. They need every available person to work.

The dynamic doesn't change if you increase the size of the work force 10, 20, 50%. You still want overtime coverage on the busy times. You still have to pay that double time to several border guards. Furthermore, on the actual holiday, all border guards make double time because it is a holiday!

From a tax payer perspective - a single border guard costs the tax payer the following.

Salary - $60,000 per year - subtract income taxes paid back to the government - about $40,000 per year.
Family Benefits, dental, insurance, etc - $12,000 per year.
Training - $5000 per year, higher at the start, balanced over the course of their career, including courses, etc.
So at the end of the day, a border guard costs the tax payers $57,000 per year. More or less, this is a rough cost.



So overtime - The overtime they are paid is at double time, right? On the surface yes, in reality no.
When they get that $60 per hour, their salary is taxed at a much higher rate - close to 50%.
Their normal salary is taxed at about 35%. So dollar for dollar, once taxes are recuperated, the government pays $30 for overtime, and $20 for regular time. So now it's actually closer to time and a half.

But that's not all. By paying overtime instead of hiring more employees, the government doesn't have to pay more into benefits and more into training. So the $12000 per year in benefits doesn't go up. The $5000 a year in training doesn't change.

This works out to about $8.00 per hour in savings in paying overtime vs paying another regular salary.

So by my estimates, the regular time actually costs the government $28. The overtime costs them $30.

But don't worry, all is not wrong with this article.

One important question is, what is the tariff-collecting benefit of having more border guards vs. less.

Does the average border guard collect more in tarriffs than they make?

Would adding one extra border guard increase that amount?

How much would drug trafficking go down with increased border guards?

What is the perfect amount of border guards?

I'll leave it to the government, the economists, and the Border Guards management to figure that out, because I have no idea.

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