The socio-economics of Santa

I am often accused by my wife of having a somewhat ‘humbuggish’ view of Christmas. To illustrate her point, I thought it might be instructive to move away from the commonly held and idealised view of Santa Claus as international folk hero, and instead opt for a more critical analysis from a demographic, sociological, and socio-economic point of view.

For example, how much does Santa earn? How many elves does he need to employ to manufacture all those toys, and how many toys might that be? On the customer-facing side, how many children are served by Santa’s distribution network?; and, assuming Mr Claus does not employ any form of magic (bah humbug), what technology might Santa need to fulfil his contractual obligations (as implied in the lyrics, “Santa Claus is coming to town”) on Christmas night?

There is readily available data from a number of reputable international information sources, that – together with a little extrapolation, creative thinking, and intelligent guesswork – can help us in our quest for answers to the above questions.

Santa’s salary

Table 1.1. The Santa Index from insure.com

Believe it or not, estimates have been made of Santa’s annual income – and the good news for those who believe in steady increases in wages in the public sector, Santa does not seem to have been as badly affected by the world austerity crisis as many public sector workers in the UK…

According to figures compiled by insure.com, Santa’s salary for 2016 (the latest year for which figures are available), Mr Claus would have been paid US$146,308.51 last year.

This is worked out by breaking down Santa’s “job” into a number of smaller roles (15 of them, in fact) that he fulfils during the year. Each of these are then compared to the average wage paid by an index of similar (US) occupations, and finally an extrapolation of this average indexed hourly rate is multiplied by the number of hours that Santa is estimated to dedicate to each one of the 15 roles throughout the annual wage cycle. The final salary figure is reached by adding up the net value of each of the 15 roles.

For example, the important job of determining whether children “have been good or bad” during the year – a task that according to the adjusters at insure.com would require an hour a day for a total 30 days (30 hours total a year) – would be paid at the average rate payable to Private Detectives and Investigators, whose mean hourly wage in 2016 was US$25.41 (the market for PIs has obviously deteriorated somewhat since Magnum and Jim Rockford retired). Multiplied by 30 hours, this gives Santa a total income from this part of his job of US$762.30. (Though quite how this task is achieved in 30 hours when it involves the screening of 596 million children – see below – is not explained.)

Table 1.1 (above) gives a breakdown of all 15 roles ascribed to Santa, and demonstrates that his 2016 income was up 2% on 2015 – somewhat better than the wage increases awarded to the majority of public sector workers in the UK over the same time period, but hardly stratospheric. And in any case I wouldn’t have “wrapper of gifts” (annual income US$1,915.20) in there at all – that’s a job for the elves in my book – so as far as I’m concerned Santa’s salary for 2016 was US$144,393.31…

Tax haven

This may seem a trifle low for what is, effectively, an overall role that is the equivalent of a Managing Director of a global manufacturing outfit employing thousands of workers (see later in the article for analysis of employee requirements).

Indeed, of 1,000 people polled by insure.com, 18% thought Santa should be paid more than US$300,00 a year; with a further 4% saying his salary range should be between US$200,000–300,000. Compare this, however, with the 8% of respondents who said that Santa should receive no salary at all; and the 71% overall who said that at US$146,308 a year, Santa is overpaid.

So, what of the man in red’s socialist credentials – for here we have a man universally considered to be one of the planet’s great altruists?

On this matter it is pertinent to note that under international law, no country currently owns the North Pole or the region of the Arctic Ocean surrounding it – effectively, therefore, Santa is domiciled in a tax haven!

You see, the five Arctic states that encircle Santa’s workshops and manufacturing complex in the North Pole – Russia, Canada, Norway, Denmark (via Greenland), and the United States (via Alaska) – are limited to a 230-mile Exclusive Economic Zone around their shorelines, which leaves Santa tantalisingly beyond their clutches!

The area beyond that (as well as the vast area of seabed under international waters) is administered by the International Seabed Authority, an organisation set up to administer mining rights in the neutral zones under the world’s oceans. The pesky Ruskis have, apparently, planted a national flag on the seabed under the North Pole, but this act alone is not sufficient to qualify that country to make Mr Claus subject to its domestic tax regime.

The inescapable conclusion from all of this is that Santa is, in fact, a tax dodger whose not insubstantial economic activities benefit none of us in terms of tax revenues. Curiously, however, I have not lately heard many socialists condemning him in the way that they have, say, Gary Barlow, Bono and various others…

 

Christmas Night

So, just how busy is Santa on Christmas night? To answer this question we need to start with an assessment of the number of children to whom Santa pays his annual night-time visit.

This is tricky. Does Santa, for example, deliver to sub-Saharan Africa, where poverty levels are high? Or Asia? And at what age goes Santa stop delivering? For argument’s sake, let us assume that all children are covered, irrespective of poverty level; and further that Santa stops delivering once a child reaches the age of 15.

According to the interactive and fully searchable United Nations Population Division database there are currently 7.55 billion people in the world (2017), of whom 1.96 billion are aged under 15.

At this point it is important to remember that Christmas is a Christian tradition (the clue is in the name – “Christ-mas”, as in Jesus Christ), so we need to adjust our estimates downwards.

According to the Pew Research Center’s April 2017 report The Changing Global Religious Landscape, Christianity is still the world’s largest religion, its 2.3 billion followers making up 31.2% of the world’s population (Muslims come next with 1.8 billion and 24.1% – they will outnumber Christians by the year 2060, apparently). Interestingly, most countries in their censuses do not enumerate atheists and agnostics as distinct populations, so it is not possible to form a reliable estimate of the size of this sub-group – but in any case, most atheists that I know seem perfectly happy to exchange presents and invite Santa into their homes each year, regardless of religious conviction.

So, if we assume that the Christian demographic mirrors the world demographic in terms of the % of children that make up the total, then using the equation 7.55 billion (world population) divided by 1.96 billion (number of total world population under 15) we can work out that 25.9% of the population is made up of people that we can refer to as being of “Santa deliverable age” (0–15 years old for the purpose of this analysis).

Now, if we extrapolate that 25.9% figure across the world’s 2.3 billion Christians, we get a figure for the number of children Santa Claus visits on Christmas night of 595.7 million.

This is a really useful figure to have at our fingertips, because (apart from demonstrating the enormity of Santa’s task) from it we can go on to estimate all sorts of things – like the number of households requiring a delivery on Christmas night, the number of toys requiring manufacture during the annual production cycle, the value of such enterprise, the (estimated) number of workers (elves) required to maintain such production levels, and, for the more politically minded, the total lost corporation and income tax revenues resulting from Santa’s tax exempt status.

For argument’s sake, let us assume that, on average, the children of “Santa deliverable age” throughout the world are clustered such that there are an average of 1.5 children in each household that qualifies for the delivery of presents on account of it having at least one child under the age of 15.

This being the case, Santa needs to make 596 million (total number of Christian children under 15) divided by 1.5 (average number of under 15s per Christian family with children under 15) = 397.1 million separate house calls each Christmas Eve. Over a nine-hour delivery window (9pm–6am) this requires a delivery rate of 44.1 million homes per hour (7.3 million per minute; or 123,000 per second). This will clearly require some expensive and rather futuristic technology to achieve…although in making this calculation I have, admittedly, taken no account of the international time zone factor that has the effect of extending this nine-hour window somewhat…

Now, according to an article in the Daily Mirror (not the most reliable of sources, I know), the average child in the UK gets 16 presents under the tree – assuming half of these are from Santa (8), and assuming UK parents to be more generous than in other areas of the world, let us assume a total average of 4 presents from Santa for each child across the Christian world.

That means Santa’s workshops need to produce 596 million x 4 = 2.38 billion toys each year to fulfil the Christmas demand (or 6.55 million per day for each day of the year apart from Christmas Day).

In all the literature I have seen, I have not seen any evidence of factory-level mass production methods being utilised by the elves in Santa’s employ – rather, each item is hand crafted. At an output of, say, 20 toys each per day per elf (including wrapping) – they are, after all, highly skilled and very dextrous – that would require a workforce of some 327,000 elves (this perhaps explains why one so rarely sees elves these days; they are all hard at work in the North Pole).

Toys R Us at #22

Even at an average of £10 a present that mean’s Santa’s elves are producing toys to a value of £23.8 billion each year (£59.5 billion at £25/toy); not to mention the food (147.5 million tonnes) that is required for importation to feed said elves; the paper, sellotape and ribbon required to wrap all the presents; the warehouse and logistics facilities needed to categorise and store them; the printing facilities needed to write all the labels; and the power requirements for lighting and heating.

By way of comparison, according to Forbes’ list of America’s 100 richest companies, Toys ‘R’ Us was ranked at #22 (https://www.forbes.com/companies/toys-r-us/), enjoying sales in 2016–2017 valued at just US$11.54 billion, a workforce of 64,000, with 1,500 stores in 35 countries. After paying US$34 million in taxes, and after deductions for the cost of sales, depreciation and interest payments, it recorded a net loss of US$36 million last year…so let’s hope Santa’s operation is more profitable!

Incidentally, a word on wrapping paper – let us pray for the sake of the environment that Santa uses recycled paper because at an average of just 0.5m2 per present, his requirement is for 1,190km2 of the stuff, enough to cover the Isle of Wight more than three times over! I won’t even start on the number of rolls of sellotape needed!

 

Santa’s wage bill

And so to the costs of production, the majority of which will be the wage bill. With a workforce of 327,000 (and no account here is taken of any ancilliary staff needed to keep the place clean, tidy up the rubbish, prepare meals for the workers, keep their accommodation clean, or provide any form of leisure and relaxation) this bill is likely to be fairly hefty.

Assuming Santa adheres to a minimum wage level for his elfish staff (and also assuming he isn’t so stingy as to make deductions for providing food and accommodation), we can determine the annual wage bill for Santa Inc.

Let us assume first that the elves work the same hours as their boss – whose working day can be worked out from Table 1.1 above and averages 11.75 per day. Let us also further assume that no overtime rate is applicable for either (a) length of shift above 8 hours, or (b) working at weekends; and also that the workforce is paid at the current UK higher rate minimum wage band of £7.50/hour (over 25s).

This means that elves take home £7.50 x 11.75 = £88.13 a day x 365 days = £32,165.63p each (which puts Santa’s salary into perspective somewhat!). That takes the annual wage bill for the whole operation to £10.45 billion, a labour cost of production per toy manufactured of £4.39! Don’t forget also that living in a tax haven as they do, nothing is payable in income tax or national insurance contributions from either employer or employee.

 

Santa, employment law and the EU working time directive

Some of Santa’s 327,000 elves take time out for a group photo

Which brings us to the question of employment law. Given the long hours worked by both Santa and his workers, Santa Inc appears at first sight to be in breach of the so-called ‘working time directive’. This piece of employment protection legislation dictates that in any 17-week period no worker should be forced to work for more than an average of 48 hours a week.

Given that both Santa and his elves work an 82.25-hour week, this important piece of law is clearly at play. That said, if the elves are prepared to sign an ‘opt-out’ clause they can be exempted from the provisions of said working time directive as long as their occupation doesn’t fall into certain specific categories that include airline staff, ship-workers, lorry drivers (who are covered by the even more restrictive EU working time directive) and some security guards.

The rules (in the UK) state this: “Your employer can ask you to opt out, but you can’t be sacked or treated unfairly for refusing to do so. You can opt out for a certain period or indefinitely [but] it must be voluntary and in writing.”

As long as all his 327,000 elves have opted out voluntarily, then, Santa’s operation does stay on the right side of the law. If not, well he’s going to have to increase the size of his workforce by nearly half as many again to more than 500,000 to keep up with the rate of production required to meet Christmas Day demand.

But there’s more. When it comes to the night in question the more stringent EU working time directive covering the driving of HGVs (and there can’t be many heavier than the one that is carrying 2.38 billion presents) will create a serious problem for Santa, who must by law take 45 minutes of breaks after every four-and-a-half hours of unbroken driving, subject to a maximum of 10 hours driving in any single shift. In order to drive for nine hours, therefore, Santa will need to take an additional 1.5 hours of breaks, which could see him having to deliver until 7.30am, putting him at serious risk of being detected by children at the end of his route as they begin to wake up. A good job indeed that “he knows when [they] are sleeping, he knows when [they’re] awake”.

What is more, the EU working directive covers shift work that is non-driving in nature, so in order to have any chance of getting his round done in time Santa must not do any of the loading up or getting the reindeer ready immediately prior to setting off (because to do so would count against his total driving time, of which he needs every minute!).

In such circumstances Santa would be wise to take a driver’s mate – if he’s running late and gets to 10 hours total driving time he must, by law, take a continuous 9-hour break, and I’m not sure the Sleigh has a sleeping compartment…

 

Conclusion

I think it’s fair to say from all of the above that there’s one hell of a business racket going on in the North Pole, even if it’s one funded by Santa’s own extraordinary wealth. We, as taxpaying citizens of the earth, are missing out on income tax and national insurance contributions to the tune of some £3.13 billion a year, although in fairness Santa could argue, with some merit, that his considerable production costs are funded entirely from his own resources and should therefore be tax deductible. Operating as he does at a loss, corporation tax revenue cannot be expected; though on the flip side one might expect the annual interest on such extraordinary savings from which the whole operation is financed, to be taxable.

What is also clear is that Santa is pushing to the limit the boundaries of employment law and the working time directive.

What I have not decided, however, is whether the mulled wine, carrot and mince pie that is traditionally left out for him on Christmas Eve by the world’s children can be considered a business perk, and therefore also subject to tax…

Mind you, if Santa enjoys a 125cl glass of wine at each of the 397.1 million homes he visits each Christmas Eve I doubt he cares much either way! At more than 66 million bottles of plonk in the one night, that’s one hell of a hangover to deal with!