Why is everything related to construction so expensive today?
Homeowners have expressed “sticker shock” when pricing any maintenance or new construction item.
When the pandemic hit, manufacturers and product installers alike were surprised to see a major uptick in consumer purchases related to home improvement.
This led to several material cost escalations and if there is one thing The Guys have learned after nearly 90 combined years in the industry, it is this: when material prices go up, they rarely come back down.
Combine this dynamic with the many severe weather events we have experienced that caused major damage to homes, infrastructure, and commercial establishments and created claims situations for insurers.
Due primarily to these issues, the cost of insuring a business today is much higher than it was only a few years ago.
But the one issue that has really put the industry in a bind is the scarcity of good people to employ. Many high school programs have discontinued their entry-level and training programs in skilled trades that the industry once relied on as a feeder for new hires.
Good companies quickly came to realize they had to provide not just a job but a career that supported growth and advancement.
What this means financially includes the cost of ongoing training in both soft and hard skills, providing a benefits package that includes retirement savings and medical care, and offering annual compensation that allows employees to purchase homes, raise families, and take paid vacations.
The average employee works around two thousand hours a year. If you consider an hourly wage of $25 an hour for starters, you quickly realize that direct pay alone costs a company $50,000. This does not account for governmental contributions, liability insurance, medical costs, training, retirement, or non-productive time like driving and vacations, which are part of the compensation.
Such an employee can easily cost a company three to four times that hourly wage, especially when you realize construction is a production industry; in other words, a company has to actually produce something in order to create cash flow.
So, the conundrum employers face is developing a company culture that encourages people to build careers “in-house” and not use their employment as a stepping stone to other opportunities.
One of the methods firms have used for years is to provide cash bonuses as incentives for work well done or work completed on time.
But cash is not a good long-term incentive, as we have learned from experience. For example, if I give you a dollar-an-hour raise, you quickly compute that equates to $160,000 a month, just enough to cover the payment on a new fishing boat you desire.
No sooner have you purchased the boat, but you now have several unanticipated additional expenses from licensing to insurance, fuel, dockage and other necessities. You need another raise!
But companies cannot keep raising the pay. We learned this in the last recession when highly compensated employees were the first we had to let go because the volume of work and the dollars generated by it dropped precipitously.
What employers have discovered is a better strategy. Good people want to work where they feel appreciated. They want to work in a predictable setting where everyone knows the rules and what is expected of them. They want to work in an environment where they can advance based on merit and where they can work safely and take pride in their daily accomplishments.
One owner told of a situation where an employee went above and beyond to thrill a customer. Being the new owner of a motorcycle, the worker was thrilled to receive a high-quality leather jacket at a company meeting as a reward. The jacket lasted for years as a constant reminder of his owner’s gratitude while costing far less than a raise.
This presents another lesson for employers. If you are going to purchase and distribute company-branded clothing or gear, have it professionally designed so people are proud to wear it.
Another owner with a largely male workforce sponsored an annual dinner where spouses were encouraged to attend. As part of the scheduled events, there was a genuine thanks and recognition of the spouse and the sacrifice they made, accompanied by an envelope given to them with enough cash to “buy themselves something nice.”
Yet another employer shared with us his notion of recognizing good people. He would annually award workers with trips that included the cost of their families. The memories a family creates on such a journey last far longer than an hourly raise and encourage familial participation that often overlaps with the business culture.
Yes, quality work does cost a lot today, but the price is not going down. If anything, that new roof or water heater will be even more expensive next year. Make certain you protect that investment by only working with Pros you can trust. Professionals like those you can find every day at Insideoutsideguys.com.
Listen to the Inside Outside Guys every Saturday and Sunday on AM 760-WJR from 10 a.m.-noon or contact us at insideoutsideguys.com.
This article originally appeared on The Detroit News: Inside Outside Guys: Why good employees make home projects more costly
Reporting by Ken Calverley and Chuck Breidenstein, The Inside Outside Guys / The Detroit News
USA TODAY Network via Reuters Connect
