The Honorable Alan R. Greenspan
Chairman, Federal Reserve Board
Dear Mr. Greenspan: On behalf of the mechanical contracting industry of America, I wish to applaud you and your colleagues for your magnificent stewardship of the American economy and convey to you this industry's continuing support of your efforts to keep inflation at bay. I doubt you could find any other group of people in America more devoted to your cause.
You'll be happy to know that despite a skilled labor shortage, the likes of which have not been seen since the last World War, wage rates for pipe trades workers have barely kept pace with what little inflation we've seen in recent years. Annual increases between 3 percent to 4 percent have been the norm in union agreements, and while nonunion plumbers and fitters have seen their pay edge up about a percentage point more, they never had much buying power to begin with. Other businesses may behave irresponsibly with regard to compensating hired help, but you certainly can't point the finger of blame at this industry.
A trained economist such as yourself might well ask, why is that? After all, it seems to contradict economic law for wages to merely hiccup in response to demand that churns like a belly filled with jalapeEos.
The secret, Mr. Chairman, is that our industry is all about preventive maintenance, literally and figuratively. Mechanical contractors keep worker wages steady by preventing the buildup of excess cash. For example, take a look at the first-quarter financial performance of three of the largest public companies in the industry:
- Encompass Services - Sales $966.5 million, net income $14 million (1.4%).
- Emcor - Sales $741.5 million, net income $4.9 million (0.67%).
- Comfort Systems - Sales $362.6 million, net income $4 million (1.1%).
True, not every mechanical contractor is so intent on reducing inflationary pressures. Some of them manage to generate windfall profits ranging between 5 percent and 10 percent of revenues. But I assure you such reckless behavior is well outside of the industry's mainstream, and enormous peer pressure constantly is at work to bring these few back to the pack.
In closing, I would like to issue a plea on behalf of the patriotic mechanical contractors who read our magazine.
Mr. Chairman, I'd be the last to tell you how to do your job. Continue as you will, using your power to restrain all those spendthrift dot-coms and high tech firms from throwing a monkey wrench into our nation's finely tuned economic engine. But please be aware that while rising interest rates mean little to those new economy cowboys, each tick upward threatens to derail the construction boom that is the source of our industry's penurious profits. Our readers are economic soldiers who have valiantly bled for their country. Please don't jeopardize their survival by triggering a new all-out war for work.
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