The January 1990 cover story of this magazine, written by me, was titled “The Manpower Crisis.” It featured interviews with apprenticeship recruiters and other industry experts addressing a skilled labor shortage that had already started to rear its head. Demographic and social trends indicated the problem would only worsen in years to come.
It sure did.
In the ensuing 16 years, no other issue has pressed so hard upon PHC contractors as the tight market for skilled labor. PM sponsored a conference last spring, and has devoted countless pages of space in this magazine to the topic. It comes up over and over in conversations at industry gatherings.
These conversations usually go something like this:
Contractor: “It’s so hard to find good plumbers.”
PM reporter: “What do you pay them?”
“Oh, we pay them the going rate.”
Underwhelming Pay: The going rate for skilled plumbers in most markets is the nonunion rate, averaging around $18 an hour at last glance. (This is about the nationwide average, which will vary from region to region and between urban and rural markets.) Add another five or six bucks in benefits.
Union wages and benefits tend to be substantially higher, but the unions are in the minority in most markets and nonexistent in many. They no longer define local trade pay scales except for Davis-Bacon projects.
The vast majority of U.S. plumbers now work nonunion. Working full time, they earn between $35,000-$40,000 a year on average. Overtime premium pay can boost that handsomely, but if you’re a young kid looking at a pipe trades career, you’d be wise to view overtime as a bonus rather than something to count on for mortgage payments. Besides, a steady diet of 50- and 60-hour work weeks leads to burnout. It’s one reason you see so many plumbers switching careers before they reach middle age.
The going rate in most markets isn’t something to get real excited about. Young people can earn about the same amount doing less grueling service work, such as tending bar or waiting tables in a halfway decent restaurant, or in any number of government jobs. This is one reason why so many stay away from the pipe trades.
Econ 101 Rescinded: In watching this labor shortage unfold over the last couple of decades, I’m puzzled as to why the marketplace hasn’t responded as it was predicted to do in the Economics 101 course I took way back in my college days. The textbook said that where labor shortages arise, wages usually go up to entice more people to that field.
Since about the late-1990s, trade wages have been rising a little faster than inflation - in the 3 percent to 5 percent range annually according to the reports I’ve seen - but that’s not enough upsurge to make much difference in supply.
One reason is that trade wages actually declined in inflation-adjusted dollars from about the late-1970s through the mid-1990s. That coincided with a big place from a predominantly union to predominantly nonunion labor force in the pipe trades. Even with respectable pay increases over the last 10 years or so, the buying power of today’s trade wages doesn’t equal that of earlier decades.
With so many PHC contractors tormented by the scarcity of skilled labor, compensation for those jobs ought to be rising a lot faster than it has. Why hasn’t it? My theory has to do with the “hang dog” outlook of so many people within this industry.
Inferiority Complex: A phrase I’ve heard people in our industry speak over and over is, “I’m just a plumber.”
Modesty has a certain charm in a world overpopulated with egomaniacs. At the same time, that just word grates on the nerves. Too many people in this industry have self-esteem issues.
Consider all the ink spilled in these pages over the years by critics of the flat rate pricing practices of some residential service contractors. This may be the only industry in the universe in which business owners complain about competitors who charge too much!
In virtually every other business, competitors who overprice themselves are seen as a blessing to be exploited. Those who get cussed out are the competitors who ruin the market by charging too little.
Our industry’s topsy-turvy thinking has its roots, I think, in an industry-wide inferiority complex. I remember walking out of a Frank Blau seminar years ago after hearing him spread the message that contractors ought to shoot for six-figure incomes for themselves. As the crowd was exiting, I heard one contractor say to a buddy: “Ain’t no contractor in the world worth that kind of money.”
Plumbing contractors constantly complain about their poor image in the eyes of the public. That image will not be corrected until contractors like the one just quoted learn to hold their heads up high.
Leapfrog The Going Rate: People who undervalue themselves will surely undervalue the people who work for them. That’s why it’s unthinkable for many contractors to shatter the going rate for labor in an area.
Usually you can find a few contractors willing to pay a buck or two more an hour when they get really desperate for help. Their pitch appeals to legions of mediocre plumbers who keep hopping from shop to shop for that extra buck an hour. Then work slows down, they get laid off, and they’re back to taking the first job they can find at the going rate.
Ask yourself, how much is the best plumber you know worth compared to all the mediocrities you’ve employed over the years? Think of increased productivity. Think of jobs completed on time with fewer hassles. Think of eliminating rework that has cost you a bundle over the years. Think of happy customers and endless referrals rather than a litany of complaints. Think of some of the mopes you’ve employed over the years that you wouldn’t trust to work in your own home, but whom you’ve inflicted on the public at-large.
Don’t you think someone who can deliver you to the promised land of top-notch professionalism might be worth $5 more per hour? Maybe even $10, or $20?
Or can you not even conceive of paying that much to someone who is, after all, just a plumber?
Steal Your Employees: Now the big question becomes, where do you find people worth $5-, $10- or $20-an-hour more than the run-of-the-mill applicants you get every time you run a classified ad? I know this is going to get me into hot water with a lot of you, but the truth in most cases is that you’ll have to steal them from your competitors.
Face reality, the best people probably already have a job. They are the last ones to get fired or laid off. And they’re probably paid at least a little more than the going rate. If you want them, you’re going to have to pay top dollar to recruit them away from their present employers. You’ll also need to treat them like human beings rather than mere labor units.
A misguided ethic permeates this industry that considers it unethical to “steal” a competitor’s employee. That attitude is full of holes.
The term “stealing” an employee suggests ownership, but ever since President Lincoln’s Emancipation Proclamation in 1863, nobody in this country has held ownership rights over any other human being. We are all free agents, and if you have the wherewithal to treat people better than another employer, you have every right to make them an offer.
I understand that most of you are buddies with some local competitors, and I’m not suggesting you stab your friends in the back. If you decide that a personal relationship is more important than your business interest, that’s OK. Just understand that this does not make it an ethical or moral issue.
In most cases, employers invoke friendship, ethics or morality to disguise the real reason they resist hiring people away from competitors. It’s the fear that someone may do the same to them. Nobody wants to get into an employee bidding war, so an unspoken rule evolves that holds it to be unethical to go after a competitor’s people.
An odd thing about this rule is that it only seems to apply to direct competitors. If a contractor hires someone away from a fellow contractor in a different market, nobody looks at it as doing anything wrong. It’s just considered somehow wrong to hire someone away from a company that’s chasing the same work as you do. Can anyone find any logic in this?
The way to ensure that nobody does it to you is simply to treat your employees better than your competitors. To do that, you may need to shatter the going rate.
I believe that the laws of economics I was taught way back in Econ 101 still apply. If employing top-notch plumbers is important to your business, pay them whatever it takes to come to work for you.
And stop worrying about competitors who charge too much!