Miscellaneous RamblingsWhy do thing cost so darn much?

June 15, 2016by Jerald Sargent0

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I was reading an article about the high cost of things the other day, as a business owner I think i have something to add. No matter how you feel about minimum wage laws, taxes, regulations and technology these and more play a role, sometimes a huge role in the final cost of goods and services.

As a restaurant owner for more than two decades and now as a general contractor the cost of labor was and continues to be one of the larger costs of doing business and without exception these are passed directly to the consumer. If you want a sixteen year old dish-washer to make $15 an hour that’s fine as long as you understand YOU are paying for it, not the owner or the shareholder.

In the restaurant business especially, labor is a huge expense in fact it is the highest cost in many restaurants even more than the food. As a result any increase is a big deal so the question as a country is this; do you want more or less employment? it really is that simple, higher wages result in fewer jobs because it pushes marginal businesses out of business. eventually you are left with fewer but larger restaurants open. Chain restaurants are able to outlast smaller independents so the long term trend will be more chains and restaurants that can take advantage of self ordering kiosks and automated food production stations such as fast food restaurants  to minimize labor cost increases.

In the construction industry you find more prefab construction than ever, from pre-made trusses to engineered wood floors there is a push for speed to lower the labor portion of construction. In my Slabjacking business polyurethane is quickly replacing mudjacking due in part to the faster pace in which jobs can be completed. Where mudjacking is a slow laborious production, polymer injection is a fast and relatively sanitary process. Two jobs a day verses four so while the material costs are much higher the labor costs are half as much.

As the national debates continues it is important to realize like most things there isn’t a cut and dry argument on either side, higher wages/lower employment, more regulation/higher cost, higher taxes/greater costs and/or higher evasion rates.

When it comes to a concrete repair business like mine it is especially important to control labor costs. Replacing concrete is expensive not because concrete is expensive, it’s cheap, it’s the three guys or more it takes to place and finish the concrete that causes that small hundred square feet of concrete to cost twelve hundred dollars. We can repair it for much less in large part due to the much lower labor cost associated with raising verses replacing concrete.

As a business owner I see the advantages of less regulation, less taxation. I work across state lines and some states are much more business friendly than others, does that keep me out of more difficult states? Yes, or at least much more cautious entering those markets. Business is risky enough without our elected officials ignorantly working against job creation. Having thirty different taxing districts, thirty business licenses, issues with licensing trucks, trailers and compliance with trucking regulations is not helpful to business creation and that’s before one employee is hired. Add to that all the issues and costs relating to employing workers with the added state and federal oversight and you start to understand why some employers choose to skirt the law or use temp agencies to staff their operation. It’s a complex issue worthy of a robust debate rather than the partisan fight it has become.

Just my brief thoughts.

Jerald Sargent




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