Market conditions drive pricing. I mean, I’m not an economist, but I feel confident in making this statement. So when I dropped a chunk of change on a water heater replacement/installation last year, I didn’t think much of the exorbitant price. They have the skill set, and while I could probably figure it out myself, I would have had to have contended with numerous auxiliary activities beyond the unit itself: draining, plumbing, water, gas, disposal, permits, etc.. Skills and convenience are why contractors exist, but you pay more, obviously. This is why I had calculated the Blue Collar Cost, to set this expectation:
I had landed on a price expectation of:
Estimated Materials Cost * Materials Upcharge * Labor Cost = Final Cost
And where Materials Upcharge = 1.45
And where Labor Cost = 4
Using this, I could predict the cost of a professional solution and compare that to what I was willing to learn and attempt on my own. If the final cost of the professional route didn’t invoke vomiting and weeping on my part, then I’d entertain the idea. It has proven to be somewhat reliable.
So when the water heater needed immediate attention, I made an assumption that the cost was in alignment with this formula (due to a lack of puking and weeping), and so I didn’t shop around. But recently I researched the cost of the unit, out of curiosity, and came to the sudden realization that my calculations were out of date, and more in my favor. Pre-COVID, labor costs appear to have been much higher, and despite the years of companies justifying price hikes due to “supply chain issues”, the product markups have dropped as well. Here are the new coefficients:
Materials Upcharge = 1.34
Labor Cost = 2
I admit, I am surprised. It leaves me to ponder the reasoning. Maybe the labor pool in trades has increased in the last 7 years due to skyrocketing tuition, driving down wages. Maybe COVID beefed up factory production and supply chains in response to the disruptions. Maybe more trades business have opened shop, increasing competition. There’s certainly a litany of speculation that I could dive into, but for now, I’m just happy that the skilled labor and appliances I need are dropping in price.
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–Simon