Now that we have become accustomed to rapidly rising gas prices the oil industry knows that they have us where they want us. Ironically, at the moment there is no shortage of supply, nor is there a heavy seasonal demand. Oil companies are able to charge higher prices in the overseas markets and so they demand higher prices here. The oil company profits are secure but the rest of us are rapidly sinking into financial quicksand as we see everything made of petroleum or transported by it increase in price.
Rising gas prices affect the small contractor because the public becomes cautious in spending money for services that they otherwise would consider essential. Many begin to fear that their savings, what little they may have in an economic recession, will dwindle or vanish completely. So they begin paring their expenses to the bone, letting the faucet drip and masking the crack in the bedroom window with duct tape.
Service contractors are hit from two directions, less work and rising costs. The phone rings less often and even when it does the public often now claims poverty and demands the lowest price possible. No one can blame them. The contractor travels from job to job and the rising cost of fuel adds to the cost of the work. Not only does the cost of travel increase but the materials to do the job cost more; someone has to pay the additional freight and that gets handed down to the contractor as higher prices. Seeing profits fall and prices raise there is no choice for the contractor except to raise prices to make up the difference in income.
This is a vicious circle. Left unchecked this cycle leads to less income for nearly everyone with the exception of the oil companies, who continue to profit during this downturn. It also leads to fewer jobs.
As a small business owner the best that I can do, the best that any contractor can do, is to try to absorb the increased costs without passing them on to my customers. This is only an interim solution. No one can face rising costs and diminishing returns for long without finally raising their own prices. It would be financial suicide to continue to absorb these increases. Keeping prices low is not wholly altruistic. Since the public is pinching pennies, contractors who raise prices quickly may find themselves at home, trying to think of new ways to drum up customers or waxing political, instead of working.
The employees of contractors are suffering, too. Many contractors have had to scale back and reduce the size of their workforce. Those unemployed plumbers, carpenters, and electricians are grabbing work where they can, acting as odd jobbers. There is no question that they can do the job for less. They do not have the overhead of an established business. If they have no contractor’s license they are not paying worker’s compensation, business insurance, or an accountant. They are not like the greedy politicians handing out entitlements like candy to gain votes or the corporations who will do nearly anything to increase their profits. They are trying to feed their families. They are trying to survive.
With the economy in such a muddle what should the concerned consumer do when their water heater begins leaking or water starts leaking from the slab in their kitchen? Now more than ever you should look to a licensed, bonded contractor with an excellent track record of service. If they have been around for decades then they have been through economic downturns before and have survival skills. It is a good bet that they will not want to lose their contractor’s license and that they want to leave their bond untouched. Turn to the established business for help. When these businesses see their workload increase they will begin hiring again. That’s the way to end the vicious cycle and to get the tradespeople back off the unemployment line.
Americans in bygone days stood together in difficult economic times and we can do it again. By supporting established businesses and calling on them for our service needs we can do our part to stem the tide of unemployment and protect our own investments at the same time. It is a simple principle. When small businesses thrive the engine of capitalism starts moving, employment rises, cash starts flowing and the consumer starts buying again. That’s always been the key to our economy and the American way.
Gary R. Tanner
Owner – Town and Country Plumbing