PART 1: You Pay For What You Get

The Green Industry at large is not prepared for major labor cost increases. Is your company?

If a fast food worker commanded $15/hour to assemble Big Macs or Whoppers, what kind of wage should a guy earn who is building retaining walls, repairing irrigation systems, operating lawn equipment or repairing that equipment when it requires service?

I started to really think about that earlier this spring when the mainstream news media began reporting on the fast food-worker strikes happening all over the country. What if landscaping workers suddenly commanded a 30% pay raise?

HYPOTHETICAL SCENARIO – 10 employees working 40 hours/week for 35 weeks making an extra $3 per hour = $42,000 in additional labor costs. If this company was doing $800,000 in annual revenue at a 7% net profit margin, three-quarters of the company's annual profits would be wiped out, leaving it with a net profit margin of just under 2%.

Is 2% acceptable to you? Is making a 2% profit why you risk so much in owning and operating your own business? If not, you know what you'd need to do to offset this kind of labor-cost increase: Either find significant overhead to cut (good luck) or raise your prices (good luck).

We'd all like to live in a society where we all have high-paying jobs, free health care, handsome pension plans, cheap gasoline, etc. But something has to give. Someone has to help pay for it. If we want to pay fast food workers $15/hour, we better be ready to pay a lot more for our Big Macs and Whoppers. And if we want to pay guys $15 or $20/hour to run string trimmers and spread mulch, we best be prepared to pay more for those services too.

The problem is that most consumers are not prepared to pay more. The other problem is that, generally speaking, the Green Industry is not prepared to even ask for more. Remember what happened when things tightened up in 2008-9? Pricing collapsed in this industry. If economic conditions tighten up again and landscape companies are congruently faced with sharply rising labor costs, something's going to have to give.

"Fair wage" champions and, unfortunately, unsuspecting consumers, are going to realize that they have to pay for what they get. In the wake of rising labor costs, that's either going to be higher prices for the same quality, or the same prices for fast food-like quality. If and when the Green Industry is ever faced with this dilemma, I can only hope that it will have figured out how to respond. As of right now, it hasn't.