Why Do Prices Go Up During Inflation?

  • June 3, 2022
  • 3 min read

In today’s world, it’s not uncommon to witness a steady rise in prices for various goods and services. While many factors contribute to this trend, one significant aspect often overlooked is the escalating costs associated with skilled labor. In this blog post, we’ll delve into a specific example from the automotive industry to shed light on how the retention of technicians, the backbone of vehicle repair services, plays a pivotal role in the surge of service costs.

Unpacking the Automotive Dilemma

The automotive industry, a cornerstone of modern society, relies heavily on skilled professionals known as technicians or, more colloquially, mechanics. These individuals are the linchpin in dealership service departments, entrusted with the crucial task of repairing vehicles, especially those that have been in collisions.

The Technician Conundrum

Recent investigations, including interviews with dealership service managers, have highlighted the growing challenges in retaining these indispensable automotive technicians. As repair rates for vehicles soar, so do insurance premiums, both directly influenced by the rising costs associated with technicians.

The Value of Technicians

Technicians are more than just grease-stained hands under the hood; they are the single most valuable asset to a dealership. Surprisingly, their significance surpasses even that of car salespeople and managers combined. To underscore this point, a compelling research finding reveals that the loss of just one technician can cost a dealership a staggering $172,000. This figure accounts for lost production revenue, the expenses involved in finding a replacement, and the impact on service prices.

The Widening Talent Gap

To compound the issue, the industry is grappling with a shortage of technicians. With approximately 16,000 dealerships in the U.S., there is a substantial deficit of 50,000 technicians. This scarcity not only intensifies the competition for skilled professionals but also contributes to the overall increase in service costs.

Lucrative Career Opportunities

An interesting side note emerges from this dilemma. For those contemplating a career change, automotive technicians are in high demand. The pay rates can be lucrative, reaching as high as $60-$80 per hour, especially for specialized technicians working on diesel engines or high-end vehicles. Additionally, the job often comes with enticing perks such as 401(k) plans, insurance coverage, and inclusive training.

Beyond the Auto Industry

While the automotive industry serves as a poignant example, the ripple effect extends far beyond. Manufacturing plants, responsible for producing a myriad of goods, also face the challenge of securing highly skilled workers. This challenge, combined with the increased costs of materials, fuels, groceries, and production-related components, contributes to the broader spectrum of inflation.

A Glimpse into the Future

As we navigate through these economic complexities, it becomes evident that the cost of skilled labor is a key driver behind the surge in service costs. Whether in the automotive sector or beyond, understanding the intricate interplay between labor expenses and service prices provides valuable insights into the current state of inflation and its foreseeable trajectory.

The next time you question why prices seem to be on an upward trajectory, remember that the hands that fix, build, and maintain are playing a significant role in shaping the economy of today and tomorrow.

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