During the 2022 International Roofing Expo,® the most common questions I was asked were about inflation and rising material and labor costs. Sadly, there are no good answers. I suppose if I had a better handle on what the current administration is going to do or be allowed to do by Congress, the answer would come more easily. Unfortunately, it is still a mystery.
Yet the recent past certainly offers some clues. President Biden’s Build Back Better proposal came to a screeching halt in December 2021 when Sen. Joe Manchin (D-W.Va.) finally admitted what we already knew: He would not support it. Manchin is from a conservative state that in the most recent presidential election went to Donald Trump with more than 68% of the vote. There was never a chance he was going to support Build Back Better knowing another $1.75 trillion would only serve to fan the inferno of existing inflation.
Inflation, from a government perspective, creates a “dog chasing its tail” phenomenon because it triggers automatic adjustments in entitlement spending that correlate to the previous year’s inflation.
For example, Social Security payments, welfare payments, veterans benefits, federal retirement programs, etc., all have automatic cost-of-living increases. But it gets more insidious. Federal spending, even on the discretionary side, often comes with an automatic right to refund with increases. Everything gets more expensive, which requires even more deficit spending and the subsequent demand from voters and politicians alike to provide relief in the form of direct payments. And the cycle continues.
Phil Gramm and Mike Solon wrote about this very idea in an op-ed published in The Wall Street Journal. They state: “In virtually every case where [Secretary of the Treasury] Yellen claims that Build Back Better will expand employment and production, experience and logic suggest otherwise. Almost 43% of the first year’s cost of the bill is funding the expanded child tax credit with no work requirement. A quartet of University of Chicago economists have concluded the expanded child tax credit would reduce labor supply by 1.5 million workers, just as soaring pandemic transfer payments resulted in 2.5 million workers dropping out of the labor market. More than 20% of the bill’s first-year cost, $52 billion, would fund tax cuts for rich people in high-tax states, not exactly a supply chain fixer.”
They continue: “At some point, the Biden administration and Congress must accept a corollary to Adam Smith’s truism: ‘It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner but from their regard to their own interest.’ When government gives people the things they normally must work to be able to buy, many will butcher, brew and bake less. This is the lesson of the War on Poverty. When means-tested transfer payments rose dramatically, the share of prime work-age people in the bottom 20% of American income earners who actually worked fell to 36% from 68% over the ensuing 50 years. All analysis of the labor component of the supply chain must recognize that if the government gives people things they typically get by working, many people will quit working.”
I think it’s normal to look at the increased costs of the roofing materials you purchase and struggle trying to explain them. Yet every raw material supplier, manufacturer, trucking company and distributor are facing the same labor pressures as contractors. Everyone is working hard to do more with less labor.
Inflation is in no small part a result of the constriction of labor. I have spoken about this for the past five years. I focused mostly on demographics, but government transfer payments have brought an already difficult labor situation more clearly into focus. That’s why NRCA has a laser-driven emphasis on workforce issues. As legal labor becomes more difficult to find, NRCA has the certification, training and educational tools to put you in the best possible place to capture more workers. Our lobbying efforts in Washington, D.C., have targeted career and technical education dollars and pragmatic, thoughtful immigration reform.
You are not helpless in this. You can take part in Roofing Day in D.C. 2022 April 5-6, the industry’s national fly-in event, to educate legislators about issues of importance to your business. You can separate your company from the competition by having NRCA ProCertified® crews that we believe will be more valuable in the marketplace. People are willing to pay more for the assurance of skilled roofing crews, and you can make more money with fewer workers using this program.
Inflation is here to stay until the next recession corrects it. Until then, I humbly suggest you partner with us. The programs NRCA developed have been put in place and built by roofing contractors just like you. You can benefit from their work. It’s there for the taking.
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