From Where I Stand — I want a raise.
There is no more empowering and terrifying phrase an employer can hear. Pay raises can be a sticky subject for most employers. There is often a disconnect between employers and employees when it comes to this annual conversation on compensation. Employers are privy to more information regarding the health of the business. On the flipside, employees have a much deeper understanding and awareness of the value they bring to an organization. For these differences, most companies do what most people do when faced with a prickly and contentious issue, ignore it for as long as possible. For most employers, in non-union shops, wages and salaries seem to exist in a vacuum. They are established through a series of tiny conversations and negotiations held at millions of businesses across the country. Some employers consult salary surveys or websites such as Payscale, but, for the most part, percentage increases are usually tethered to the profitability of the business coupled with previous salary history. In order to really understand wages, one needs to take a step back. Then thousands of steps up to the tallest mountain peak to truly see the patterns and trends that exist at the 35,000 foot level. Wages are established in those small conversations, but each is like a pebble thrown into a pond. It seems like a minor gesture at the time, but its ripple effects are profound. Each industry would be that pond and the thousands of conversations about salaries that happen every year are like dump truck after dump truck filled with pea gravel. Even as Executive Director of the ILCA, my scope is limited. We do not publish an Illinois-centric salary survey of the landscape industry although one is sorely needed. We rely on an even bigger organization, the National Association for Landscape Professionals (NALP) to provide us with this data. NALP publishes a comprehensive salary survey entitled the Employee Compensation Report for the Green Industry. The newest version was just released. In this column, I will compare the salary data from the 2006 and 2016 versions. I noticed some fascinating patterns that, when viewed through the lens of macroeconomics, explain a lot about where we have been, but tell us more about where we are headed. First, the basics. The 2006 version reviewed the salary information of 340 firms, where the current version analyzes 215 companies. These firms participated in a voluntary survey and I am sure, due to NALP’s membership, they captured data from many of the same firms for each survey. The 2016 version contains a nice executive summary crafted from IBISWorld market data. IBISWorld is a market intelligence firm that analyzes industry and consumer data across thousands of industries around the world. The 2016 report shows there are 474,237 landscape and lawn care companies across the country. The industry employs
969,257 people. The industry is worth $78 billion and has an annual growth rate of 3.9%. The report also says that landscaping will benefit from steady per capita income growth in the residential market. This growth will push more consumers to outsource their landscaping services. In addition, continued economic growth will also boost commercial expansion pushing more dollars towards commercial, retail, and apartment and condominium complexes. In short, the landscape market has entered its next growth cycle. Landscaping is highly labor intensive. Although specialized equipment exists, it has often been used to augment, but not replace human jobs. The amount of physical workers needed is the reason landscape companies labor costs, including subs, was 40.2% in 2016. Given that almost half of the landscape industry’s revenue goes towards labor, fluctuations in labor costs have an enormous impact on economic prosperity. So, what does the new data indicate? From 2006 to 2016, wages, of course, went up. This is true of almost every profession across all industries. Even during a recession, wages will eventually creep up over a 10-year period. The question then becomes, how far did they go up in relation to inflation? Also, what does the future hold for wage increases? I reviewed the wage data for seven positions using the 2006 and 2016 data sets that are included in the report; Project Manager, Production Manager, Operations Manager, Foreman II, Foreman I, Crew Person II, and Crew Person I. (see table) Both reports reviewed hourly rates for “beginning” and “experienced” employees. The report also reviewed beginning and experienced annual compensation, as well. For brevity, let’s look at the experienced hourly rates. That will remove typical, but difficult to predict variables like overtime and weather delays that are found in the annual compensation numbers. The table clearly shows a mixed bag. For the most part, the news is positive for landscape employees as most positions were well above the inflationary increases for that 10-year span. Only two positions fell below the inflation adjusted levels, but not by statistically significant levels. This does match the anecdotal data that I heard for the post-recession labor market. Many companies were trying to either buy labor by raising labor rates or they were reacting to concerns they could lose employees to other firms and raised wages accordingly. A cynic could read this information and draw a different conclusion. It would’ve been much easier to explain the labor crunch if the 2016 real wages were well below the inflation adjusted wages. Then, it would be easier to pinpoint the culprit and raise wages above the inflation line to attract more workers. Quite honestly, I was hoping that would’ve been the case. It would’ve been a “Well, here’s your problem” moment that would be easier to remedy than deep, structural change. The 2006-2016 data has a huge black hole for more than half of the years profiled due to the recession. In all likelihood, that held wages in
An Honest Day’s Wage
The Landscape Contractor January 2018
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