Managing Your Labor Costs - A Winning Strategy

  • by itradmin - Mon, 02/20/2017 - 14:19

There is nothing so powerful as truth, and often nothing so strange.
- Daniel Webster

Real incomes are rising in the US. The trend is not a straight line, as evidenced by the chart below. The median annual earnings trend (adjusted for inflation) shows that there are periods when the trend will drift sideways, decline, and rise. The pervasive trend since the early 1980s is one of rise. Real American households are bringing in more money even after adjusting for inflation. Politicians can data mine this to their hearts’ content. However, business folks must deal with reality: if you are selling into the economy assuming economic conditions are getter better, not worse, you are more likely to have a winning strategy. If you assume that earnings are going to continue to generally rise until the next Great Depression hits, you would be correct again. Tight labor markets for skilled workers is going to be a hallmark of our economy until we hit that Great Depression. Assume wages are going up. This means a) your labor expenses will go up, and b) consumers will have more money to spend on more stuff. Wrap those two thoughts into your outlook for the next 10 years and will be fundamentally ready to lay a realistic foundation for profit growth.

Use technology and innovative processes to manage your labor costs. Fighting this budget buster all the way through to the Great Depression will only serve you well when the decline comes. Build your brand by knowing your competitive advantage and being in a position to sustain, or grow, your margins. If this sounds impossible, you know you have a lot of work to do. This is the future we all must contend with.