Last week, the US government released the latest inflation statistics for February.
From February of last year, to February of this year, the Consumer Price Index (CPI) rose 1.7% nationwide. Some regions were higher, some were lower. (Check out the table below for more detail.)
So what is inflation exactly? ....
Inflation is the general increase in price levels of the things we consumers use everyday--food, clothing, rent, utilities, etc.
Inflation also reduces your purchasing power, making your dollars worth less and less over time. In other words, what you could buy for $50 ten years ago now costs over $58 today. For the same thing.
How Does This Affect Labor Rates?
Your labor rates work the same way. If you charged $50 / hour ten years ago, then you would charge $58 today just to keep up with inflation. That's not a raise, that's just to stay even! Because everything else around you is increasing in price too.
Insurance companies raise their auto insurance premiums at much higher rates than inflation, while autobody labor rates barely keep up. (See chart below.)
To see what labor rate you need today to keep up with inflation, from what you were paid 10 or 20 years ago, you'll need an inflation calculator. We think the best one comes with NumberNerd (one of the modules included with our PowerPak subscription), because it is specifically designed for the auto body industry. But don't take our word for it. See for yourself! Request a Free Demo and we'll show you, along with LaborRateHero and BillableGenie.
Because your business costs very well may be increasing at rates higher than inflation, NABR recommends that you think about updating your labor rates with inflation as a minimum requirement, not as a long-term solution to your labor rates challenges.
And remember that small things add up to big things. So even making small changes in your labor rate proactively, to keep up with or get ahead of inflation, can yield big results in your revenue and profits.
Anytime you choose to change your posted rate, please report those new rates to us by completing a new Labor Rate Survey.
Check out the summary table and chart below for a closer look at inflation at work.
Information compiled by: National AutoBody Research
Data source: US Department of Labor Statistics
Red line shows motor vehicle insurance premiums. 252% increase
Blue line shows motor vehicle body repair (total bill). 167% increase*
Black line shows Consumer Price Index (CPI). 121% increase
*Note that the blue auto body line shows the total severity. This line is not labor rates, because the government does not measure that; they measures total repair cost. The increase in cost over time is driven more by cost of parts. Labor rates have remained closer to inflation.
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Sam Valenzuela is the President of National AutoBody Research.