Tuesday, 29 July 2014 12:48

How Average Labor Rates Have Kept Up With Inflation Varies by Market

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Recent government data (see paragraph below) show that for a 5-year period ending early this year, the overall cost of autobody repair barely exceeded inflation over that same period (with the price of auto insurance rising even more during that period).

But have shop labor rates—excluding the parts and other costs that make up overall repair costs—kept up with inflation? Some shops say there has been no change in the “prevailing competitive labor rate” in their market for three, four or even five years.


Based on data from CCC Information Services, comparing national labor rate averages in 2013 to those averages in 2006 shows that for the most part, labor rates (when looked at on a national basis) aren’t keeping up with the overall U.S. inflation rate for that time period.
Take the national average rate for mechanical labor in the U.S., for example. In 2006, the average mechanical labor rate was $67.56, according to CCC; by last year, the average had increased about 14 percent to $77.04. But that’s about $1 less than the average would need to have been last year just to equal overall inflation since 2006.


Body and paint rates increased about 11.4 percent over the period, compared to an overall inflation rate of 15.6 percent; that meant the national average body rate for last year ($46.12) was about $1.74 less than it would have been if body labor rates had kept up with inflation since 2006.
The news was even worse for frame labor rates, which rose just 10.2 percent over the period, making last year’s national average ($52.43) more than $2.50 lower than it would have been if it had kept up with inflation.


If there was any initially-positive news for shops in terms of rates versus inflation it involved paint materials. The national average rate for paint materials last year was $26.64, according to CCC. That’s up about 19 percent from 2006, making it about $1 higher last year than it would have been had it only kept up with inflation. But most shops say their costs for materials has outpaced inflation by even more than that from 2006 to 2013.


Market-by-market comparisons
Labor rates continue to vary widely market by market throughout the United States, so have rates in some markets kept up better with inflation than they have in other markets?


Similar comparisons to inflation can be done using historical labor rate data provided by shops. One shop in Northern Virginia, for example, reported a body labor rate of $28 in 1999; the shop owner felt certain that an increase that averaged about $1 year (to the current labor rate of $44) couldn’t have kept up with inflation. But in fact, if adjusted only for inflation since 1999, the shop’s labor rate today would be about $39.84, more than $4 less than the shop’s current rate.


The news was less good for a Portland, Ore., shop whose hourly body and paint labor rate has risen from $40 in 2002 to $48 this year; adjusted solely for inflation since 2002, that shop’s rate would be $52.71.


That shop’s paint materials rate has just kept up with inflation (though again, paint prices have likely outpaced inflation), but its current frame rate ($52) is $7 shy of keeping up with inflation since 2002, and its mechanical rate ($75) is $10 less than it would be if adjusted just for inflation.
To the south of Portland, the current mechanical labor rate ($62) reported by a shop in the Eugene-Springfield area in Oregon is actually running ahead of inflation over the 15-year period. But the other labor rates in the market haven’t kept up with inflation. Frame labor was $44 per hour in 1999, meaning it should be $62 now to have kept up with inflation; the shop reported a $55 frame labor rate currently. The shop’s current $50 body and paint labor rate is about $4 less than it should be if it had been adjusted only by the overall inflation rate since 1999.


Rates reported by an Iowa shop in the Quad Cities area are a bit closer to keeping up with inflation since 1999. At $58 per hour, the current body and paint labor rate is $1.77 lower than had it risen 42.3 percent (as overall inflation has) from what it was in 1999. Frame labor rates are also about $2 behind, but the paint materials rate has actually risen 50 percent since 1999, putting it almost $2 higher than it would be based solely on inflation.
A shop outside of Newark, N.J., had body and paint labor rate data back to 1989; with inflation, the $30 labor rate in 1989 would have grown to more than $57 today, which is about $10 more than most insurers there are paying today, according to the shop.


A shop in a smaller community in north central Pennsylvania had data showing its body and frame labor rate is up 4.3 percent since 2011, and its frame and mechanical rate is up 3.8 percent; all of that falls short of the 5.4 percent rate of overall inflation since 2011.

Check your own rates
Want to do your own comparison? All it takes is historical information about your labor rates going back three, five, 10, 20 or even 30 years. Gather that data and then find one of the many online “inflation calculators” (for example, www.usinflationcalculator.com). There you can indicate the oldest year for which you have data, enter one of your labor rates for that year, and hit calculate. The website will show you what the inflation rate has been since that year, and what you labor rate would be today if it had been adjusted based only on overall inflation in the United States.

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