This month, DWM reported that prices for materials used to make windows and doors were on the rise last month. The PPI for flat glass was up 1.3 percent in December from that same month in 2016. This increase came on the heels of a 0.2 percent increase in window and door hardware in November, which was 1.1 percent higher than 2016 prices. Plastic materials were up 1.8 percent that month vs the previous year.

Still, looking at the overall scheme of things, these increases are quite modest. When it comes to managing cost of goods sold, the real story this year and into the foreseeable future will be the rising cost of labor. The nearly universal story I hear from my window and door customers is the cost of maintaining a stable labor force. Most of my customers are able to maintain a segment of their work force which is stable, experienced and knowledgeable.

Many of these workers are Baby Boomers, born between 1946-1964.  The concern here is many of these people are retiring or are nearing retirement age.

“When they walk out the door for the last time, a whole lot of knowledge goes out the door with them – never to return,” says one concerned plant manager. Behind them are the Generation X (Baby Bust) workers, born in 1965-1979 and the Xennials, with birth dates between 1975 – 1985. Many of them also have been around for a number of years and represent another portion of a knowledgeable and somewhat stable workforce, yet many are tempted by higher paying jobs outside of the window and door industry and end up leaving. Then there are the Millennials, those born between 1980 -1994.

The Millennials bring two concerning trends to the table – the first of these concerns is drugs. A recent study found that more than 12 percent of Millennials abuse prescription painkillers vs only 8 percent for the Boomers and Gen Xers. (For more, read this article.) Indeed, one window company I know released a third of its workforce in 2016 on a single day during a plantwide random drug test. During the 12 months that followed, the same company hired 250 new workers, retaining only 50 of these people beyond 12 months.

The second concern with Millennials is negative population growth. Millennials are having fewer babies than the generations before them. They came of age during the severe economic crises of 2008. Many of them saw their parents lose their jobs and home, and it scared them. The result is that they are reluctant to get married, start families and buy homes. Many of them end up living with their parents well into their 30s. The result is that deaths are outpacing births for Millennials and we see a negative population growth among them. The most recent data is shown here in a study published by indy100.

So, what does this mean for the window and door industry? For one, it means we may have to pull some of the retired folks out of retirement as consultants to train the younger generations, especially since employee turnover is so high. It also means that we may have to raise wages in order to attract a different segment of the available workforce. Perhaps higher wages will result in lower turnover. I know one window company that raised its wage rate $3 per hour in 2018 in an effort to keep people on board. “There has to be balance between higher wage rates vs. the costs associated with continuously hiring new people and training them,” said the company’s HR manager.

The other factor that will come into play in the future for window and door companies will be the advantages of investing in automation. As I said in last month’s blog, the new tax code represents a significant opportunity for corporations to enjoy higher profitability rates. A portion of these profits can be used to re-invest in the company in the form of automated machinery, which can reduce the dependency on labor while improving overall efficiency and quality. Another factor in the new tax code that will make investment in automation even more desirable is that corporations will now be able to fully and immediately deduct the cost of equipment as opposed to spreading the depreciation of these equipment costs over a number of years. A recent article in Forbes explains how.

So how will your company battle the ongoing issues related to labor availability?  Be ready to take advantage of the positive factors that are looming on the horizon.

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