HE THINKS YOU SET HIS WAGE. THE BID SET IT.
Every owner gets this question eventually, usually from somebody good who is about to leave over it. The answer is math, it takes four minutes, and almost nobody in the trade has ever heard it said out loud.
An apprentice is generally paid 60 to 80 percent of a journeyman wage because he produces 60 to 80 percent of a journeyman's output against the standard the job was estimated on. The cost per unit of work comes out close to the same, which is the whole design of the scale. The job was also priced 6 to 12 months before anybody mobilized, at the wage rates that existed then, so the money available for that hour was fixed before the crew list existed.
Nobody in the field is being cheated and nobody in the office is getting rich off the difference. Two numbers were set before either of them walked onto the job: how many hours the work is worth, and what the contract pays.
This post is the conversation with a person. That page is the estimating mechanism underneath it and what to do about it in the contract. Read Labor Rate Escalation, Bid to Build for the complete treatment, worked figures included.
THE JOB WAS PRICED BEFORE HE WAS HIRED.
A commercial package gets estimated 6 to 12 months before the trade sets foot on the site, and longer on phased work. Whatever the wage rates were on the day that estimate went out, those are the rates the contract value carries. The job gets built at next year's rates and paid at last year's.
So when somebody asks why there isn't more in the hour, part of the answer is that the money in that hour was fixed on a date, and the date was before the interview. That isn't a thing an owner chose. It's a thing an owner signed.
THE HOURS CAME FROM A MAN WHO DOESN'T EXIST.
Estimates don't get built on your crew. They get built on a published production standard. In electrical that's the NECA labor unit, which says how long a given installation takes for an average journeyman doing it.
That average journeyman is a construct. He's never late, never learning, never held up by a conflict, and he isn't on your payroll. Every hour in the bid assumes him. When the work gets assigned to somebody running at 70 percent of him, the same scope takes about 1.4 times the hours, and the bid didn't move.
WHY 70 PERCENT PRODUCTION EARNS 70 PERCENT PAY.
Here's the part that sounds harsh until you run it. If an apprentice produces 70 percent of a journeyman's output and gets paid 70 percent of the journeyman's wage, the cost per unit of installed work is about the same either way. That's not a trick. That's the scale working as designed.
It reads as unfair from the field because the hour looks identical from outside. Same truck, same heat, same eight hours. What differs is how much of the task that hour finishes against a standard somebody else wrote, and neither of them was in the room when it was written.
Where it stops cancelling is the person. Sixty to eighty percent is an average across a lot of people, and the averages cancel beautifully. A second year running 60 percent production at 75 percent of the journeyman wage doesn't, and almost nobody finds out, because production is rarely measured per person. That cuts both ways: the apprentice beating the standard is invisible for the same reason, which is the person you can least afford to lose.
Two things do move against the cheaper hour, and neither is the one people reach for. Comp, general liability and payroll taxes all run off payroll dollars, so they fall right along with the wage. A per-head benefit like the health premium doesn't: it's the same dollar figure on either wage, so it takes a bigger bite out of the smaller one.
The other piece nobody prices is supervision. Journeyman hours spent directing an apprentice are hours not installing, charged to the job at the journeyman rate, and the labor unit never included them.
WHAT TO TELL HIM HE CAN DO ABOUT IT.
This is the part worth having ready, because a person who hears only the math hears no. Josh came up through electrical and went from $13.50 an hour to well over $200k in ten years, so this list is his and not a theory.
Beat the standard and ask for the difference. If somebody consistently installs work bid at 300 hours in 260, that's real money the job didn't spend, and it's a reasonable thing to put on the table as a bonus or a rate. Most people never ask because most people have never been told the standard exists.
Go where there's less competition. On runway work, which is prevailing wage and which most shops won't touch, Josh paid electricians $105 an hour on some projects. Specialty scope pays because fewer people will do it.
Work prevailing wage. Public jobs are funded to pay union scale whether the shop is union or not. Or join the union, where the rate is set and the hall finds the next job when yours runs out.
Take the travel work. Per diem plus a premium, because fewer people are willing to be away.
And the long one: get the license. Josh's whole jump came from passing the master exam, which most people don't. A period at a discounted rate is the price of the thing that changes the rate permanently.
WHY THIS CONVERSATION IS WORTH FOUR MINUTES.
The people who leave over pay usually aren't leaving over the number. They're leaving because nobody explained the number, so the only available explanation is that somebody's taking it.
An owner who can walk through the bid date, the labor unit and the production ratio in four minutes turns a grievance into a plan. The same conversation also tells your good people what to do to earn more, which is the cheapest retention you can buy.
And if you can't walk through it, that's worth knowing too. It means the production factor on your own crews has never been measured, and that number is where your labor margin lives.
THE SHORT LIST.
FREQUENTLY ASKED.
