The High Cost of Do-It-Yourself Cost Cutting

What's Your Toil Worth?

You can find examples virtually anywhere you look in the economy and in your daily life. And most of them don't work out to be as much in the consumers' favor as my airline example. It's at work at the rental car counter when the company decides to hire one less person to process reservations. The company cuts costs and you wind up waiting in line a little longer.

This kind of do-it-yourself cost cutting isn't limited to the consumer world. Look around you at work. Many of the vendors that your company buys from used to employ salespeople to explain new products, take orders and resolve problems and complaints.

Now, many of those sales have been shifted to the Internet, which sure saves the vendor time and money, but adds some work for the customer. And woe to you if you have a problem.

It's easy to understand the attraction of this kind of do-it-yourself cost cutting to companies that have made all the easy cost reductions and still face pressure to reduce costs. The company saves an easily calculated amount of hard currency and the customer faces a fuzzy and hard-to-calculate increase in the toil-and-trouble cost. How much, for example, is an extra 20 minutes spent waiting in line worth to a customer? Because of their subjectivity, their fuzziness, and their invisibility, none of these toil-and-trouble costs are included in the official inflation numbers.

The Consumer 'Benefit'

But consumers aren't passive patsies in any economic system. This do-it-yourself cost cutting can be a pain in the neck for consumers, so if it didn't offer them something in return they'd protest enough, with their purchasing decisions, to stop the strategy dead in its tracks.

So what do consumers get out of it? A chance to turn "free time" into cash. That's a very attractive deal in an economy where income is growing relatively slowly. According to Mercer Human Resource Consulting, companies expect to increase pay by 3.3% in 2004. That will match the 3.3% raise in 2003. Next year, 2005, is expected to be slightly better, with pay increases projected at 3.5%.