Should engineers price gouge 14

[2dye4]

After any hurricane in the US the price of lumber
immediately goes up even for inventory that was on
the shelf before the storm. The price rises can be
dramatic 3X or more. The reason of course is the sudden
need for repair lumber. This practice is widely supported
by the free marketers and the point is made that this
price gouging helps ration a crucial resource in times
of need. Makes sure people are building dog houses with
plywood needed for roofs.

Consider a scenario where the engineering outsourcing
suddenly is interupted by a dramic event or events.
Say a bird-flu pandemic or global war.

Is it ethical for us engineers to demand the market price
for our services in time of a shortage brought on by
international circumstances??

Maybe we ask 350000 US dollars per year for a job that
previosly paid 60000 ??

 

[SnTMan]

Not that I believe it would ever happen, but I would not object to getting a little more money out of the business types who are flat cleaning up on globalization.

I would not consider it gouging, I would consider it the market at work.

That'll be the day...

Mike

 

[ziggi]

It's basic supply and demand, I say go for it. Price gouging is just capitalisation on market changes, basically its a way to maintain market efficiency (making sure that those who want it the most will buy it), kinda like ticket scalping. "When the streets run red with blood, buy property."

The BS about making sure its not used for a dog house is just a PR scam to quell any complaints.

 

[BJC]

So when there is a surplus of engineers should we do the $60,000 job for $ 20,000?
Read the following page.

http://www.aflcio.org/corporatewatch/paywatch/

I am sure some of those people will appreciate your willingness to work for a fair wage so they can pocket more.
Someday when your kids are struggling through the local state college ( hopefully not in engineering) their kids will be driving their sports cars off to some ivy league school.
If someone is willing to pay $350,000 for the job then it's worth it ot them.
I would guess a lot of engineers don't take basic econ.

 

[SnTMan]

BJC, I don't think I can stand to look at that link.

Mike

 

[Jabberwocky]

I think you have a point, in principle. Just like the free market works, in principle.

I've always thought of the free market concept as the examples you get in Physics 101 where there's no friction or air resistance and pulleys and ropes have no mass. Good an functional in principle, but not 100% applicable in real life.

The main "friction" with your idea is that most engineers are on a salary. These salaries tend to only change year to year, and usually only minimal raises are involved, perish the though of your annual salary going down.

In order to respond to your sudden engr. crisis, all pay scales would have to be constantly fluid and updated every what...hour? day? week?

The concept does have merit in taking contract work, as I understand it you can still make a monetary killing taking a contractor job in Iraq or Afghanistan - supply and demand.

 

[Comcokid]

Let's flip this question around some. Assume this situation - you are an engineer paid 60,000, and there is no disaster or occurance which has created a supply / demand issue for engineers.

Now, would you be willing to work for $40,000? Of course not!

I see jobs all the time on Monster listing a position requiring a great deal of experience, but which want to pay only 80%, or sometimes only 60% or less of the going 'average' rate. No way I'm going to apply for such a job if I have a choice.

If circumstances or events drive cost of engineering up, then the higher price is the new norm.

 

[ziggi]

I was going to make the same comment Jabber just made, salaries are not fluid, there's a term for it in economics but I forgot it and it's not important.
The principle of economics is very similar to physics - assume this and that etc. - however human resources economics differs significantly from resources economics and thus we have to use a common denomintar, in this case the basic principle.

If there is a severe glut of engineers, salaries will drop however they won't dip drastically or at all as employers still have to factor in new employee training costs, lay off packages etc etc.

 

[StressGuy]

Comcokid,

If you have the job making $60k, then no, there would be no consideration for taking a $40k job.

But, if you lose that $60k job (layoffs/downsizing/etc.) then that $40k job looks a whole lot more attractive.

Unless your an airline pilot, chances are you are not going to see a pay cut from your employer. Instead, when market conditions change and they can't/won't justify the current payroll anymore, then either you or your coworker is going to get the axe.


Oh, and for what it's worth, there is an engineering crisis right now and I and many other are benefitting quite a bit. This after suffering through a very slow last six years or so.

Edward L. Klein
Pipe Stress Engineer
Houston, Texas

"All the world is a Spring"

All opinions expressed here are my own and not my company's.

 

[Senselessticker]

In my mind...price gouging of any kind is only capitalism in progress. The great thing about capitalism is competition. Eventually, competitors will give in to lower prices to stay in business.

For young folks these days.... Engineering is not even considered to be a "well paying" job as compared to other options available to folks coming out of college. I think this is going to change over the next ten years... here is why:

Many "good" engineers or potentially "good" engineers are choosing other career paths to follow the buck. Meanwhile, there is massive amounts of infrastructure (within the US) which is literally "starting to fall down". Levies, dams, bridges, power distribution systems, transportation systems, etc... will eventually need massive upgrades, not to mention power plants, sewer plants, and other utilities of which society is very dependent will... eventually... need to be replaced, upgraded, etc... How about the effort to build a series of new nuke power plants, produce clean drinkable water in major cities, deal with the effects global warming, immigration, war, pandemic, or simply transision into a society not dependent upon oil as the primary source of energy for travel.

Eventually....engineers will be in very high demand to solve major problems as means to preserve human life. Price gouging will certainly occur, but it will be no different than what has occured with the health care system in the past 10 years. Its just supply and demand from social studies in 6th grade.

 

[0707]

“Consider a scenario where the engineering outsourcing
suddenly is interupted by a dramic event or events.
Say a bird-flu pandemic or global war.

Is it ethical for us engineers to demand the market price
for our services in time of a shortage brought on by
international circumstances?
Maybe we ask 350000 US dollars per year for a job that
previosly paid 60000 ??”

2dye4 (Daifur?)


A dramatic event of this nature, would affect the most populous areas where engineers are located. Being so, the probability of a great part of the engineers to be killed would be great. However, for the remaining of the population who would survive, the proportion of survivors engineers would be more or less the same as it is now.

In this scenario the cost of economical recuperation would push down salaries and engineers would be paid less than they are paid nowadays.

luis

 

[ScottyUK]

When did ethics and big business ever go hand in hand? In a situation such as that discussed, are the EPC companies going to take advantage and indulge in price gouging? You bet they are! If the engineers are dumb enough to work for them for 'normal' rates while the company makes a killing in the market, who is the fool?

----------------------------------

I don't suffer from insanity. I enjoy it...

 

[sms]

Experienced rotating machinery engineers are in high demand right now, rotating machinery engineering has been very very good to me.

-The future's so bright I gotta wear shades!

 

[electricpete]

I would say take the $350k, remember you are doing an important service by filling that urgent need, pay $20k to a related relief fund to ease your conscience, and enjoy!

=====================================
Eng-tips forums: The best place on the web for engineering discussions.

 

[zdas04]

The term "price gouging" is simply someone's spin on an event. An activity or an asset is worth what a willing customer will pay. If I charge someone $50k to stamp an engineering drawing, and they pay it then who got gouged?

Jessee Jackson says that big oil is "price gouging" America while the industry is saying that in constant dollars prices are very close to levels in 1983 and well below the embargo prices of 1976. Folks are welcome to stop being willing purchasers of the product (smaller cars, consolidate trips, walk, etc), but they don't--they just complain about the gouging.

I am in a very high-demand engineering field, I've spent years of my life an considerable money to develop a level of expertise that people feel they need. Consequently, my hourly rate is about twice the going rate that my competitors charge. Anyone that feels I'm gouging has elected not to pay my outrageous fees. The people remaining keep me slightly busier than I mean to be. In fact I'm so busy that I'm considering raising my hourly rate from outrageous to embarassing. I contend that I can't be price gouging as long as my clients know in advance what I'm charging and are willing to pay it.

David

 

[moltenmetal]

There is no such thing as "price gouging" in engineering services, nor in engineering salaries. Customers and engineers have the choice whether to procure the services or not. In fact, the market constantly applies downward pressure to engineering bill-out rates and salaries by bringing on new sources of supply: out-sourcing to countries with lower labour costs, increased immigration and graduation rates etc.- it's only fair that we lean back a bit when times are good!

In Canada, the same downward pressure hasn't applied to doctors to the same degree as it has to engineers. The result has been that an engineer's salary has slipped over the past 50-60 years from a level roughly equivalent to that of the average medical doctor to less than half what a doctor makes currently. And we engineers have saved more lives than doctors could ever claim to! (take drinking water filtration and chlorination and sewage treatment as an obvious example- that was engineers, not doctors!)

There IS such a thing as price gouging when there the thing purchased is not a commodity where the consumer has a choice whether or not to consume it. Nobody shops around for doctors on a price basis! Perhaps zdas04 has it right: many others have told me that their workload doubled when they doubled their fees.

When people sell bottled water at $10/L during a disaster, that is price gouging- even though it results from simple supply and demand, the "free and fair" aspect of the market has been removed by the disaster. I suppose you could choose to die of thirst, but that's not really a choice, is it?

Don't worry: if we're ever in a situation where we can't keep the lights and heat on and the tapwater flowing because of a shortage of engineers, society will react swiftly to "fix" the problem. Until then, charge what the market will bear and not a penny less!

 

[zdas04]

moletnmetal,
Interesting example. But, the guy with the water to sell has it because he took a risk and spent money on a commodity with limited profit-potential in good times. Shouldn't he be compensated for the risk? The people crying about it can't drink the money. They could have stock piled bottled water cheeply just as the "gouger" did.

David

 

[metengr]

Supply and demand for services or jobs. If someone or an organization is willing to pay for your expertise so be it, and take full advantage of it. However, after a period of time the law of averages catches up and as in physics things tend to achieve some balance. Engineers that can charge higher rates can do so until others achieve the same level of expertise over time and all of a sudden, engineering rates suddenly become more competitive.

 

[11echo]

Anybody remember the 80's? When oil/engineering companies dumped the older engineering types and kept the younger engineers. The "thinking" (and I use that term loosely) was "Why pay all this money out when the younger types could push all the numbers around more cheaply"! Also oil/engineering companies started removing all the perks for working at their companies ...3 week vacation disappeared, bonuses were reduced or totally pulled, & medical benefits were reduced.
The oil/engineering companies reduced everything down to salary ...I personal work for a company 15 years, and my perks were no different then somebody that just walked off the street. So WHY would I stay with that company if I could get a higher salary else where? I always thought "if" I could stick it out, some day it would pay off ...WELL its pay back time now! I don't have to "Stick it to them"!! ...They fight to pay me more to come work for them! ESPECIALLY us "older" types! ...And Pay is the key word! Remember the oilman's pray of the 80's? "Please God let there be another oil shortage, I promise not to piss it away this time!" ...Amen Brother!

 

[DRC1]

Never really understood why engineers salaries are so low. I work in heavy constrution (contracting end) and buy engineering to support our operations. I use engineers I select and rarely question what the cost will be. Since I have a long relationship with these firms, I know I will be charged fairly. I might spend $10,000 dollars to help design an operation that may cost $100,000. with good engineering, i may be able to cut 5 to 20% of the cost. Without good engineering, the cost could double. I see that frequently in claims. A ulti million dollar project will have paid maybe $50,000 for engineering. The engineers were shopped to get the best price, and then the scope of service is reduced. ( we only need a few borings, we don't need survey - we can get the cotractor to "as-built")Now a days, not only is scope reduced, time frame is reduced. Then the contractor claims a changed condition and asks for delay, rework, etc. costing several hundred thousand or millions of dollars. For an extra $50,000 in engineering, the job could have been done as intended on time and on budget.
In short it is impossible to spend too much money on GOOD engineering.