Why Your Handyman Costs $80/Hour (And How to Fix It)

The Disease Behind Rising Service Costs

In 1967, economist William Baumol identified something counterintuitive: sectors with stagnant productivity see their costs rise anyway.

Not because they're getting better at what they do, but because everyone else is.

Here's why….

…A tech company figures out how to double their output per employee through better software.

They can now afford to pay their workers more. Meanwhile, your local plumber still fixes pipes the same way he did twenty years ago. But if he wants to keep good employees, he has to match those rising wages elsewhere. Same productivity, higher costs.

The result?

Your home services….cleaning, repairs, landscaping…all get more expensive even though the work hasn't fundamentally changed.

Why $30/Hour is the New Normal

Home service businesses are textbook examples of Baumol's cost disease. A house cleaner in 2024 doesn't clean significantly more houses per day than one did in 1994. A handyman doesn't install twice as many fixtures. A landscaper doesn't mow lawns faster.

But all these workers need to earn enough to live in an economy where other sectors have seen massive productivity gains. When software engineers are making six figures because they can automate entire workflows, the person fixing your sink needs higher wages just to survive.

This creates a vicious cycle. Service businesses raise prices to cover higher labor costs. Customers complain about the costs. Business owners feel trapped between employee demands and customer pushback.

The Global Workforce Solution

Here's where it gets interesting. Baumol's cost disease assumes you're stuck hiring locally. But what if you're not?

The internet has created something Baumol never anticipated: a global talent pool for knowledge work that can be done remotely. This doesn't help with your plumbing, but it transforms everything else.

Need customer service? Administrative work? Bookkeeping? Marketing? Design? These roles can now tap into talent from regions where $30/hour isn't entry-level… it’s juicy!

Quality Over Geography

The key word is "skilled." This isn't about finding the cheapest labor! It's about finding high-quality professionals who HAPPEN to live where the cost of living is lower.

A talented developer in Ukraine can build the same app as someone in San Francisco. A customer service specialist in Costa Rica can handle your clients with the same professionalism as someone in Chicago. The difference isn't quality… it’s simply cost of living!

I tell people all the time… if I lived in argentina, I would only need to make a few thousand bucks a month to have a great life!

Breaking the Cost Disease Cycle

Smart businesses are already figuring this out. Instead of being trapped by local wage inflation, they're building global teams for everything that doesn't require physical presence.

This doesn't mean eliminating local jobs. It means being strategic about which roles need to be local (your technicians, your customer-facing staff) and which can be done anywhere (your back-office operations, your digital marketing, your administrative work).

The businesses that thrive in the next decade won't be the ones that complain about rising labor costs!

They'll be the ones that systematically identify which parts of their operation can tap into global talent pools while maintaining (or improving!) service quality.

Baumol's cost disease is real. But unlike an actual disease, this one has a cure.

Yallah Habibi,

Jon

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