By April 2009 the national unemployment rate reached 8.9% according to the U.S. Labor Department of Labor. By comparison, the unemployment rate reached 10.8 percent in the 1981-1982 recession and 9.2 in September 1983 so it is clear that we are deep into a very severe recession. The loss of or reduced income experienced by so many is leading to the rise of insourcing.
Insourcing is typically used in a business context but it happens in the consumer realm too. People who, when times are good outsource chores like house cleaning and maintaining the lawn and garden, eliminate or cut back on these when times are bad.
Maid service is typically one of the first services to get cut which is reflected in the mirroring of the unemployment rate by the contraction of the housekeeping industry. People who are unemployed or who have had their hours cut can either no longer afford to hire a maid or can no longer justify outsourcing the house cleaning because they now have much more time on their hands. ServiceMagic, an online directory of local service providers which links them to homeowners, saw a 12.7% drop in maid service requests during the month of October 2008. The States that have experienced the greatest job loss have also shown the greatest drop off in maid service business.
A large percentage of the maid service providers are small businesses or family owned and operated and may not be able to withstand increased pressure from customers to cut their prices for house cleaning services. While they may be tempted to do so they should not cut their prices so much that they are not able to achieve a reasonable operating margin. When pressured by their customers to bring prices down to more affordable levels they should suggest as an alternative that customers reduce their frequency of service. This was they retain a proportion of the revenue and the customer still gets their house cleaned but may need to do more maintenance cleaning between visits.
Customers who are reluctant to do their house cleaning themselves will begin to shop around for better prices and may be tempted to switch providers for a better price. They will spend more time shopping around for deals online at classifieds site or online marketplace websites and are more likely to respond to a direct mail offer with an advertised discount.
Ironically, the supply and demand can become very unbalanced because even as the maid service demand is shrinking, the supply of providers increases. As more and more people are unable to find employment there is a shift to attempting to start one's own business. Given the relatively low startup costs and minimal qualifications required, a house cleaning business becomes an attractive option. Other house cleaning services like window cleaning and carpet cleaning require specialized equipment and expertise to achieve the best results and so these are less attractive targets but they will typically also be affected less by insourcing for that same reason. Of the two, carpet cleaning is probably likely to be insourced before window cleaning. One can hire carpet cleaners from local stores and achieve a satisfactory cleaning.
Fortunately insourcing is unlikely to be a permanent change. When the conditions that cause people to do themselves what they one paid others to do change, they will quickly return to outsourcing those tasks. Once the economy begins to recover, it can take years for the jobless rate to decline again so it is likely to be a few years before we see growth in the maid service and house cleaning industry.
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