In a nutshell, not having to fabricate a new pricing system.
As I said in a previous reply, but didn’t emphasize, the main reason auto shops have a significant markup on parts is tradition. That’s how it’s always been done (in a general sense - particulars change with time), and it’s easier to follow the well-worn path than to carve a new one.
Nevertheless, your point about the psychological effect of those parts prices is a good one. It is sometimes problematic, and there is ongoing discussion among the thinkers in our field about how to deal with it. Some advocate exactly what you suggest - higher labor rates and lower parts markups. I’m (slowly, cautiously) heading that way myself.
Some background may be helpful in developing insight into the situation.
There was a time when professional repair shops were given a genuine wholesale price on parts, while the general public paid retail. The prices paid by the do-it-yourselfer at a parts store were much closer to (and sometimes the same as) those at a repair shop. During this era it was also typical for mechanics’ pay to be a commission of half of the billed labor.
Things have really changed, especially in the aftermarket. Many parts venues have targeted and competed for do-it-yourself sales. Often what a walk-in customer pays is within 10% of what a shop pays. And in the aftermarket “retail price” is a hazy concept, at best. There is “suggested list,” which no one pays (at the parts store) anymore. Even it is a poor guide - I’ve seen cases where the same part has 25% difference in list price at two different stores, yet the same wholesale price to shops.
And while the palatability of shops getting a hefty parts markup has been declining, the costs of providing good auto service have been increasing. Shops found they needed to raise their labor rates significantly, and without passing half of it on to the mechanics. The trend has been to lower percentages in commission pay (typically 25-30% of billed labor), and higher percentages in parts markup (100% in some markets). Shops are hesitant to further increase labor rates, but also becoming more aware of the downside of high parts markup.
The pricing systems used by most shops have not changed to reflect the times. A better, fairer system would have smaller parts markups and a big jump in labor rates. Problem is, who’s going to go first? Having a labor rate 50%-100% higher than everyone else doesn’t look so good to the average consumer. It would probably hit a brick wall with repair-warranty companies, who sometimes have a labor cap. It could really put one in a bind in a court of law.
So from a shop’s point of view, you can have some problems related to parts prices, or you can change and have problems related to labor rates. The former is a flawed but known to be workable approach. The latter is untested and brings the risk - and fear - of failure. Change likely will occur, but it’s unlikely to be sudden or rapid.
I will suggest this. I don’t think it’s particularly effective for consumers to be concerned about a shop’s labor rate, or which estimator it uses, or what its parts markup is, or any of the other variables that factor into price. The meaningful figure is the bottom line - $X to do such-and-such job. Hell, even that is of limited help in drawing comparisons, because there are also variables in intangibles such as accuracy in evaluation/diagnosis, quality of workmanship, and thoroughness in addressing problems. These can all affect how much the customer pays in the long run. While that particular brake rotor might be a commodity, the repair as a whole isn’t.