4 ways builders are working around the labor shortage
Labor is at the heart of residential construction. Master suites don’t frame themselves, nails stay in the gun, and kitchens aren’t plumbed without a trained and reliable workforce making it all happen.
Although labor is one of the most important elements of the construction, it is among the hardest to control. The industry lost more than 40% — or 2.3 million members — of its workforce from April 2006 to January 2011. What’s more, six in 10 construction workers who lost their jobs during the recession went to work in another sector or left the job market entirely by 2013, according to data from the Bureau of Labor Statistics.
“They’re not coming back,” said David Piper, vice president of purchasing and architecture at national homebuilder Taylor Morrison. “Many of these jobs are [a] younger man’s work, and in the years since the recession, a lot of these guys have aged out of the industry and moved on to other professions.”
According to a National Association of Home Builders analysis of BLS data, the construction industry set a cycle high of 225,000 open jobs in July 2016, the most since February 2007. Meanwhile, the share of builders reporting a shortage of key trades has risen from 21% in 2012 to 56% in 2016.
And so, as demand returns, builders are finding the need to get creative to find new workers, including raising wages, supporting training programs, streamlining operations, and searching high and low for new workers.
Broadening hiring horizons
“We first started to really take notice of the labor shortage about 18 to 24 months ago,” said Tim O’Brien, president of Tim O’Brien Homes. His Wisconsin-based firm builds 160 homes per year in Milwaukee and 75 a year in Madison. “At first, we were able to work with it, but it has since become more and more difficult.”
The shortage has hit O’Brien's team hard, causing them to build fewer homes and take longer to put them up. “We missed some deliveries last year,” he said, “and we have had situations where foundations are back-filled and waiting for framers for as long as 30 to 45 days.”
O’Brien has gone as far as to hunt for new workers outside of his market. “We ask distributors who have a statewide reach if they know of any workers in other parts of the state that are not booming as much as we are, who would be willing to travel here for good work,” he said.
Paying a premium
Framing crews are in the greatest demand of all trades among builders and subcontractors today, according to a June 2016 survey by the NAHB, with 68% of builders and 78% of subcontractors reporting a shortage.
Due to the tight market, framers are commanding higher wages than in recent years. Still, while O’Brien currently pays his framers 50% more than he did two years ago, he doesn’t dispute the fairness of the increase. “I’m glad for the framers,” he said. “They took a big hit with the recession and had trouble finding work and took big pay cuts. Now the wheel has turned and they have plenty of work.” These workers are back to what they were making before the recession, and they can charge a premium on top of that, he added.
Beyond the framers, O’Brien estimates that he is paying 15% to 20% more for labor across the board. In its survey, the NAHB noted that at least half of the responding builders and subcontractors reported labor shortages in categories including rough and finished carpentry, bricklayers and masons and painters.
“Many of these jobs are [a] younger man’s work, and in the years since the recession, a lot of these guys have aged out of the industry and moved on to other professions.”
Vice president of purchasing and architecture, Taylor Morrison
At Taylor Morrison, Piper said, higher wages are unavoidable in the face of today’s labor situation. “The only way to get the labor you need is to pay up for it,” he said. “If we don’t pay a fair market rate, houses don’t get built.”
The NAHB survey noted that three-quarters of builders said the labor shortage caused them to pay higher wages and subcontractor bids. Slightly more than one-third passed along some of that cost to buyers in the form of higher home prices, and just under one-third said the shortage kept them from completing projects on time.
Similarly, in a survey of 1,459 contractors nationwide conducted by the Associated General Contractors of America during July and August of 2016, 48% of responding companies said they have increased pay for hourly craft workers in response to difficulty filling positions and 54% expect their hiring woes to continue.
Supporting training programs
Higher wages help, but they aren't the entire solution, as there are only so many workers to go around and demand far outweighs their supply. Hiring among builders and remodelers is rebounding, with the residential sector adding a net 120,000 jobs from November 2015 to November 2016.
Builders can bolster this trend by helping to create more qualified workers. This is the central mission of the Washington, DC–based Home Builders Institute, the NAHB’s nonprofit workforce development arm. The HBI offers subsidized training in the construction trades to underserved and at-risk youth and adults, ex-offenders and veterans transitioning back to the civilian workforce.
The HBI serves more than 3,000 men and women each year, including 100 veterans, with homebuilding associations across the country, property management companies, and smaller design-build and systems firms among its partners.
The HBI’s largest single program is run in conjunction with the Sheridan Correctional Center, in Sheridan, IL, which graduates 300 people each year. The organization runs similar programs nationwide, producing graduates who are qualified to work across different sectors of the construction industry including carpentry, electrical, masonry, plumbing, HVAC and facilities maintenance. HBI President and CEO John Courson said the organization has a job placement rate of over 80% for graduates of its programs. He estimates that the rolling number of students and graduates at any one time is more than 13,000.
"The building industry is a great place to get started in the working world with a good-paying job in an honorable profession that has a path to advancement. We need to tell that story.”
President and CEO, the Home Builders Institute
Vocational training as a part of the high school curriculum is particularly important, Courson added, as is raising the profile of the building trades.
“There is a great need to educate schools and parents as to the dignity of these professions,” he said. “Not everyone can, or wants to, go to college. The building industry is a great place to get started in the working world with a good-paying job in an honorable profession that has a path to advancement. We need to tell that story.”
High school vocational programs are popular but often underfunded, according to a recent report from the Massachusetts Budget and Policy Center. Last year in that state alone, there were 3,200 students on Career/Vocational Technical Education high school wait-lists. The center said it would cost at least $27 million to fill the gap in Massachusetts high schools.
The report cites a study conducted in the 1990s by the MDRC, a nonprofit, nonpartisan education and social policy research organization, which noted immediate and long-term benefits for students in CVTE programs. The most effective programs today, according to the report, emphasize individual instruction and employer partnerships, as well as offer industry-standard equipment and facilities, and place vocational training alongside the regular curriculum.
Scott Paige, national vice president of operations for Mattamy Homes’ U.S. business unit, also sees the need for career training to begin early. “A viable solution would be the reintroduction of vocational schools with support from builders and local trades,” he said.
The hope is that some combination of high school and post-secondary vocational education, as well as employer-led training efforts, can grow the pool of potential workers, prepare them for the jobs that need them most, and use the industry’s high starting wages and upward mobility prospects to retain them.
Running a leaner operation
Like other builders, Mattamy is seeking to minimize the effects of the labor shortage by running a tighter ship. “We try to mitigate as best as we can by over-communicating with our trade partners about upcoming production needs so they can plan how to staff our jobs,” he said. “However, even the best-thought-out plans can require adjusting as a result of changing conditions.” Paige said his firm expects there will be surprises and so it works with its trades to minimize the risk of lost production time on its homes.
Similarly, O’Brien said the labor shortage has forced his company to rethink every step of their operations. “We have to find ways to do more with less of those labor resources,” he said. “We have to be able to offer our workers certainty so they know when they show up to do their thing, the materials are all there and we are ready to get going on their part of the build without delay. It is forcing us to be a more efficient company.”
Another creative solution in O’Brien’s quiver is his support of workers who wish to start their own small companies within the homebuilding supply chain. “We can support [them] by offering guaranteed, predictable work as well as helping finance their startup with a loan [or] buy their first truck for them. They can work off that debt over time.”
Approaches like these can help chip away at the problem. But while they may prove effective in the short run, Courson, O’Brien, Paige and Piper all favor vocational training and job preparedness programs as the most promising long-term fix.
“We have to be able to offer our workers certainty so they know when they show up to do their thing, the materials are all there and we are ready to get going on their part of the build without delay. It is forcing us to be a more efficient company.”
President, Tim O'Brien Homes
O’Brien has even committed to training future workers in his market.
Each year for the past six, his company has built a single-family house with the help of about 15 students from the local high school. “Each year we work with a new group of kids [on a new project],” O’Brien said. “They are there when we dig the hole for the foundation in August, and they work with us on the site Monday through Friday from 7:30 a.m. to 10:30 a.m. until the end of December. By the time they finish, they have been able to learn about [many different] parts of the homebuilding process and have had a great time while they’re at it.”
If programs like O’Brien’s proliferate, the next generation of construction workers just might be swinging their first hammers in a program like that today.