How increased infrastructure investment captured national attention — and what it means for the construction industry
The construction industry has found itself in unfamiliar territory. For a sector typically relegated to the back of people's minds — only coming to the forefront during road construction or bridge closure annoyances — the industry is seeing a different kind of public outcry.
And this time, it's one of support.
After several recent reports highlighting the dire status of the nation's infrastructure, Americans seem to finally be taking notice of an issue that construction firms have attempted to call attention to for years.
A long road to reaching the public eye
A national poll released this week by the Association of Equipment Manufacturers found the majority of U.S. voters — regardless of political affiliation — believe repairs for the nation's highway, bridge and energy grid infrastructure are crucial. Of the respondents, 76% of Democrats, 70% of Independents and 68% of Republicans said they believe the federal government should be doing more to improve infrastructure.
The AEM poll followed several industry reports lamenting the state of the nation's infrastructure, but the timing of its release — just 90 days before the election — has garnered more attention as the public looks to new politicians and leaders for potential solutions.
A February American Road and Transportation Builders Association study found that approximately 10% of the nation's bridges were structurally deficient in 2015. And in May, the American Society of Civil Engineers reported that the U.S. will lose an estimated 2.5 million jobs and $4 trillion in gross domestic product over the next decade if it can't overcome the impending $1.44 trillion deficit in infrastructure funding.
Although Congress passed a five-year, $305 billion highway bill in December, construction industry groups said the Fixing America’s Surface Transportation Act didn't go far enough, as it failed to resolve how Congress will pay for the bill long-term and failed to establish a long-term solution for future infrastructure funding needs.
How a boost in infrastructure funding would impact construction companies
Construction industry groups have continued to call on Congress as well as state and local governments to boost infrastructure spending to fund crucial projects.
Brian Turmail, senior executive director of public affairs for the Associated General Contractors of America, said in an email that "there is no doubt" that increased infrastructure investment would have a positive impact on construction firms operating in the transportation industry. "While demand for construction, especially from the private sector, has grown steadily over the past several years, many infrastructure firms have seen less of a recovery than other types because of slow growth in federal investments and the fact many state and local budgets remain quite tight," he said.
Public construction spending has seen a pattern of declines amid this environment of tight budgets at all government levels. Earlier this month, the U.S. Commerce Department reported overall construction spending fell for the third consecutive month in June, with a 0.6% slide in the public sector. Before Congress passed the FAST Act, the AGC partially attributed previous low construction employment numbers to a lack of a long-term funding measure, and Caterpillar reported that Congress' inaction negatively affected the equipment giant's sales.
Despite the $305 billion FAST Act compromise, construction groups are looking to the next presidential candidate and the next group of lawmakers to push through an even greater investment in infrastructure. "We are certainly doing everything within our power to make sure the next Congress and administration make investing in our aging infrastructure a real priority," Turmail said. "Especially considering that we are on the brink of some extremely transformative changes in the way we move people and goods in the U.S. with the advent of autonomous and connected vehicles, for example, and the growth in ride share services, it is hard to imagine federal leaders would undermine this progress by letting our infrastructure continue to lag."
Will the industry's labor shortage rain on its potential funding parade?
Along with the groundswell of support for infrastructure project funding, one concern has recently emerged as a potential hitch in the plan: the ongoing construction labor shortage.
Politico said in an article Monday, "Instead of creating thousands of jobs, experts now warn that a new infrastructure investment could face the exact opposite challenge: a labor shortage ... The biggest concern with a large infrastructure program may be that projects are delayed due to a lack of workers."
Although the construction labor shortage isn't news to anyone in the industry, the issue has failed to gain significant traction in the national media. Since those concerns were raised this week, however, building groups have countered that the skilled labor shortage shouldn't deter lawmakers from infusing infrastructure projects with more funding. "The best way to address tight labor markets is to provide the kind of long-term stability and funding needed to signal to potential employees that the jobs will be there for the long term," Turmail said.
The Politico article also added that a large infrastructure investment could possible serve as "insurance against an economic downturn" in case a recession hits the U.S. economy and laid off workers search for a new industry with open positions.
Construction groups have consistently warned that the industry needs to develop a plan to build up the worker pipeline, with some experts suggesting marketing efforts, a greater focus on technical training in school, immigration reform and a broad coalition effort. Construction representatives have also implored lawmakers at all levels to boost the number of training and recruiting programs for skilled trade programs.
What lies ahead for the infrastructure issue
Infrastructure spending has been a popular talking point for both presidential candidates during this election cycle. In May, Democratic presidential candidate Hillary Clinton promised to roll out her five-year, $275 billion infrastructure plan to Congress within the first 100 days of her first term. And last week, Republican presidential candidate Donald Trump said that if elected, he would "at least double" the amount of investment in infrastructure proposed by Clinton. Trump's plan relies on bonds to fund major projects, while Clinton's involves establishing a national infrastructure bank.
However, the construction industry has heard hollow promises before, as politicians have campaigned on increasing infrastructure funding but failed to follow through — due either to opposing parties in Congress blocking action or a lack of prioritizing the issue.
Turmail said the AGC is waiting until the election and inauguration to find out if the candidates are serious about their infrastructure plans. "It really comes down to which of their campaigns is more viable than the other," he said. "And we will only know the answer to that question in November."