Hand-in-hand with encouraging post-recession news about plentiful construction spending and a growing number of housing starts lies a problem that analysts say is going to get worse: There aren’t enough skilled laborers to keep all of those jobs going.
A survey by the Associated General Contractors of America sums up the trend: Up to a third of U.S. construction firms has had to turn down jobs in the past year because they couldn’t hire enough skilled workers to do the work.
The industry has plenty of jobs to go around; indeed, hiring is so robust that unemployment in the construction sector—including residential, commercial and government—has dipped to 7.5%, the lowest level in seven years.
But a recession-induced exodus of 2 million construction workers between 2007 and 2011, coupled with lightning-quick job creation of 609,000 jobs since then, has left building firms struggling to man their backhoes.
Here is a roundup of how that is affecting the industry:
The economic recovery is strong enough in Michigan to support the building of 28,000-plus homes a year. But builders started just 13,000 houses in the past 12 months, largely because they can’t hire enough framers, carpenters, plumbers and electricians to build any more.
The result: The pace of home construction will remain slow for at least six more years, predicts the Homebuilders Association of Michigan.
Association CEO Bob Filka estimates the state lost 60,000 trades during the recession—and many of them aren’t coming back.
“As a result, [the labor shortage] is going to put pressure on how long it takes to get a new home built, and how long it takes to get someone to come out and check your house if you have a problem with plumbing or electrical systems,” Filka told Michigan Radio.
Various surveys report that a quarter to a third of U.S. construction companies are struggling with labor shortages severe enough to limit the number of jobs they can accept.
The hardest-hit firms, according to an analysis of federal employment data in 2012 by the Associated General Contractors of America, are in: Phoenix-Mesa-Glendale, AZ; Bethesda-Rockville-Frederick, MD; and Newark-Union, NJ.
Companies that added the most construction jobs in the past year are in: Dallas-Plano-Irving, TX; Houston-Sugar Land-Baytown, TX; and Philadelphia.
Greater demand for fewer workers means those workers can demand fatter paychecks, according to the Associated General Contractors analysis.
About 70% of construction companies say they are paying skilled laborers more than they did a year ago, with 13% of companies describing those wage increases as “significant.”
More payroll fraud.
Some California builders are still finding cut-rate laborers, says the research group Economic Roundable. Their strategy: They pay workers under the table and off the books.
Some misclassify employees as independent contractors to get out of forking over payroll taxes. The Economic Roundtable estimates that one-sixth of California’s 895,000 construction workers is part of this so-called “gray economy.”
Lack of subs.
The hardest trades to hire these days, according to Associated General Contractors, are: carpenters, project managers and supervisors, followed by qualified laborers, estimators, electricians, plumbers and ironworkers.
Houston-based luxury apartment builder Camden Property Trust has stationed guards at its Austin and Denver job sites to prevent competitors from poaching its workers with the promise of higher wages.
Likewise, Robert Crout, president of the Central Oklahoma Home Builders Association, was quoted in The Oklahoman saying some unlicensed contractors are offering laborers working in tornado-torn neighborhoods cash bonuses of $200 to walk away from their jobs on the spot and join new construction crews.
Local governments are ordering fewer frills on new schools and public buildings as they pay millions more in construction costs than they expected.
In Dorchester, SC, for instance, bids for three new elementary schools and a middle school came in at about a third more than officials had budgeted for, forcing them to build the structures without upgraded HVAC systems, LED lighting, landscaping, and classroom sinks.