There is a widespread consensus that U.S. home construction is now constricted not by demand but by availability of labor. That was the topic of a report on CNBC on March 29, and the conclusions of that report sparked debate across the Internet.
Here’s a link and quote from the original report on CNBC by Diana Olick.
Thousands of construction workers left the industry during the recession, many of them heading to the energy sector. The assumption was that they would return when energy lagged and homebuilding recovered. They did not. The labor shortage in building actually worsened in 2016 — a surprise to most analysts.
“We thought we’d see a flow back of workers from the energy sector,” said Rob Dietz, chief economist with the National Association of Home Builders. “The labor shortage has basically grown and accelerated. It’s the top challenge in the building industry right now.”
Dietz points to both an immigration and a generational challenge. The workforce is aging, with the typical age of a construction worker now 42. More Americans are going to college now, and so they are less likely to pursue a career in construction. Simply put, young Americans don’t want to build houses anymore. That leaves the business to immigrant laborers.
“These jobs, Americans don’t want,” Gene Myers, CEO of Thrive Home Builders, said. “We have a hard-working Hispanic labor force here in Denver that really is the foundation for the construction industry.”
But is that the whole story? Several writers took issue with this conclusion. Here’s Lydia DePillis in the Houston Chronicle. She thinks the decline in unions is a big factor.
Although pay in the construction industry has been rising lately, that comes after a period of long decline, leaving wages substantially below what they were in the 1970s. As for training, employers are now leaning on the public education system to replace what trade unions used to provide, before they were ground down to almost nothing. …
Unions did more than just organize for higher wages (which they still do in states where they remain strong, like New York). They also ran a comprehensive training system, largely funded by employers, that kids could enter right out of high school free of charge. After apprenticing for several years, young workers could expect a well-paid job as long as they wanted it. …
By and large, contractors would still like to avoid dealing with organized labor. “We don’t want the union back,” said contractor Tim Reilly, citing all the rules and restrictions that come with it. Still, it’s left a gap. ‘The training program was one thing they had that was good,” he says.
At Slate’s MoneyBox blog, Daniel Gross says there’s no such thing as a job Americans won’t do. The obvious answer is to raise wages.
There’s no such thing as a job an American won’t do. There are such things as jobs that Americans in your geographic area won’t do at the conditions on which you are offering them. At this point in the economic cycle, building homes in Denver now seems to be one of them.
When regional labor markets are tight, you have to send the price signal to potential workers that it will be worth their while to leave their current home or position in order to apply—that the job will pay well, that it will carry benefits, that if you get hurt or sick you’ll have good insurance, that there might be job security and prospects for training and development. That price might be closer to $100,000 than it is to $50,000. But that’s where we are in the economic cycle. And if builders prefer not to pay up to attract workers and are reluctant to try to charge more for their end products, they’ll muddle through at low volumes. That, alas, is also where we are.
Mother Jones’ Kevin Drum takes a look at the actual Bureau of Labor Statistics data behind the debate.
Starting in 2014, construction wages did indeed go up after falling for four years. But by the end of 2016, having barely made up the earlier decline, homebuilders gave up on this exercise in experimental economics. Wages have dropped 2 percent since October even though the construction industry is apparently still facing a labor shortage. They’re now paying wages lower than they did in 2010.
So what’s the solution to the skills gap issue? Importing workers who accept lower wages? Better training? Bring back unions? Pay Americans more? The debate continues.