The Perfect Storm - Part 7

Where Are The Next Generation Of Construction Workers?

During the early stages of developing the story line for our web series about the lumber and labor market I was racking my brain for a title. The image that drew me to the eventual title was the climax from the movie “The Perfect Storm.” The image I had was where a fishing boat, the Andrea Gale, was climbing a near vertical ten-story wave during the storm of the century. The imagery seemed so appropriate for our web series; fighting that unimaginable uphill torrent.

That’s exactly what builders and contractors must be feeling currently in trying to deal with skyrocketing lumber and framing labor prices, not to mention increases from most other scopes as well. When I looked into the meaning of the phrase, the perfect storm, using it as the actual title seemed, well, perfect. The expression, the perfect storm, describes an event where a rare combination of circumstances aggravates a situation drastically. It seems to me that the expression accurately describe what’s taking place in the building industry right now as the combination of spiking lumber and labor prices aggravates construction activity around the country.

In our final segments of The Perfect Storm, we will be focusing on the labor predicament currently facing our industry. And while our efforts will specifically be addressing the topic of rough framing labor I think it is important to start by putting things into perspective regarding the entirety of the construction workforce. From 2007 - 2011, construction hemorrhaged roughly 2.2 million jobs across the US, or 28% of its workforce. Construction accounts for 1/20th of all jobs in the United States, but, a third of all jobs lost throughout the recession were from construction. During the downturn, hundreds of thousands of these laid-off workers left the field, retired, or moved to other states to find work. The question everyone is asking, (and no one seems to know the answer), is will they come back, and if not, who is waiting in the wings to take their place.

One cannot talk about the construction workforce without looking closely at the makeup of the people who build the structures in this country. Over the last few decades there has been a ever increasing number of immigrant workers join the construction industry. And, regardless of where you stand on the immigration debate you would be hard pressed to argue that the building of America over the last 15 years could not have taken place without this critical element to our construction workforce. The largest component to the immigrant workforce is Hispanic construction workers. According to a 2009 study conducted by The Center for Construction Research and Training, Hispanics comprise 30% of the overall US construction workforce with the most noticeable increases coming since 2000. That is second only to the Agriculture industry where 36% are of Hispanic origins. At the peak, nearly three million Hispanics were employed in construction and that number is likely underestimated due to the possibility that sampling techniques in the study may under-count undocumented workers. Hispanics represent 52% of the overall drywall workforce, 43% of the roofers and 25% of the carpentry workforce. Other trades with high percentages of Hispanic workers include concrete, painters, and brick masons. Of the 2.2 million construction workers who lost their jobs during the downturn it is estimated that close to a million were Hispanics.

All the while, subcontractors were struggling to survive, fighting increasing operational costs, yet taking less money to win a job.

It would be foolish to think that those displaced workers simply were waiting out the economic downturn readying themselves to return to the construction industry when times improved. First of all, construction earnings had been deteriorating to the point that making any kind of reasonable living became increasingly difficult for legitimate businesses and their employees. The market was so competitive at its peak that many subcontractors were taking jobs too cheaply. Of course, builders and contractors were eagerly accepting these lower numbers oblivious or indifferent to the profit plight they generated for the subs and their workforce. Owners and developers benefited because they could get their projects built for less. Investors and capital markets were happy because, well, because everything takes a backseat to profits for those folks. All the while, subcontractors were struggling to survive, fighting increasing operational costs, yet taking less money to win a job. The result was a gradual decline in the sheer volume of viable subcontractors in the marketplace, especially those who were playing by the government’s rules and regulations. Then the downturn hits, and this deteriorated sub-base has little or no work. The result is a precipitous loss of subcontracting businesses, skilled workers and laborers alike, most looking for other means to support themselves, and with frighteningly few options.

The complexion of the construction subcontracting workforce had been changing for years. The aging baby boomer population, the backbone of the American workforce for decades, had begun retiring and subsequent generations provide fewer entrants into our industry. New workers are not interested in working with their hands and minds in physically-demanding jobs, often in difficult environments. The construction industry lacks appeal to young, potentially skilled workers. An increasingly poor image has discouraged young people from looking into the construction industry as a viable career path. School aged kids are being pushed towards college, not towards blue collar jobs as our economy has evolved from primarily a manufacturing and construction-based economy to one based on providing information and services. All the construction downturn did was mask a serious problematic trend of an insufficient pipeline of younger workers entering the trade. We are just now starting to experience the consequences with the current uptick in construction activity and the alarming thought is that we are only building a fraction of our anticipated needs, looking forward. There is little doubt that as the housing sector continues to recover, the labor drought will worsen and we are left wondering what will be the effects should our nation move closer to what is regarded as a more normal pace of construction, roughly a 50% increase over where experts project this years starts to end up.

Higher labor pricing is the most immediate impact builders and contractors are feeling. “I have been able to get crews so far, but they are smaller and also more expensive,” remarks Ryan Neighbors, of Neighbors Construction serving the greater Kansas City market. “I have seen framing rates increase at least 20% in the last year. Framing contractors understand that it’s their market and they can command the price that they want.”

Wolverine Building Group’s, Vice President, Curt Mulder, agrees. “The framers that are out there are very busy. I imagine that most of the framers out there are going to work, number one, for someone who they can trust to pays their bills, and number two, who is offering them desirable, profitable work. I would say that my framing labor rates have increase 20% over the last year and I think that is just the start.”

It’s not just framing pricing that is of concern to the builders and contractors. The overall quality of workmanship and carpentry competency is a major source of apprehension as well. Continues Mulder, “The overall skill level (of carpenters) just doesn't seem to be there, even like it was five years ago. I suspect that a lot of framers just left the industry altogether and don’t intend to come back, or haven’t yet, because they have not seen the stability in the market.”

Of course, Mulder’s concerns are hard to substantiate and even more difficult to quantify. Part of our industry’s problem, and it has been developing for decades now, is that we have completely abandoned any notion of true workforce development. Years ago, companies invested in developing and training their tradesmen, often hiring them as actual employees. But over the years the industry moved to rely heavily on independent contractors and these companies seem more reluctant to invest in worker training for a myriad of reasons. The common practices that professional-level organizations hold very dear to their hearts, like recruiting, hiring, and training quality employees, just do not seem to exist in the craft world. The general risk over time is less skilled workers, lower overall quality but higher costs because of it.

Traditionally, vocational programs and formal apprenticeships have provided training for the skilled labor trades in the construction industry but huge shortfalls in school funding and a general lack of interest have greatly reduced or eliminated these programs throughout the country. American High Schools have largely shifted their focus on preparing students for four-year colleges rather than vocational schools. The Bureau of Labor Statistics estimates that over five million people own or are employed by companies specializing in certain construction trade crafts. That is considered to be roughly 69% of the total people employed by the U.S. construction industry. Most research points to the fact that there has been, and will continue to be, a national shortage of skilled labor due to retirement of trade veterans combined with poor enrollment rates in what few training programs still exist. In fact, the industry will need to recruit and train 275,000 (180,000 for growth and 95,000 for attrition) for each of the next ten years to fill the gap in the labor pool. Every entity of the industry, including subcontractors, manufacturers, suppliers, builders, general contractors, owners, and laborers themselves, are seeing the affects. Furthermore, controls on immigration continue to hinder what many considered to be an available and willing source of entrants into the trades.

VIDEO: A prominent Midwest framer describes the challenges in today's new construction labor market

Aside from rising framing rates and suspect carpentry quality comes another major concern, productivity. Downtime has become common place as building sites and construction companies await crews and the average time for completing a project drags out. “There is definitely a shortage of framing labor right now,” bemoans Neighbors. “The size of the framing crews tend to be smaller and it is creating delays on our jobs. Framing contractors either can’t find enough guys or they just didn't figure enough money to have the right size crew there. Either way, productivity suffers and it is definitely impeding the progress of our jobs.”

While there have been some reports that adequate labor concerns is a local or regional problem, a recent survey by the Construction Industry Institute indicates that over 75% of contractors are currently suffering from a noticeable shortage of both skilled and unskilled labor for their projects. That would indicate that it is generally a larger systemic problem than first thought. Paul Davidson reported in a USA Today article that labor shortages are already prompting builders to raid each other’s job sites for workers and we have heard of some builders and contractors who have added additional job-site security to keep both material and worker theft at bay.

Certainly, there is no clear consensus on the scope of the problem but it does have many worried that if prices rise too much, it could impact the overall housing recovery. Others hope that with the prospects of earning power improving so will the number of people interested in a career in the building industry. Yet the question remains, where will the next generation of workers come from and how quickly can they be trained? Until then, Rusty Porter from CF Evans in Orangeburg, South Carolina, sums up most builder’s and contractor’s feelings when he says, “I’ve got the same challenge everyone else has...manpower! A lot of framers are struggling to put together crews and I don’t see that improving quickly.” We can only hope that an eventual return of skilled, legitimate framing contractors and their workforce find their way back into the marketplace soon so we can better fulfill the increasing construction demands currently on our doorstep. Unlike the Andrea Gale, let’s hope our industry can punch through this wave and does not succumb to this perfect storm.

Make sure you tune into our final installment of The Perfect Storm when we will take a closer look at the cost impacts subcontractors have incurred in the last few years and why simply labor supply and demand is not the only reason rates are increasing.