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Competition For Labor Heats Up

The labor shortage in construction is no myth. Here in Texas, amidst the immigration debate, we’ve heard from business leaders who tell us that it now takes about four weeks in Houston to frame up a house and homes built in Dallas take about six months to complete.  Over at Business Insider, reporter Mamta Badkar reminds us that America-born construction workers are simply vanishing:

“The reasons are varied. Many of these unemployed construction workers went to other sectors like manufacturing. Many found themselves moving to the oil and gas states where the energy industry has been booming. At least some have just left the labor force.

“[Bank of America’s Michelle] Meyer argues that many others became self-employed working as renovators or in land scaling.

“‘These are two sectors which are often part of the ‘underground’ economy (cash payments), and therefore not captured in the official statistics,’ she writes.

“Another major problem keeping workers away from construction is the lack of attractive wages in homebuilding. Average hourly earnings are still growing very slowly compared to historical levels. They are up 2.2% year-over-year, up from 0.1% YoY in early 2012, but much lower than 2006 peak of 5% growth. Really wage growth has been under 1%.

Badkar also writes that many of those worker have simply “moved on to better things.”   One of our resident experts, Pat Kiley, has said many times that construction has got to step up its game in a war for talent, because industries like oil and gas are looking for the same kind of folks to work for their companies.  The competition is fierce.  Just this week, the editor of Texas Energy Report (subscription required), Polly Ross Hughes, reported that oil and gas companies are having a hard time filling jobs, but for a much different reason.  In oil and gas, qualified candidates are able to ask for more money and if they don’t get it, the positions go unfilled.  From Hughes’ story:

“Half of energy companies say they’re hiring in the next six months, but it’s the job seekers holding the best cards when it comes to negotiating pay and benefits, according to a semi-annual hiring survey from Rigzone.

“The online source that tracks talent recruitment trends in the oil and gas industry said Monday that companies seeking employees dipped slightly from the 53 percent that reported doing so in the first half.

“However, it also found that hiring managers are finding their talent searches increasingly tougher as job seekers take advantage of a competitive market for their skills.

“‘Oil and gas professionals today recognize the energy job market is theirs for the taking,’ Rigzone President Paul Caplan said in a statement announcing the survey results.  ‘It’s up to companies to offer the right position for the right compensation package or risk losing candidates to firms and industries competing for the same in-demand talent.’

“Nearly four out of 10 hiring managers (39 percent) report that it’s taking them longer to fill positions for a lack of enough qualified professionals for their openings, the survey found.  That’s up from about one in three (32 percent) who reported longer fill times at the start of the year.”

So, how can construction compete with that?  While much of the reporting about depressed wages focuses on residential construction, many of the same things can be said of the commercial sector, which has gone wanting for workers as well.  The blame can't be solely placed on contractors because they're under pressure to deliver a quality product for the lowest price while Washington sits on its hands when it comes to immigration reform.  Remember: wages of many construction workers are depressed because they’re either undocumented, misclassified as independent contractors, or both.

Texas home builders have been especially fervent in their opposition to fixing the misclassification problem, as we documented in this special report called Thrown Away People.  If those workers were paid as employees rather than subcontractors, much of this could be averted.  Other than a limited crackdown on the practice that puts ethical employers at a competitive disadvantage, Texas’s leadership has yet to do much about it.

There is a private sector solution.

Those who can do the most to immediately improve the situation are the owners of projects who can demand, for example, that their buildings be constructed following the principles outlined in the Construction Career Collaborative.  Those include safety training, workers' compensation insurance for all workers, and hourly pay, including taxes and overtime. Owners like Texas Children’s Hospital, MD Anderson Cancer Center, and the Archdiocese of Galveston-Houston have stepped up to the plate.  The Houston Independent School District is implementing its Labor Compliance Program – a program that utilizes C3 principles – and the Austin Independent School District’s board has heard about C3.  They should follow suit, as should responsible owners throughout Texas and the nation.

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