The following article was written by Don Cerlanek, General Manager of MEMCO (Marek Employment Management Company) Atlanta:
Representatives of the City of Atlanta Workforce Development Agency, the American Subcontractors Association - Georgia Chapter, the State Office of Economic Development/Go Build Georgia and the U.S. Department of Labor Wage and Hour Division recently met with the leadership of Marek, a leading Atlanta subcontractor, to discuss rapidly developing issues linked to a shortage of qualified construction workers in the Atlanta region.
The discussions identified the current state of the construction industry in the Atlanta region and across the nation that are creating the skilled labor shortages. These shortages are contributing to the inability to attract new talent into the industry and to companies like Marek. According to the construction industry representatives in the meeting, there were four parts identified as the “problem.” They include:
- Immigration/Undocumented workers not being able to obtain work permits or green cards
- Tax status/misclassification of workers as 1099’ers
- Inability to attract young people into the industry
- Negative perception of the industry
From the mid-80s to the recession of the last decade, hiring and training a qualified hourly workforce meant offering a fair wage, benefits including health insurance and PTO (Paid Time Off), overtime pay, workers comp insurance and safety training.
During the recession, a large number of skilled workers could not find work and some estimate that over 40% left the industry. As the economy and industry recovered, the traditional employment model is being challenged by the state of the industry and a new employment model has emerged, one that offers none of the benefits spelled out in the Marek model. Due to the loss of workers during the recession, the retirement of many skilled craftspeople and a greater emphasis in the education system to focus on Tech jobs and not crafts jobs, companies like Marek have lost the ability to attract young talent into the industry. This has happened at a time when the demand for talent is soaring. This, according to Stan Marek, CEO of Marek, is what the current or “new” employment model in play in the Atlanta area looks like. The labor suppliers and subs:
- Apply for tax ID#
- Obtain certificate of insurance
- Hire workers as 1099 independent subcontractors (misclassify them)
- Provide all the workers you need and bill the owners $25/hr.
- Pay these 1099 workers $10-14/hr. in cash
“The use of this current model results in no taxes being collected or paid, no insurance coverage being provided to protect the workers on the jobsite, no overtime paid for the long hours required to meet rigid time schedules, and no safety programs or training are being offered to further protect the existing workforce. Companies like Marek who offer a full range of benefits and safety training cannot compete with this model,” said Stan Marek, CEO of Marek.
According to the DOL representative in the meeting, Wayne Kotowski, Wage and Hour Division, “Wage and Hour has been fighting this problem, with farm labor contractors for instance, for years so this is not a new concept. This (1099 worker) model has exploded and now includes other industries such as bartenders and Uber drivers. This is not a problem that is isolated to construction. We, WHD, are changing direction of enforcement to include the drywall industry and large commercial drywall companies all over the South. There is more bang for our buck.”
We can see that the items listed as “the problem” are all related and will likely get worse as the market recovers in the Atlanta region. How can we solve them? One answer is seen in a public/private initiative called C3, Construction Career Collaborative.
C3, currently comprised of over 100 owners, contractors and subcontractors, began in 2009 when AGC, Associated General Contractors, and other partners in Houston, TX identified a looming generational problem. “The current employment model cannot work and is not sustainable. States like Texas and Georgia are going to continue to see increased population growth rates. At the same time, the workforce is continuing to age and there is a lack of skilled training. C3 is a not-for-profit 501(c)(3) organization and was created to reestablish the belief that a career in the trades is attractive,” said Mike Holland the COO of Marek. He continued, “The mission of C3 is to create an alliance of socially responsible owners, contractors and specialty contractors who will positively affect the growth of a sustainable workforce for the commercial construction industry. It has to begin with owners. Owner reaction thus far, it’s about time!”
When a workforce is viewed as a commodity, vital things such as safety training are ignored in order to reduce cost. But at what price? The impact is lower quality craftsmanship resulting in longer schedules, poorer quality buildings resulting in higher maintenance costs, unit cost increases, suppressed wages and an unattractive industry in which people are unwilling to consider as a career.
The strategy for a long-term solution is simple and it is owner driven. Building owners and developers must ask the question, “What is the right thing to do?” The result, if we cannot solve the labor shortage problem, is that we will not be able to sustain a skilled craft workforce that can meet the demands of our industry.
By addressing, not ignoring, this employment problem, the growing trend of being socially responsible can become the norm. Similar to what LEED has done environmentally. However, market influencers and leaders are needed now, especially those who have a long-range view of the industry and the courage to show the way and lead by example when it may be unpopular to do so.
Don Cerlanek, LEED AP, General Manager of MEMCO (Marek Employment Management Company) Atlanta. Cerlanek is currently President of the ASA Georgia Chapter.