Home builders are facing delays and rising costs as they struggle to find enough construction workers.
That’s partly a function of the housing boom and bust, which helped push industry-wide employment above 7.7 million in 2006, only to watch it come crashing down by nearly 2.3 million over the next five years. While builders are used to ups and downs, the most recent bust was extreme in magnitude and duration.
“The difference this time is that a whole generation left the business and they didn’t come back,” said John Gillilan, operations manager at Bothell, Wash.-based Element Residential Inc. “So there’s a vacancy in the ranks at almost every company.”
That’s bad news for builders, who can’t grow as fast as they would like amid increasing delays and rising costs—factors that could feed through to home buyers in the form of less supply and higher prices.
For experienced trade workers, that means demand for services, steady work and signs of rising compensation.
But elsewhere in the labor force, the picture is mixed. The missing, for example, include industry veterans, immigrants and young would-be construction workers who came of age when the industry just wasn’t hiring. Especially for the young, it could be a lost opportunity—the construction industry offers jobs with decent pay for workers without a college degree. It also has implications for the broader economy, where labor-force participation is near a 40-year low.
Earlier this year, research by Federal Reserve economist Andrew Paciorek found “a large and growing group of workers” who were likely candidates for construction employment but instead were simply out of the labor force.
This result is particularly striking because few people that I identify as likely construction workers are over the age of 60, and at most a quarter of the increase can be explained by increases in school or college attendance. As a result, the average real income among relatively high-probability construction workers has fallen by about 13%, compared with declines of 3% among employed construction workers and 4% among all adults, employed or not.
It seems there are many underemployed workers who appear to be relatively good candidates for construction employment, at least on the basis of these basic characteristics. In particular, there may be a large pool of people who would find construction work attractive but did not enter the industry during the bust years. The open question is how difficult it will be to draw these people into the sector if demand for new homes picks up. These potential workers may require more training to compensate for “lost” on-the-job training during the bust years. Alternatively, if labor supply decisions are “sticky,” underemployment among relatively high-probability construction workers–mostly non-college educated men–could be more persistent, regardless of the training available.
Of course, that’s not the entire problem. Higher wages, for example, would likely attract more workers–at the cost of thinner profit margins or higher home prices.
And many builders lament tougher immigration rules and research suggests that Mexican workers have walked away from the U.S. construction industry. A report released by home-building analyst John Burns Real Estate Consulting Inc. found there now are 570,000 fewer Mexican-born construction workers in the U.S.—both in the residential and commercial sectors—than at the construction industry’s peak in 2007.
Another factor: Construction is physically taxing and not everyone wants or is able to stay in often difficult jobs. That may lead to early retirement, costing the industry its most experienced workers.
“Since the peak, that’s 10 years,” said Tom Woods, a Blue Springs, Mo., home builder and chairman of the National Association of Home Builders. “So all the guys that were 55, 45 years old [in 2005 and 2006] they have retired out of being a framing carpenter. Framing carpenters don’t work until they’re 65 years old and retire. They can’t—their bodies don’t take it.”
Kevin Gibbons worked as a construction contractor for 35 years in New York, quite often sawing boards and laying floors along with his crews. He left the industry in 2010 and now builds cabinets that are fitted into emergency vehicles and commercial vehicles. He says he grew tired of the physical toll of construction and of dealing with difficult home buyers and homeowners.
“I’m 60 now, so I’m not looking to get back into it,” he said. “I’m happy where I am, so there’s no reason to go back. I’d done it a long time, so it’s not like there’s anything to go back for that I hadn’t done.”
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