By ALAN J. ORTBALS
Construction is booming across the nation and the skilled workforce is having a hard time keeping up, according to the Associated General Contractors of America.
Construction spending in September reached a new seven-year high and climbed at the fastest rate since early 2006, according to an analysis by the AGCA. But, while construction was strong overall, spending on nonresidential projects declined by 0.1 percent between August and September. The AGCA pointed to growing workforce shortages as likely impacting the amount of work firms were able to perform for the month.
“Overall demand for construction continues to grow at a very robust rate,” said Ken Simonson, the association’s chief economist. “It appears, however, that many firms performing private nonresidential work could not find enough qualified workers in September to keep pace with growing demand.”
Simonson offered that the reason for the skilled labor shortage in commercial work as opposed to residential may be due to greater complexity of the projects and need for higher skill levels in all trades.
Construction spending in September totaled $1.094 trillion at a seasonally adjusted annual rate, 0.6 percent higher than the August total and 14.1 percent higher than in September 2014, Simonson said. He noted that the total was the highest since March 2008 and the year-over-year growth rate was the strongest since January 2006, indicating a faster pace of construction spending overall.
However, private nonresidential spending fell by 0.7 percent from August even as it remains 14.9 percent higher than a year earlier. The construction economist noted that while spending on sectors such as lodging, manufacturing and offices experienced significant year-over-year growth, most categories saw a decline in spending between August and September as firms struggled to replace retiring workers amid growing labor market tightness. There were only 479,000 unemployed construction workers in September, the smallest September total in 15 years, Simonson said, citing data from the Bureau of Labor Statistics.
Eighty-six percent of firms responding to a recent AGCA survey reported having a hard time finding qualified workers to fill available positions. As a result, many firms are likely struggling to find enough staff to keep pace with the growing demand for construction services, prompting the slight drop in monthly construction spending in the private nonresidential sector, according to Simonson.
One market that is particularly hot is multifamily residential. This sector has been strong for some time, according to Simonson, but he said he does not believe it’s been overbuilt.
“Most people believe that we’ve hit the peak in the multifamily market,” Simonson said. “But so far the figures on vacancy rates remain very low; rents keep rising about 5 percent per year; and there is still a very high level of building permits for multifamily housing, so it looks like multifamily construction will remain hot for at least one more year.”
The AGCA has expressed growing concern regarding the workforce shortage and has developed a 9-point plan to address it.
“Demand may be starting to outstrip the industry’s capacity given the severe and growing shortages of available, qualified workers,” said Stephen E. Sandherr, the AGCA’s CEO, who urged elected and appointed officials to act on measures outlined in the association’s Workforce Development Plan designed to make it easier to prepare, recruit and train new workers.
Efforts are also underway locally to get more young people interested in manufacturing and building trades. The Madison-Bond Workforce Investment Board, the Mid-America Workforce Investment Board and the Leadership Council Southwestern Illinois are collaborating on creating materials and making presentations across Madison and St. Clair Counties. David Stoecklin is executive director of the Madison-Bond WIB and chairman of the Leadership Council’s economic development committee. He said that a recent analysis revealed a workforce gap of about 3,000 people in trades and manufacturing in the two counties over the next five years.
Stoecklin said that there were multiple causes for the labor shortage. Many of the career and technical education programs in high schools have been reduced or eliminated because of cost. Programs like No Child Left Behind and Common Core have pushed school districts to focus on test results. And, everyone from parents to the president of the United States has been pushing teens to go to college.
“We hope to hit the ground running in January with the speaker’s bureau to get out and talk to the PTAs, PTOs, guidance counselors, school staff, principals, as well as moms and dads — anybody who will listen to us,” Stoecklin said. “One of the things that we need to do is have more business involvement with the school system, letting the school system know that there are good jobs available for
their students if they’re prepared in the right way.”
Stoecklin pointed out that the cost of a college education has skyrocketed in recent years and many graduates end up saddled with $50,000 in debt or more. At the same time, many college degrees have limited demand in the labor market, tamping down salaries and making it tough to pay off that college debt.
Meanwhile, a high school graduate can enter an apprenticeship program and earn money while he or she learns. Stoecklin said their research revealed the average income in manufacturing is $80,000—a salary that many college grads would aspire to. Plus many employers offer tuition reimbursement so a person can easily move up the ladder to management if they want to.
“There are great careers out there,” Stoecklin said, “but we have to win the hearts and minds of moms and dads. We’ve been bombarding kids with, ‘go to college; get a four year degree.’ But those opportunities are limited — not limitless. What are you going to do with a four year degree unless it’s in something like engineering or nursing? I really question what a person with a BA in history or a BS in psychology is going to do with that.”
Preparing the next generation of skilled construction workers
EDITOR’S NOTE: Following is Associated General Contractors of America’s Workforce Development Plan to address the need for skilled construction workers.
As the construction industry emerges from a severe downturn that began more than eight years ago, many firms report having a hard time finding enough skilled workers to fill key positions. These workforce shortages may at first seem counter intuitive for an industry that was forced to lay off more than 2 million workers since 2006. However, these shortages are the consequence of a series of policy, education, demographic and economic factors that have decimated the once robust education pipeline for training new construction workers.
The lack of a sufficient number of secondary-school career and technical education training programs across the country means that as the construction industry expands to meet growing demand, an increasing number of firms will have a hard time finding skilled workers. Left unaddressed, these shortages will ultimately undermine the industry’s recovery and impact broader economic growth as staffing shortages lead to construction delays. That is why the Associated General Contractors of America has identified an array of measures that federal, state and local officials should adopt to expand secondary-school career and technical education and post-secondary training opportunities so more people can enter into a growing number of high paying construction jobs. Those measures are outlined in this plan.
How construction worker shortages could slow the economy
Construction worker shortages pose a threat not just to firms looking to recruit new talent. These shortages have the potential to undermine broader economic growth. As construction firms struggle to fill key positions, they will be forced to propose slower schedules for vital projects, tempering the pace of economic development. After all, construction is one of the few industries where the vast majority of work must be performed on-site and cannot be off-shored.
What happened to the once robust construction education pipeline?
A number of changing trends have combined to cripple what was once a robust education pipeline for new construction workers. Those factors include the dismantling of the public vocational and technical education programs, declining participation in union apprenticeship training and an increasing focus on college preparatory programs at the high school level.
Why an industry that shed two million jobs has a hard time finding workers
The number of unemployed construction workers currently seeking employment has tumbled from 2.2 million in January 2010 to 525,000 in August 2015 – the lowest amount for the month since 2001, according to the Bureau of Labor Statistics. Many laid-off construction workers likely opted to return to work in other sectors of the economy. Other laid-off construction workers simply decided to hang up their tool belts and retire.
Given the potential negative economic impacts of construction worker shortages, and the need to re-invigorate the construction skills education pipeline, the Associated General Contractors of America has identified a range of measures that federal, state and local officials should take. These measurements include an array of legislative and regulatory reforms that are designed to make it easier for private construction firms and not-for-profits to finance and operate their own training programs. These changes would expand training opportunities while rightly shifting additional responsibility to the private sector.
Taken together, the measures outlined below have the potential to significantly improve the scale and quality of the domestic training pipeline. That is why officials are urged to adopt this plan in its entirety, instead of as an a la carte menu.
- Reform and reinvigorate the Perkins Act. Congress and the administration must work together to make a number of reforms to the Carl D. Perkins Career & Technical Education Act – the primary federal funding vehicle for career and technical education programs.
- Offer community college career and technical programs to high school students for free.
- Encourage private funding for craft training programs. It has long been lawful for the members of a multiemployer bargaining unit to agree that each will contribute a certain amount per hour to fund such programs as long as their agreement is embodied in a collective bargaining agreement with an appropriate union. To meet the construction industry’s future needs for craft training, open-shop contractors need to have the same option.
- Make it Easier for veterans to get training and be hired. Congress should enact measures to allow veterans participating in pre-apprenticeship training programs to receive the same amount of educational assistance as individuals participating in apprenticeship programs.
- Encourage partnerships between registered apprenticeship programs and community colleges.
- Expand federal apprenticeship resources and collect more comprehensive data on all apprenticeship programs.
- Enact immigration reform. Congress and the administration need to ensure that the millions of undocumented workers who have been participating in the domestic economy for years have a way to attain legal status.
- Make it easier to establish public schools focused on career and technical education.
- Implement Workforce Innovation and Opportunity Act. WIOA streamlines much of the workforce development system, gives states greater flexibility to address the most crucial local worker shortages, and strengthens employer engagement.
As demand continues to pick up around the country, the construction industry will face worker shortages with increasing frequency. Decades of converging policy, educational, demographic and economic trends have combined to dismantle the once robust vocational education system that provided a steady supply of skilled construction workers. Meanwhile, the regulatory measures put in place when more workers chose union representation no longer make sense in an industry where roughly 85 percent of construction workers are employed by open-shop contractors according to the Department of Labor.