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Labor Shortage? More Like Wage Shortage. Crummy Jobs Keep Good Workers Away.

Orange County Register writer Jonathan Lasner recently tackled the complex subject of the alleged construction worker shortage, and questioned those who blame the situation on a lack of skilled workers.  In his piece, “Construction Faces Shortage of Workers (Maybe),” Lasner does not shy away from either side of the argument. But he is suspicious of non-union contractor lobby claims that a lack of skilled workers is the cause, rather than low wages and questionable business practices.  

Lasner provides Bureau of Labor Statistics information for Orange County as an example:

  • Nationwide, construction bosses employed 6.08 million in September, up 3.9 percent in a year and the highest total since May 2009.
  • In California, construction employment is back at 697,100 — up 164,400 or 31 percent — from post-recession lows. Roughly 1 in every 10 California jobs created in the recovery is in construction.
  • And in Orange County, construction payrolls ballooned by 21,000, to a six-year high of 86,700, thanks to a hiring pace that’s triple the growth rate for all local employers.

Bill Wilhelm, president of Orange County-based R.D. Olson Construction, told the Orange County Register:

“The shortage of qualified construction workers is a real problem for the industry, which has shown impressive signs of positive growth.  Due to the slowdown of the past, numerous workers either left the industry or left the state of California and have not returned,” Wilhelm said. “Add on top of this, the next generation of construction workers is not sufficient to take the handoff from those craftsmen who have entered or are entering retirement.”

But as we wrote in September, much of the labor shortage ballyhoo is being propagated by one questionable, internal survey from the Associated General Contractors of America (AGC).

Unions counter that non-union contractors are paying workers under the table and, in some cases, misclassifying them as independent contractors to lower labor costs. Wages are thus being driven down to levels where skilled workers are unwilling to accept the jobs. From Lasner’s piece:

A study of California’s construction labor market by the Economic Roundtable, funded by the United Brotherhood of Carpenters, details a continuing move away from what they dubbed “formal” building work to what they consider traditional employer-employee relationships.

A growing number of California builders – notably homebuilders – use independent companies to staff job sites. Those subcontractors employ – properly and not – growing ranks of “independent contractors.” Those independent workers typically don’t get many of the benefits and legal protections associated with regular jobs, with employer compensation savings running as high as 30 percent.

The union study claims there’s an even larger workplace – not so secret but often off the books – where salaries can be as little as half of the norm. The average California veteran construction worker had a $32,800 salary in 2012, the study said.

Roughly 140,000 California construction workers are in these so-called informal positions –roughly 1 in 6 of all construction staff members, according to the union study. These workers are either improperly categorized as independent contractors or in under-the-table payment situations.

By the union’s math, “informal” workers earned $1.2 billion less in compensation in 2011 vs. what they would have gotten in “formal” workplace arrangements. And it’s not simply salary. Missing dollars also would have helped fund several state worker-protection programs.

To union officials, simply meeting labor-law requirements could improve worker supply.

“There’s no real worker shortage,” says David Kersh, executive director of the Carpenters/Contractors Cooperation Committee.

As economists note, a true shortage of workers would be reflected by a rise in wages. It is simple supply and demand. But wages are going down, so it is dubious to contend repeatedly that something else is the cause of the construction market’s incongruity.

Read Lasner’s entire piece here.

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