Lack of skilled labor could slow construction surge
Construction companies in the South Sound, like BPCI Accrete Construction in Puyallup, are hiring, but finding that skilled labor is shrinking. The applicants are certainly there, but very few are knowledgeable, according to BPCI president Michael Cholerton.
Photo courtesy of BPCI Accrete Construction
Attendees at the 2017 Horizons Economic Forecast, hosted by Tacoma-Pierce County Chamber of Commerce last month, heard encouraging news about the construction industry in the county, as well as the South Sound as a whole.
The numbers say it’s a growing sector: The industry added 2,300 jobs year-over-year through October 2016, second only to retail trade in nonfarm employment growth. The sector’s taxable retail sales are flexing some relative muscle as well, with increased taxable sales of $728 million – a 48.8 percent climb – relative to just four years prior.
And the industry’s growth trend looks robust, according to Neal Johnson of Sound Resource Economics, who prepared the Horizons Forecast.
“With reported construction costs attached to building permits issued in the first three quarters of 2016 up 17 percent from the same period in 2015,” Johnson wrote in the forecast, “construction employment should continue to grow into 2017.”
Similar trends are surfacing in both Thurston County and South King County. Residential construction, for one, continues to see high demand, with Seattle’s escalating home prices forcing home buyers to turn their gaze south for affordable real estate. Couple that with continuing strength in Pierce’s warehouse and distribution sector and the demand exists for more inventory all over the region, which means construction noise shouldn’t be rare in 2017.
While that’s great news on the surface, though, there’s one substantial caveat bubbling: Some South Sound companies are learning that finding workers to fill those construction jobs is getting increasingly difficult. Now that the recession has ended and the industry has begun to bounce back, the inherent problems within the workforce are becoming more evident.
“Finding quality labor is just about impossible right now,” says Zach Kosturos, owner of Prime Locations in Lacey. “A lot of contractors have more jobs lined up than they have the staff for.”
The problem isn’t a lack of applicants, says Michael Cholerton, president of BPCI Accrete Construction in Puyallup.
“We get lots of applicants, but none of them know the trade,” he says. Most of the skilled workers he sees are older, with few younger workers entering the field.
“While there was high unemployment during the recession, nobody was training to go into construction,” he says. “People really don’t want to do construction as much anymore. It’s not as desirable as a field like tech. We’re not really seeing new people coming into the industry.”
Far be it for anyone to bemoan the rise of college education, but the transition of the country’s workforce from blue to white collar has been a tourniquet to the industry’s workforce for a while. Since the 1960s, college graduation rates have soared; while in 1965 less than 10 percent of Americans had earned a college degree, by 2012 the number of 18-64-year-olds with at least a two-year degree had increased to 39.4 percent. And while high-tech jobs have grown within the construction field, the lure of more computer- and office-based high wage careers has been a drain to skilled labor.
The recession, it seems, has accelerated the process, pushing millennials concerned for future earning power into white collar college tracks. Theresa Wall at Kaufman Brothers Construction in Tumwater has watched the trend firsthand.
“We have a lot of work in our pipeline, but we’re having the same difficulty,” she says. “A lot of people want to work behind a desk.”
While Kosturos and Cholerton found it easier to hire skilled workers during the economic downturn, Wall saw early warning signs.
“We’ve been noticing this issue even throughout the recession,” she says. “It has to do with the millennials and their work desires. There are more people going to college and learning different types of trades, and fewer people going into these types of jobs.”
A national issue
It’s not just a local trend, either. Construction employment throughout the United States declined by 3,000 net jobs in December, according to analysis from Associated Builders and Contractors, a national construction trade group. And while the nation’s construction sector still grew in 2016 – adding 102,000 net new jobs on a year-over-year basis – that’s the industry’s smallest employment increase in more than four years. And this is all despite a spending report that has nonresidential construction spending expanding to its highest level nationally in eight years.
“One possible way to reconcile seemingly contradictory data is to point out that construction firms are reporting greater difficulty filling available positions,” said Anirban Basu, chief economist for Associated Builders and Contractors, in a January report.
“More than 80 percent of ABC members report difficulty finding appropriately skilled labor. Accordingly, many construction firms are required to do more with fewer people, which should eventually show up in construction productivity data that reflect the amount of output generated by the average worker on a per-hour-worked basis.”
South Sound builders are confirming Basu’s observations, with capacity limited and the amount of time each project takes lengthened – sometimes considerably.
“Things take longer,” says Kosturos. “We manage 1,300 units and about a million square feet of commercial space. In every location, we always have things going on, but now, they may take a month, instead of a week.”
It’s not just the builders, either.
Other trades related to construction – electricians, plumbers, etc. – are having trouble filling skilled positions.
Patrick Hafey is a project manager with Advanced Build Northwest, a Lakewood-based green design firm which develops foam panel homes that meet SIP (Sustainability in Practice) standards for a niche market. Although the company’s in-house labor pool is stable, Hafey reports that they’re running into the same problem with subcontractors.
“We’re in a specialized building field,” says Hafey. “If my current electrician is booked up for months, it kills timelines. Window suppliers went from being seven days out to 28 days out. These days, you have to place orders up to five weeks in advance.”
High turnover resulting from unqualified crews also causes delays. Even though Kaufman Brothers was able to find applicants, most of them didn’t last more than a week or two.
“We’re looking for good help anywhere we can find it,” says Wall. “We’re using social media and offering finder’s fees for anyone in our crew that can bring in someone that turns out to be a viable employee.”
The company also has visited local community and technical colleges searching for effective workers, without much success so far.
Perhaps the most important impact is a decrease in capacity to take on new projects.
“When you can’t get the subcontractors, you can’t take on more work,” says Cholerton. “People are saying they’re full and they can’t bid on anything. Instead of getting two or three bids, now you’ll get one.”
Already, the result has been higher costs for projects, a trend that he expects will continue.
“The lack of labor will drive up prices, and then people will get interested in the industry again,” he says. “When the market shrank, a lot of people got out of the business. But now that the demand is increasing, nobody is big enough to handle it. The rates are going to go up.”
What’s the solution?
The prospect of earning a competitive wage may bring younger workers back into the industry, but it will still take them several years to acquire the skill levels needed.
“We aren’t actually educating people in the trades anymore,” says Kosturos. “They don’t teach wood shop in schools and there’s nothing taught to get them interested, so we have fewer people coming into the field from the get-go.”
In the past, such trends were reversed when the market slowed down, but that’s not an outcome anyone wants, according to Kosturos.
“We need to offer more avenues for people to learn these trades. You can go online and learn computer programming for less than it costs to go to college,” he says. “You can’t do that for construction. It takes swinging a hammer.
“But, if there were a way to create a similar training system that exposed people to framing or finish work, gave them an opportunity to shadow someone, and educated them about the potential wages, that would be a start.”
Such solutions are exactly what Teri Pablo and her colleagues are working on. Pablo is director of Yelm Community Schools’ Current Technologies in Education, the district’s equivalent of a career and technical education (CTE) program.
“We’ve been talking about how to address these issues,” says Pablo. “How can we build those partnerships with industry and show students those jobs are out there? We need to know that those industries are looking for students and find a way to funnel students to those opportunities.”
The state may be looking to give the industry a hand. For the first time in history, the State Board of Education and Workforce Training and Education Board passed a joint resolution to develop policy and legislation that identifies career readiness standards for CTE, restores enhanced CTE funding, and strengthens high school and beyond planning.
“It’s all around providing adequate entry points for career readiness,” says Pablo, a past president of CTE Directors of Washington. “We want to re-look at how we design programs to meet the needs of industry. When it comes to skilled labor, there’s room to grow.”