For several years now, there has been a growing concern by construction owners and contractors in the Gulf Coast regarding the need for more skilled construction professionals.
A recent Reuters News article highlighted the concerns of U.S. refiners that severe labor shortages will hamper their ability to conduct needed and critical maintenance to their facilities.
Much of this concern is fueled by simple supply and demand as the Gulf Coast is, and will be, the epicenter for large industrial construction projects requiring thousands of skilled craft professionals.
Between 2013 and 2016, according to Industrial Info Resources, a leading analytical firm that focuses on the U.S. construction market, 1,206 capital projects, with a combined value of $145 billion, broke ground in the Gulf Coast region. Comparably, from 2009 to 2012, only 902 capital projects were undertaken, with a value of $59 billion. As we look into 2017, IIR’s early analysis projects another $30.8 billion in construction starts, representing over 400 capital projects. Labor demand will peak in 2018 into 2019 then taper off but remain high through 2025.
One of the major drivers behind the workforce challenges facing the Gulf Coast region are the general economics of the construction industry, especially when it comes to wages and benefits.
Nationally, average wages in the U.S. construction industry have taken a huge plunge since the 1970s. In the latter part of the '70s, the average wage for a construction craft professional, adjusted for inflation, was over $30 per hour. Today, it’s less than $25 an hour. And rather than raise the base wage and benefit package to a level that would attract high-quality individuals into the industry, and into the Gulf Coast market in particular, contractors in this region have embraced the practice of offering “per diem” incentives that are given and taken away at a moment’s notice depending upon labor market needs.
Additionally, the Gulf Coast region unfortunately leads the country in terms of contractors and labor brokers who fraudulently game the system when it comes to the recruitment of foreign guest workers under the federal H2(b) visa program.
The story goes even further than that.
A recent 98-page report produced by Stockton University’s William J. Hughes Center for Public Policy provides an unnerving look into the “underground construction industry” in New Jersey, which, unfortunately, has become all too common in states across the nation, especially in Texas.
The Underground Construction Economy in New Jersey highlights how “off-the-books labor,” illegal employee misclassification, wage theft and other issues not only swindles current workers, but provides huge disincentives for future workers from choosing a career in the skilled trades, not to mention cheating federal, state and local governments out of millions and millions of dollars each year.
In Texas, the Workers Defense Fund (WDF) has studied the local construction labor market with unprecedented depth. In a study entitled, "The Failed Promise of the Texas Miracle", WDF concluded that:
“Texas has prioritized investment in businesses that can promise large numbers of jobs, [but] the state has failed to invest in the education and job training programs necessary to ensure that Texans can actually obtain those jobs.”
So, who does invest in training the skilled craft workforce that is so desperately needed along the Gulf Coast? Believe it or not, it’s North America’s Building Trades Unions and the employers and contractors they partner with. And it’s not even close. Not only are over 75 percent of all skilled craft construction apprentices across America trained and educated within NABTU’s Joint Labor-Management Training Centers (JATCs), but along the Gulf Coast the Building Trades and their partner contractors contribute by maintaining 250 training centers, encompassing a capacity of 35,000 training slots, 900 welding booths and 50 mobile training centers, all of which is privately funded. However, many of these programs operate well below their capacities because the building trades and their participating contractors are not afforded opportunities to qualify and bid on projects in the region.
It is now critical for the construction owner community to reexamine its contracting and labor strategies, widen its pools of qualified contractors in the Gulf Coast region, and reengage in a conversation with the building trades about integrated solutions to workforce shortages.
When a news article or other type of discussion arises about what to do about skilled craft workforce challenges in this region, there is rarely a word spoken about utilizing this proven and successful infrastructure, which is privately funded through collective bargaining and built on years of labor-employer cooperation.
Because the utilization of skilled craft union workers would upset the prevailing “low road” business model that has kept labor costs unbearably low for a generation across the South, and which, ironically, is the chief underlying culprit from attracting new workers into the industry today.
Indeed, many contractors and owners look to local community colleges (where students must pay tuition, in contrast to the Building Trades’ “Earn While You Learn” model) and other ineffective programs, such as the Construction Career Collaborative (C3) in Houston that purports to promote craft training, but in truth does nothing more than “ensure compliance with the requirements of the C3 Accreditation program to verify pay practices of the skilled craft workers’ employers and verify the safety credentials of those craft workers on the project site.” In other words, it’s a program designed to keep contractors and owners from being fined or facing criminal charges for safety and/or labor violations, not to train students for careers in the skilled trades.
If construction owners and contractors are truly serious about solving the skilled craft workforce challenges plaguing this region, then we need to gain a better understanding of the economics of our own industry and eliminate long-standing prejudices associated with the word union. We need to form collaborative labor-management partnerships that can deliver the training and skilled craft professionals they seek and engage in a broader conversation, inclusive of all groups that bring knowledge and resources to the table, truly committed to finding a long-term solution.
Greg Baehr is Director – Gulf Coast with Magnus & Company, Inc. Magnus & Company is a construction advisory firm based in Birmingham, AL with an office in Montgomery, TX.