Will it Take a Sea Change to Fix the Skilled-Labor Shortage?

March 7th, 2016 by Trey Barrineau

The labor shortage that’s forced the homebuilding industry to tread water for several years is splashing over into other areas. Home prices are rising because builders can’t keep up with demand — and that construction slowdown could eventually wash over door and window manufacturers as there’s less of an immediate need for their products.

“I recently asked a group of remodelers ‘do you have a backlog because of the lack of help?’ Most hands went up,” said Mark Richardson, a senior industry fellow with Harvard’s Joint Center for Housing Studies. He was one of the panelists at a recent HomeAdvisor Insights Forum on the labor shortage in construction, which was held at the National Press Club in Washington, D.C. “Most felt comfortable with it. So I asked them, ‘how do you think it would be for Andersen and Pella if they couldn’t produce a window for six months?’ A light bulb went off, and they realized that this is not a great place to be, even if your labor costs are lower. I mean, if you can’t put the stuff in the wall, there’s no reason to produce it.”

HomeAdvisor hosted the forum to coincide with the release of its Skilled Labor Shortage Report, which reveals that 93 percent of home professionals believe hiring challenges are preventing them from growing their businesses.

“The lack of labor is hurting new construction,” said Jonathan Smoke, the chief economist for Realtor.com. “There’s no question we’re not producing enough.”

That, in turn, is boosting the cost of housing.

“A low supply of housing and an intense demand for it is driving prices higher across the country,” he said. “So this dynamic is not the same as the bubble years, when there was a lot of speculation.”

And it doesn’t look like it’s going to get better anytime soon, Smoke said.

“If you ask builders ‘why aren’t you building more,’ the No. 1 issue is labor,” Smoke said. “And 80 percent expect it to get worse and not better.”

The big reason? An aging workforce and a cultural bias against skilled labor that discourages younger workers from entering the field, issues that DWM explored in its June/July 2015 feature story, “Where Have All the Workers Gone?”

DWM’s research found that along with the current shortages, approximately 1.1 million construction workers are likely to retire within the next decade—a total that includes a significant number of experienced leaders.

“The labor shortage reveals a generational imbalance as the current aging workforce struggles to attract Millennials into its ranks,” said Marianne Cusato, HomeAdvisor’s housing expert and a professor at the University of Notre Dame’s School of Architecture.

“We had a complete exodus of people under 50 as housing contracted,” said Smoke. “You go to a builder convention, and it’s mostly people over 50. Younger workers see that and think ‘there’s no one like you there.’”

Another reason younger workers aren’t flocking to construction jobs is the working conditions.

“Go look at tech firms that are packed to the gills with young people who could be making more money in construction fields,” said Diana Olick, who covers housing for CNBC. “How do you lure young people to construction as opposed to really cool tech offices?”

A lack of diversity is another big problem. Most managers in the field are white males, said Tara Sinclair of job-search website Indeed.

“Women can do this just as well as men,” said Richardson, who said females are only about 2 percent of the workforce in construction. “It’s puzzling that women don’t feel this is an appropriate place to have a career.”

But the biggest issue is the perception of skilled labor as something to avoid.

“As a society, we have denigrated the nobility of the trades,” said Chris Terrill, the CEO of HomeAdvisor. “That’s a big part of the issue. Also, socially, we’ve gone ‘college or bust.’ That’s a model that’s broken. It does a disservice to kids who might thrive in a different path.”

“It’s a cultural issue,” said Stephen Sandherr, the CEO of the Associated General Contractors of America (AGC). “There are few parents who think, ‘I’d love it if my kid would grow up to become a carpenter.’ Our education system is skewed toward focusing kids toward college. But college is not for everyone. There are jobs out there that allow you to earn a middle-class living, have a sense of pride in what you do, with skills that are transferrable, and with opportunities for advancement.”

Training programs and apprenticeships could help, but they’re falling by the wayside. The skilled trades have lost 11,000 apprenticeship programs since 2002, and today there are only 21,000 such programs across the country.

Funding is an issue as well.

“We don’t get one damn dime contributed to our programs from the home building industry and construction industry,” said John Courson of the Home Builders Institute, an affiliate of the National Association of Home Builders (NAHB) that provides training, mentoring, curriculum development and job placement services in support of the housing industry. “That’s just wrong.”

One panelist suggested emulating Switzerland’s vocational-education system.

“Switzerland is the gold standard of these programs,” Terrill said. “It took the country 20 years to get there, though,” which demonstrates how hard it could be to change the culture here, he said.

In Switzerland, about two-thirds of the school-age population goes through apprenticeships in every imaginable field — and Terrill said there’s no social stigma attached to working with your hands. It’s also very flexible, he said – students can change apprenticeships whenever they like, or can bypass the whole process and go to college.

“Over there, school is about getting a job,” Terrill said. “It’s really refreshing to see what they’ve done. It’s a good blueprint for what could be done here.”

Swiss businesses pay for the programs, he said, adding that 80 percent of students end up getting hired by the companies that offered them apprenticeships.

“In the U.S., there are two silos — education and business,” Terrill said. “We need to bring them together. If we don’t start breaking this mold that there’s one way to be successful, you’re not going to have people to take care of you home. Plumbers and electricians make a lot of money.”

As for a quick fix to the worker shortage, panelists uniformly agreed that immigration could definitely help.

“Immigration reform is a big issue,” said Sandherr. “We’ve got to find some type of legal status for people in our industry.”

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