Lack of workers stymies new home construction
No amount of project streamlining can solve California’s housing affordability problem by itself.
To lower prices, California needs to build a lot more housing. But to do that, it needs enough workers with the skills to do so safely and correctly. Prevailing wage standards, which function as a local minimum wage for skilled construction work, can help address these critical needs and improve the industry’s competitiveness in increasingly tight labor markets.
According to the National Association of Home Builders, the number of builders reporting “some or serious” labor shortages grew from 21 percent in 2012 to 56 percent in 2016. More workers are choosing not to work in construction because it is no longer the gateway to the middle class.
A recent study by Smart Cities Prevail showed that inflation-adjusted wages for California’s blue-collar construction workers have declined 25 percent since 1990. In some communities, more than half of these workers must rely on housing subsidies, and nearly 40 percent don’t have health insurance. The study also reveals that what were once middle-class incomes are being redistributed into the pockets of developers and builders, whose profits have grown 50 percent faster than either labor or material costs since 1992.
Sadly, there are even more disturbing racial disparities. According to a UCLA analysis, the share of immigrants in California’s construction workforce has grown from 13 percent to 43 percent since 1980. On average, Latinos are being paid just 68 cents for every $1 of their white counterparts. These trends have tracked a growing pattern of illegal wage theft by unscrupulous contractors. The Trump administration’s anti-immigrant rhetoric makes it less likely that workers will speak out against employers who cheat.
But a business model reliant on below-market wages and exploitation of immigrant workers hasn’t made housing cheaper. If anything, it might be having the opposite effect, not only driving skilled workers out of the industry but decreasing the workforce productivity and quality the industry needs to be cost effective.
The burden of fixing preventable mistakes can add thousands of dollars to the cost of projects. Lawsuits over construction defects have become a thriving industry.
To address the affordable housing crisis, California must reverse these trends. Prevailing wage rates are based on local employer surveys covering dozens of different construction jobs. They set family-sustaining minimum wages and benefits for all construction workers – regardless of race, gender or union affiliation. This levels the playing field, reduces poverty and helps working families.
The entire economy benefits. So do taxpayers. Research consistently shows that prevailing wage standards reduce workers’ reliance on government assistance, and make it easier to stop employers who steal wages and cheat on payroll taxes.
Additionally, prevailing wage standards encourage more employers to invest in skilled trade apprenticeship programs. Together with competitive wages, these programs help attract workers to the industry and help them earn while they learn. A better trained workforce results in more efficiency, innovation and productivity.
California’s housing affordability crisis isn’t just about dwindling supply. It’s also about the construction industry’s failure to invest in the skilled workforce it needs to replenish it. By including prevailing wage standards in housing reforms, California can finally make sure they do.
Kevin Duncan is a professor of economics at Colorado State University-Pueblo who specializes in construction labor market policy. He can be contacted at Kevin.firstname.lastname@example.org.