Construction Labor Shortages Are Taking A Toll On Texas

Just how tight is the construction labor market around Texas? Some contractors are posting guards at their job sites to make sure crews don’t get poached while on the job by someone willing to pay more. Finding the right crew and fully staffing projects has become a tooth-and-nail fight for contractors and developers all across the state.

Almost 70% of Texas construction companies plan to hire hourly workers in the next 12 months—if they can find them—according to a recent survey released by the Associated General Contractors of America. Hourly craft workers are the biggest hurdle: 74% of construction companies say they are having a hard time hiring carpenters, electricians or plumbers.

A Dallas skyline full of cranes is bad news for the rest of the state's construction labor market. With almost $11B in construction underway in the Dallas-Fort Worth area, construction companies are doing all they can to fill their hard hats, and that's hurting other Texas metros. 11 of the 14 Houston-area companies that responded are struggling to fill hourly spots even though construction is slowing down. 50% of Houston-area respondents said they are also having a hard time filling some salaried field positions, particularly estimating personnel and construction superintendents, project managers and supervisors.

Construction labor shortages have been a problem for years. The 2008 crash spurred many construction workers to drop out of the industry and never return, creating issues for the current nationwide building boom, according to the AGC.

During the energy boom, Houston’s construction labor shortage was exacerbated by an exodus of skilled laborers into the oil and gas industry, which offered higher salaries. You’d think that workers would start migrating back to construction, but that hasn’t been the case for most. 

Many of them are holding off and waiting to see if prices recover and drilling starts again, said Michael Sireno, president of Baker Triangle, a construction company in San Antonio. He recently hosted a job fair to target nearby oil field workers who have been laid off, but they didn't show much interest. In most cases, workers earned twice as much working for drillers as for construction contractors.

Recruiting people into the trade has become increasingly difficult due in large part to issues surrounding mistreatment of workers. A 2013 report on the challenges facing the construction industry in Texas by the Workers Defense Project and the University of Texas found that workers routinely face dangerous working conditions, low wages and legal violations, like being misclassified as independent subcontractors (thus avoiding payroll taxes, employee benefits and overtime pay). The report estimated as much as 40% of construction workers may be misclassified.

And in Texas, immigration issues are at the heart of the construction labor market. The University of Texas study estimates that half of Texas’ construction workers are undocumented immigrants. (Although Austin-based US Hispanic Contractors Association chairman Frank Fuentes says “that sounds a little high.”)

To lure enough skilled craft workers, construction companies have had to revamp their compensation packages. In Texas, 63% of construction companies say they've boosted base wages for their skilled craft workers and 21% report providing incentives such as bonuses. 23% are paying more overtime and 15% are improving employee benefits. To make up the gap firms face in the short term, 55% of contractors are turning to in-house training.

To solve the problem long term, AGC proposes bringing back construction education in high schools and calls for immigration reform that would increase the pool of legal workers.

Despite the issues with labor, construction costs in Texas continue to be lower than other major metros, especially in Austin. The capital has outpaced other markets in the past few years, with a cumulative Construction Cost Index (CCI) change of 17.4% since January 2011, making it the least expensive market in a recent CBRE study about construction costs.