As a specialty contractor with a significant hourly workforce in the commercial construction industry, I am deeply concerned about a disturbing trend that has developed over the past thirty years and has recently escalated to a new level. Beginning with the 1980s economic decline in Houston and Texas, and continuing over the last three decades, employment practices in the commercial construction industry have deteriorated to the point that, for the most part, the employee/employer relationship is almost non- existent. Except at the more responsible companies, the once valued partnership between employer and worker has been replaced by the hiring of independent 1099 contractors, “pieceworkers” and temporary staffing companies. In response to owners demanding lower prices, general contractors and specialty contractors alike have largely become “brokers” of the construction process, using contracts and questionable employment arrangements to manage labor on construction sites. What began in an effort to compete during a difficult time in the 80s has persisted through extended periods of prosperity, only to accelerate during the current economic difficulties we now face.
The irony is, that while all these “new trends” in contracting/employment were developing in an attempt to compete and to control costs, the reality is that cost is merely being “redefined” and “redistributed”, which is another way of saying somebody else is paying for it. Owner’s construction costs haven’t decreased over the past 25 years. Just ask them. They have continued to climb despite these “cost lowering” practices. While hourly workers have experienced negative wage growth (not keeping up with inflation), unit costs for labor/installation have risen to unprecedented highs. Even the post-construction costs such as maintenance and rework from faulty workmanship have risen. These increases are the result of the continued decline in worker productivity, quality, training, and safety.
While the current economic climate has caused a sharp but temporary drop in materials cost, the labor cost drops are due mainly to contractors of all types scrambling to maintain backlogs and “giving away” their services in order to stay in business and to keep their crews busy until the work returns to normal levels. When the economy recovers, the short term gains will be more than offset by the ongoing decline in the quality of the workforce, and the cost increases this generates.
In addition to the spiraling costs related to loss of skills and productivity, there is the issue of traditional “employment” costs normally borne by general contractors and specialty contractors for their hourly workforces. In ever increasing numbers, employers (general contractors and specialty contractors) have turned to independent contractor (1099) and piecework relationships as a way to carve out the cost of workers’ compensation, health insurance, and even federal and state employment taxes. Who pays for this historical cost now? The answer is our entire community. Higher tax burdens for the smaller tax base, the cost of uninsured health care for medical institutions, and higher premiums for those insured. The “social cost” for these employment practices is enormous, and is generated by a flawed system designed to deliver lower “front end” costs to an end user demanding a “good deal”.
It is time for the commercial construction industry to come together, to recognize the true costs and implications of our workforce issue, and to partner with the owner community to develop and mandate meaningful standards that will insure our industry has a trained, productive, safe, and sustainable workforce to meet the future demand.
One effort currently underway to address just the concerns I have articulated is being developed at the Houston chapter of the Associated General Contractors of America (AGC). Led by Chairman Tom Vaughn (Vaughn Construction), Vice Chair Jim Stevenson (W.S. Bellows Construction), and chapter president Jerry Nevlud, AGC Houston has developed an alliance and an initiative aimed directly at the future workforce issue. Set into motion earlier this year, the task force, made up of both general and specialty contractors, has identified the following mission:
“The mission of the Construction Industry Sustainable Workforce Alliance (CISWA) is to provide a method whereby socially responsible owners, contractors and specialty contractors can positively affect the growth of a sustainable construction workforce by advancing principles that: raise the image of the construction industry, attract and retain verifiably qualified workers, provide a safer and healthier construction environment and improve efficiency and productivity.”
The task force has listed the key principles necessary to promote a sustainable workforce:
- Pay a competitive wage rate to attract and retain the workforce
- Pay by the hour with applicable overtime for workforce in lieu of piecework contracting
- Provide worker security by paying unemployment taxes, providing workers’ compensation insurance and contributing to social security for the workforce
- Require ongoing construction industry safety training standards for the workforce
- Require craft training standards and certifications for the workforce
- Provide health insurance benefits for the workforce
- Provide retirement, profit sharing or 401k plans for the workforce
The plan of the Alliance is to reach out to construction owners/users, and secure buy-in to endorse and mandate these principles on their projects. Research related to construction workforce improvement has indicated the broad support of the owner community is an absolute necessity. Early feedback from owner groups approached by the Alliance has been overwhelmingly positive, and the Alliance is moving forward with the development of specific details outlining the key principles. Specific task forces have been formed to address particular issues such as wages, safety, and training. A strategic planning session is scheduled in mid-November. As the details are worked out, additional stakeholders will be added to the Alliance. There will be a set of principles developed for the members of the Alliance and the program will be rolled out in 2011. It is the hope of the Alliance that others will follow their example and begin to work on sustainable workforce practices.