Thanks to Negative Outlook? for directing me to Dean Baker:
Businessweek tells us that homebuilders would be building more homes, if only they could find qualified construction workers. Hmmm, that must mean that wages for construction workers are soaring as the shortage causes employers to bid up wages in an effort to grab workers away from competitors or hold on to their current workforce.
That’s not what the data say. According to data from the Bureau of Labor Statistics, after adjusting for inflation the average hourly wage in construction has risen by just 0.9 percent in the five years from 2007 to 2012. Note that this a total increase of 0.9 percent over these five years, not an annual increase. If there is a labor shortage, it’s not showing up in wages for some reason. (Of course the unemployment rate for construction workers was reported at 13.2 percent in April, which also does not seem to indicate a labor shortage.)
The more obvious explanation for the fact that construction remains depressed is the near record vacancy rates. Presumably many of these empty homes will have to be filled before builders get more aggressive about building new ones.
Going directly to the Businessweek article:
Dave Erickson, president of Greyhawk Homes in Columbus, Ga., lost an employee who took a job this year in Texas. The former employee is now installing fiber-optic cable and earning 30 percent more than he did as a construction supervisor.
Go figure. So it’s not that Mr. Erickson didn’t have qualified help. It’s that the “supply and demand” thing didn’t work for him. Reading on:
A shortage of labor in a well-paying industry might seem incongruous in an economy stuck with a still-high 7.5 percent unemployment rate. But it reflects just how many former skilled construction workers have moved on to other fields.
There it is again not a column inch later. It’s not that there’s a lack of people with the necessary skills. It’s that potential employers decide not to compete on wages and benefits. (One might also conclude that if people are voluntarily leaving an industry then one of the reasons may be tthat it is not so “well-paying”, see, e.g., the case of the ex-supervisor above.) Continuing in the vein of supply and demand with respect to labor:
Gupta’s company is facing a side effect of the labor shortage: Demand for higher pay from qualified workers. On some occasions, he says he’s been outbid by rivals that need contractors for their own projects. Gupta’s preferred paint contractor left for a rival that paid more. His new cabinet contractor is about 10 percent more expensive than the one Gupta used before.
So, to reiterate, it’s not that “homebuilders can’t find enough qualified workers” it’s that they can’t find them to work for the wages they’d like to pay. Life’s tough. If only we were entitled to buy things at the price we’d like to pay… I’d have a yacht* and a yard full of Ferraris. Read Businessweek or any other publication you might pick up off the shelf and it goes without saying that the attitude conveyed is that private citizens are constrained by their resources – if you can’t afford something then it’s not appropriate to buy it. Either save your money until you can, do something to increase your revenue, etc. Don’t live beyond your means. I’m fine with that position. What gets me about the Businessweek article is the suggestion that business owners shouldn’t be similarly constrained – that workers should just be available to them at the rates they’d like to pay – that they shouldn’t be constrained by supply and demand issues the way non-business-owners are in their everyday lives.
(*I’d love to own a Hinckley or even one of these – but it ain’t gonna happen unless I win the lottery.)