The ‘Perfect Storm’ Creates Critical Labor Shortages: Lack of workers stymies home builders’ growth

New home construction is accelerating in the Grand Traverse region, thanks to an improving economy and more people moving to what is one of Michigan’s most desirable locales.

But plumbing contractor Bob Roe says he isn’t fully participating in the building boom because he can’t find enough workers to grow his 32-employee business.

“Everyone who is qualified is working somewhere,” said Roe, who with his wife, Leslie, owns Precision Plumbing and Heating Systems Inc. in Traverse City. “If I wanted to grow, I would need more people.”

Roe and others in the construction industry say there’s a severe shortage of carpenters, plumbers, electricians and other workers needed to meet the demand for new homes.

The labor squeeze, combined with escalating building material costs, has led to higher home prices. In some cases, buyers are waiting longer to have their homes completed.

Judy VajdaMost builders in the area aren’t scheduling new work until 2018, said Judy Vajda, executive director of the Home Builders Association of the Grand Traverse Area. And there are fewer builders now than there were before the deep recession years of 2007 to 2009.

“My framing contractor went from three crews to two crews because it lost people to retirement and people going out on their own,” said Dean Adams, who with wife, Tricia, owns custom home builder Bay Area Contracting. “I can’t grow. I’m stagnant.”

Adams and others in the construction industry say there are a variety of factors contributing to the labor shortage. They include a lack of interest by young people in the building trades, fewer training programs and apprenticeships, not enough inspectors, an aging workforce and the exodus of skilled workers from the region during the last recession.

BobFilkaAlso, tightened immigration policies have reduced the number of Mexican construction workers in the United States. All of these factors have produced a “perfect storm” that has created critical labor shortages in construction, said Bob Filka, chief executive officer of the Home Builders Association of Michigan.

The local home building industry also is competing for talent with other industries that are facing labor constraints. Grand Traverse County’s jobless rate was 3.9 percent in May, the sixth lowest in Michigan. There were just 1,787 unemployed people actively looking for work in the county’s labor market of nearly 50,000 workers that month.

Statewide, the labor shortage problem is much the same, if not worse. Filka said Michigan has lost about 60,000 construction workers in the home building business since the Great Recession. He estimates there are about 5,000 current job openings statewide in the industry.

“A lot of people who left aren’t coming back,” Filka said. “Our workforce is getting older and nearing retirement. We’re seeing that pain now.”

The labor market in the home building industry is tight, even though the size of the industry is just a fraction of what it was several decades ago.

About 40,000 single-family homes were built in the state annually from 1995 to 2005, the year before new home construction crashed because of an economic downturn and overbuilding.

Just 6,392 new homes were built in the state in 2009 at the depth of the recession, according to Home Builders Association of Michigan. The association is projecting the construction of 16,000 new homes this year, an 18 percent increase from the 13,581 homes built in 2015.

“Most builders can’t build to meet the demand because they’re constrained by labor and the availability of (buildable) lots,” Filka said. “Few new housing developments are being approved.”

Although the population of the Grand Traverse region has risen steadily over the past several decades, it has mirrored state trends in new home construction. There were 360 single-family home building permits issued in Grand Traverse County last year, down from 727 permits issued in 2005, according to census figures.

Higher wages: the solution?
Whenever labor shortages are discussed, some will say employers just need to offer higher wages and the shortages will disappear.

Economic theory says that if employers pay high enough wages, they will be able to attract the workers they need. But contractors say it’s not so simple.

“I could pay more and steal guys from my competitors,” said Roe, adding that he offers competitive wages and benefits. “But sometimes people don’t leave just because of money. If they’re happy and they’re treated well, they usually stay.”

The average annual wage for a master plumber in Grand Traverse County is $50,192, according to Salary Genius, which uses data from the Bureau of Labor Statistics and other sources to determine wage levels.

Roe said he recently hired several good employees from other cities in the state by using a staffing agency. But he prefers to hire local people, in part because it’s easier to check their references, reducing the risk and expense of making a bad hiring decision.

He and others say the area is just running out of workers. Many skilled tradespeople in the construction industry are baby boomers nearing retirement age. And the pipeline for new talent is producing just a trickle.

A ‘cultural issue’
As Michigan boosted graduation requirements in core academics, many school districts eliminated vocational education programs that produced plumbers, electricians, finish carpenters and other skilled occupations in the building trades.

That, and the pressure put on students by schools and parents to get a four-year degree has led to “a cultural issue that needs to be reversed,” Filka said.

Wages are generally higher for those with a bachelor’s or master’s degree than they are for those with a two-year degree or certificate. But industry officials say people can still earn a good living by working in the building industry.

“There are good-paying jobs in the construction sector,” Filka said. “It’s not just general laborers. There are carpenters, finish carpenters and the skilled trades. Those are all areas experiencing severe shortages.”

The average weekly wage in the construction industry in the Traverse City “micropolitan area” covering Benzie, Grand Traverse, Kalkaska and Leelanau counties last year was $965, compared to $729 a week for all industries, according to the Michigan Bureau of Labor Market Information and Strategic Initiatives.

Filka credits Grand Traverse area home builders with a number of initiatives aimed at getting more young people interested in pursuing careers in the building trades.

The Home Builders Association Grand Traverse Area Inc. (HBAGTA) provides scholarships to high school students planning to enroll in Northwestern Michigan College’s Construction Technology program. Since 1985, the association has awarded 124 scholarships totaling $84,500.

Vajda said the association has formed a task force to address the labor shortage. The task force is working with local schools to offer construction career information and curricula. And it is seeking to attract veterans and young people not in the labor market to construction careers.

Those efforts can’t bear fruit soon enough to building contractors like Adams.

“There’s a demand for growth, but there’s no room for growth” because of a lack of workers in the construction trades, he said.