Here’s how construction worker shortage affects consumers

Business News | 12 Nov, 2018 |

Metro Phoenix is suffering from a lack of laborers as a result of the recent recession. This is affecting multiple industries according to local contractors and real estate agents.

A study by Arizona Real Estate Notebook said real estate prices are now back up to their peak at the top of the housing market in 2006 before the recession took place – and with them, the demand for real estate. Some say this is a mixed bag as many construction workers left the state to find work elsewhere during the recession and never returned.

Now with building demand high and the number of workers low, many contractors have had a hard time filling jobs.

Founder and CEO of DP Electric, Dan Puente says that although his business is doing very well, they are feeling the effects of a labor shortage.

“The labor shortage in the construction industry in Arizona has been an issue for quite some time and does not seem to be getting any better, ” Puente said. “We can only hope that next year will be a little better.”

Competing contractors in search of workers for their companies’ projects are attempting to entice workers from other projects by offering higher wages and other incentives. You see this from the general contractors as well as all subcontractors. This is the result of a good economy and a labor shortage.

“DP Electric works very hard to retain our people as they are the backbone of our company,” Puente said. “We wouldn’t be where are today without our team, and we understand what is needed to keep them happy. DPE’s focus has always been on culture and family, this includes higher wages, benefits and perks that come with being a DPE team member.”

“The main issue of profitability is that the cost [to build] is going up but contractors might have locked into a cost per project that may have been established six months, a year or even two years ago,” Puente said.

Meanwhile, developers and owners have a desire to have projects completed by a certain date in order to remain profitable. This places extra pressure on the general contractors who cannot always meet promised completion dates.

Puente explained that electrical contractors feel much of the blame for delayed builds because they are the first to start work on a project and the last to finish. Although common sense says the electrical cannot be installed until the framing is completed, this doesn’t always resonate with the general contractor who is on a tight schedule as well.

The residential real estate market is just as heavily affected according to Michelle Noel, a real estate professional for 14 years.

We are feeling big impact because of the result of the lack of workers,” Noel said. “It’s actually taking anywhere from six to eight months for a home to be built where it used to be three to four months.”

Noel said if the high demand for homes is not met with extended build times, it is sometimes met with lower quality builds. She always urges her clients to get thorough inspections of both new builds and resold properties

She said poaching of workers is just as present in the residential industry as in the commercial industry. While it is bad for contractors, it may be good for laborers seeking to make more money.

“You have some workers who are not necessarily assigned to a specific builder, so they are self-employed,” Noel said. “They could be doing a shift in the morning and then they’re doing a shift at night…on the weekends and so they’re able to maximize their trade.”

But Noel said Phoenix’s population growth is putting as much heat on contractors as poaching is because the valley has a lot to offer.

“We do get a lot of the people that are moving from higher cost locations such as California and even the East Coast. You have the weather factor. Some folks are not in the position to stay in those colder climates, so they’re moving here,” she said. 

Housing markets in other parts of Arizona have been affected as well and a former contractor in Prescott, Fred Brown, said the blame indisputably falls on the 2007 recession.

“By the beginning of 2008 there were numerous investment banks failing, the markets had taken a severe dive, and the housing market was in shambles,” Brown said. “General contractors, subcontractors, tradesmen and laborers suddenly found themselves without work while suffering inadequate financial resources. There was a pent-up need for housing which had been suspended but was now back in high demand.”

Brown, a small business owner, said labor has never actually caught up to demand and he would be feeling the effects heavily now if he were not retired.

“I was paying an unskilled laborer $14 per hour in 2008. That same laborer now makes $28.50 per hour and is expecting increases every six months,” he said.

Perhaps the largest problem, according to Puente, is that the job of laborer is seen as undesirable altogether.

“We have not done a good job of appealing to the youth,” Puente said. “Unfortunately, I think they always kind of stereotype construction workers as guys who are tatted up and barely got out of high school and that’s not necessarily what parents want for their kids.”

He and his company along with others have begun to create solutions for this. They are working to change the perception of laborers and attract more young people to the work force.

In the meantime, Puente says DP Electric is not using a lack of qualified workers to justify lowering its standards.

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