Once upon a time, Grandpa came home from the war with a hammer and a work ethic, built his house, and helped build our nation. Today, though, the U.S. construction industry is not prepared to onshore construction of massive manufacturing facilities and rebuild our energy sector. That is not a close call, and there is no quick fix. The needed workers are not just hard to find — they no longer exist.
Over 20 years ago I stared at concept drawings and maps for a massive California passenger rail project. Those in the front of the room explained the need, cost, and schedule for the no-brainer endeavor. On paper, it was impressive.
Leaving the meeting, I said to the other attendees on the elevator, “That will never get built.” The responses were “Nope,” “No way,” and “Not in my lifetime, anyhow.” We were all construction lawyers in our 20s and 30s and knew it was delusional to think the project would ever exist in the real world. We are now a generation older. There is no rail line. Skilled labor is scarcer. We are now concerned about other marquee U.S. construction projects.
The construction industry’s productivity gains over the past three decades have badly lagged others that have proven more able to absorb innovation and replace humans. A machine can cut a straight line faster than ever to make widgets on a production line, but it cannot hang off the side of a building to erect steel. Manual labor and in-person reasoning skills remain in high demand. Why does this matter?
A Government-Subsidized Construction Boom
The next decade will welcome 200 million additional global construction jobs. The industry will see growth of as much as 35 percent compared to the previous decade, driven by unprecedented levels of so-called stimulus spending. The global construction market spending is expected to increase by as much as $15 trillion. China, India, and the U.S. will account for most of that growth — if they can manage it. For its part, the U.S. is not ready to simultaneously build this many large projects while also having workers available for routine construction. Let us consider some facts and track records.
Construction industry participants account for only 2.9 percent of the entire U.S. workforce. As of January 2023, the unemployment rate in the construction industry was 7 percent. The national unemployment rate as of January 2023 was half that at 3.4 percent. The construction industry cannot draft available people from other industries to satisfy its needs.
Today’s labor mismatch (of needs to suitable personnel) has root causes that will take generations to reverse. Baby boomers, who proved they knew how to build things, are retiring. Every busload of them is being replaced by a carload of next-gen workers. U.S. birth rates have been declining for decades and are below replacement levels, so there are fewer 18-year-olds entering the trades than ever in the past. There are record “quit rates” for hard jobs that often require physical labor and long hours. U.S. high schools push graduates toward college regardless of their abilities or desires. There is a shrinking pipeline of new construction workers and a gross lack of training. The first young work-at-home generation does not want to get muddy.
The greatest challenge in the construction industry has typically been finding someone to pay for the projects. With the economy sluggish and inflation high, the appetite for private investment has been stagnant. Recently, however, the feds have elected to subsidize certain projects such as very large EV battery plants and advanced microchip facilities. These are massive projects for the U.S. and draw skilled labor like a plug pulled in a bathtub, yet per the industry, we remain in a critical labor shortage that threatens their viability. Where did everyone go?
Even with project starts funded, we will not find enough construction workers to finish them all. Comparatively, the U.S. did not build much by way of manufacturing over the last 50 years or so since production had largely moved overseas. The mega projects of yesterday — refineries, power plants, and chemical facilities — are no longer being planned or constructed. Instead, we have been building corporate HQs, university buildings, hospitals, big box stores, and Amazon distribution centers. This has not sufficiently developed the workforce for what lies ahead.
The largest U.S. manufacturing construction projects today are chip facilities, electric vehicle battery plants, and automotive plants that will manufacture EVs. They devour labor. Intel will need 5,000 to 7,000 workers to build its plant near Columbus, Ohio. Even with an amplified pay scale and grossly higher per diems, they are at risk of not finding enough skilled workers. Ford just stopped an EV plant in Canada for that reason. An EV pant in Kentucky is drawing so many workers that a similar project in South Carolina has paused because it cannot find workers. In Arizona, an EV plant project paused because all available workers were assigned to a chip plant near Phoenix.
The government can drown these jobs in subsidies, but they will fail unless a whole new workforce materializes from thin air. Willing skilled people remain a finite resource. If everyone with a high-res vest works in these projects, who will build our homes?
Banking on Immigrants to Fill the Void
The White House has unabashedly chosen a solution to unavailable labor: immigration. They are filling the labor pool with military-aged males on a path to receiving work permits. Some hope to work. But is willingness enough?
Manufacturing projects are built to make a profit on the back end. Time is money. Owners estimate how long it will take them to turn a profit after the facility is up and running. If they spend too much on construction and raise the prices of their products to cover delays and material cost overruns, the businesses could fail. Sustained inflation has driven up the cost of the projects well beyond that which can be offset by generous government incentives and tolerable price increases to the consumer. Some of these projects are suddenly no longer viable without more government handouts that might not come.
The lead contractors cannot find enough skilled people to reliably staff the work and cannot train willing people fast enough. That is the not-so-silent killer. Contractors plan projects to include a duration for performance, cost of materials, and anticipated labor efficiency. If the project requires 4,000 skilled workers to build it in three years, but only 2,000 unskilled are available, there will be blood. And who should take the risk of that financial ruin? Smart construction managers will not commit to a firm price to build projects with resources that might never materialize and cannot bear all the costs of training the future workforce. Owners cannot finance projects with uncertain durations and unknown costs.
I have spent my whole career working as a construction and global infrastructure lawyer. I have handled disputes on projects from the Americas to the Middle East to Africa, the Caribbean, and the Pacific and have learned a few things. If anyone thinks they can succeed by importing millions of untrained, inexperienced people and throwing them at sophisticated infrastructure projects that have unforgiving schedules and rigid performance requirements, they are dead wrong. Building is not about handing out picks and shovels to the semi-willing masses. It is about engaging highly skilled tradespeople to work safely and in unison. Those are neither born skills nor developable overnight. Training takes time.
Moreover, there are able-bodied, 17-year-old, U.S.-born high school seniors with many advantages who, to do this work, will still need years of on-the-job training. Not everyone on a project is a ditch digger or bucket carrier. Untrained people are unreliable, inefficient, and get hurt on projects. They quit. Heavy construction is not a place for random warm bodies. And right now if you could gather thousands of 19-year-old men at a job site who come from the four corners of the Earth and sky-write, “Please get in a single file line for drug testing,” most would walk away. Many of the rest would take and fail the test. You cannot be high and untrained while climbing steel or operating a dozer — regardless of your country of origin.
The White House’s importation of future party members who it perceives all want to go to school, learn a trade, and weld thigh-deep in muck 65 hours a week for a fair wage is a recipe for disaster. There are stakeholders building some of these projects who will smartly spend subsidies to deliver what they promised. The winners will find all the experienced and trainable labor. The rest will manage the dregs, lose badly, and disappear.
If the past is any indicator, the taxpayers will bail out or absorb the losses that no one in D.C. asked us whether we were willing to bear. It might be too late for many to find a better way.