Scott Sumner  

How can there be a shortage of construction workers?

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The title of this post is actually two questions in one. One issue is technical, why don't wages rise to restore equilibrium? And the second is sociological, haven't we all been reading that there are no longer jobs available for non-college men? And yet, there really does seem to be a shortage of construction workers. Here's just one article of dozens that I have read:

As the Dallas Morning News notes, between 2012 and 2016, wages for Texas construction workers rose 21.2 percent, compared with 12 percent for all construction jobs in the U.S., and 2.2 percent for all jobs in the state. In Collin County, home to Plano and McKinney, construction workers make $98,000. And that was before the new administration began its immigration crackdown. The Dallas-Plano-Irving metropolitan area is short about 18,000 construction workers--about 20 percent of the total. Which means that many homebuilders literally can't find people to do the job, and the rest must attempt to pass on higher costs to their customers.
[Update: Ben Cole sent me some data suggesting the $98,000 figure is misleading---perhaps "fake news". Actual construction wages seem to be much lower.]

You can find similar articles about shortages of skilled factory workers, truckers, and many other blue-collar professions. So what's going on here?

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Let's start with the technical issue, why doesn't supply and demand (S&D) restore equilibrium? The problem here is that most labor markets are at least modestly monopsonistic, whereas the S&D model only applies to perfect competition. For instance, suppose a construction company paid its existing workers $26.50/hour. Also suppose it decided that it wanted to double the size of its workforce, because of growing demand for new houses. Under perfect competition there would be a long line of workers, just as good as the existing employees, willing to work for $26.50/hour. In the real world, however, there is a very limited number of potential employees in any given labor market. To attract more workers, you need to raise the wage rate.

OK, but then why don't firms raise the wage rate to attract those new employees and eliminate the shortage? Here's where the monopsony model comes in to play. For reasons of employer morale, if you raise the pay of new hires, you need to raise the pay of existing workers. Otherwise the existing workers resent the higher wages of the new hires. Even worse, they'll jump ship to trying to get higher wages at a competitor firm. If paying a new worker $27.50/hour forces you to raise the pay of each of your 50 existing workers by $1/hour, then the true cost of that worker is not $27.50/hour, it's $27.50 plus $50, or $77.50/hour. At that price you may refrain from hiring the new worker, and keep looking for someone willing to work for $26.50/hour. When a reporter stops by, you tell her that you face a "shortage" of workers, even though there's someone willing to do the job for $27.50/hour. That's what monopsony is all about.

That's actually the easier question to answer---a shortage is indeed possible, despite the fact that is seems inconsistent with simple S&D. But what about the other question? During the Year of Trump we read 1000 articles about the plight of America's blue-collar workers, especially non-college men. Why aren't they willing to do construction jobs in Dallas paying $98,000? That's more than many college professors make. If both spouses did that sort of work, the family income would be in the top 5%. Why the shortage?

Tyler Cowen linked to an interesting study today:

A poll from the National Association of Home Builders (NAHB) of young Americans ages 18-to-25 shows that almost no millennials want a career in construction -- a high-paying industry. 64 percent of these millennials said they wouldn't even consider working in construction if you paid them $100,000 or more.

74 percent of young adults know what career field they want to pursue, and of these millennials, just 3 percent want a career in construction trades. What's more stunning is that of the 26 percent who don't know what career they want, 63 percent of these undecided millennials said there was "no or little chance regardless of pay" that they would work in construction trades.


I've done a bit of work in construction---it doesn't seem like a bad job. So what's going on here? I don't know the answer, but I'll throw out a few possibilities, and ask you for other suggestions:

1. Millennials were more likely to grow up with indoor activities, such as computers games, and less likely to roam around outside. Perhaps that makes them softer. Before everyone jumps all over me, I strongly believe that my (boomer) generation was softer than my dad's ("Greatest") generation, which fought in WWII. And that my dad was softer than his grandparents, who were pioneers in the Midwest. That's progress!

2. In the US, Europe and East Asia, physical work is increasingly done by immigrant workers. But we've cracked down on immigration from Mexico, so perhaps that's contributed to a worker shortage. From the Dallas worker shortage article:

Competition for labor in the housing market has been intense for some time, in part because the flow of immigrants from Latin America has decreased and in part because many people who worked in housing during the boom found other work during the bust. But with the government now openly hostile to the presence of these workers, and starting to deport some of them, it is becoming that much harder.
3. Maybe the prestige of construction work has fallen, partly due to wage inequality and partly due to the fact that it's seen as "immigrant work". When I was young, autoworkers often made more than college professors. The problem with this theory is that Dallas construction workers are making good pay---so why is there the perception that construction work doesn't pay well? Maybe the Dallas figures are outliers, and the national average is far lower.

4. That raises the issue of regional labor shortages. Maybe some unemployed workers in other parts of the country don't want to move to Dallas. But why not? Maybe their wife has a good job as a nurse, and doesn't want to move. In the 1960s, wives were less likely to work outside the home.

5. Maybe millennials see construction work as unreliable, recalling the Great Recession, and want something more dependable. In The Age of ComplacencyThe Complacent Class, Tyler says people are less willing to move between states, and even between jobs.

To summarize, I believe that the supposed lack of work for blue-collar men is more complicated than people assume. I do think there is a problem here, how could there be such a widespread perception of a problem, if it did not exist? And we also have wage data that suggests blue-collar wages have tended to rise less than white-collar wages. But I also believe there are more factors at work here than we assume. Just to give one example, a successful Trump policy of bringing back blue-collar jobs might start drawing in more immigrants again, wall or no wall.

There's more going on here than meets the eye, and a good reporter should be trying to delve deeper into this issue, by interviewing more construction companies and more unemployed blue-collar workers in Texas, to get a sense of why they aren't matching up.

PS. The monopsony model does provide a theoretical rationale for the claim that a higher minimum wage might not costs jobs. The problem there is that if it doesn't cost jobs, then a higher minimum wage would also fail to lead to higher prices. But studies show that higher minimum wages do lead to higher prices. (Even studies that find no job loss). So if higher minimum wages really don't cost jobs, then they do so for reasons that are still poorly understood.

PPS. This post is about more than just construction. I predict that if all illegal aliens were expelled from Iowa, there would be a shortage of Americans willing to work in meat packing plants.


Comments and Sharing






COMMENTS (42 to date)
brokilodeluxe writes:

Hey Scott (love your posts btw),

Why is there a discrepancy between the salaries I find on Google and the $98,000 figure mentioned in the article? Is it really just isolated to one or two counties impossibly?

https://www.google.com/search?q=construction+jobs+nc&oq=construction+jobs+nc&aqs=chrome..69i57j0l5.5871j0j7&sourceid=chrome&ie=UTF-8#q=construction+worker+texas+salary

brokilodeluxe writes:

That poll about millenials is craaaazy.

As a junior-ish, millenial software engineer making good-ish money, I would start seriously hitting the gym in preparation to jump ship to construction for a six figure salary (assuming upwards mobility in my field wasn't a thing).

I'd like to think most of my millenial friends would make a similar choice for $100,000 a year

Matt H writes:

A few additional reasons

1. Once a minority group has becomes the majority of an industry, like construction, it becomes harder for others to break-in. I can't go into construction I don't speak Spanish, I can't do software QA I don't speak Hindi.
2. We've spent generations telling people not to be ditch diggers, and are surprised when the listen. Our culture is bad at given respect and dignity to people who do hard dirty work with their hands, or do anything that doesn't help them self actualize. We are tough that taking a job because it pays well isn't a good reason to do something.

Shane L writes:

I presume that after the housing crash, there was a decline in the number of young people training to enter the construction industry? I imagine there were fewer opportunities for apprenticeships and the like, also. Perhaps there is just a lag for a few years, representing teenagers who were unwilling or unable to train for the construction industry when it had so severely declined. If so, I would imagine that more teenagers are now being trained and the market would correct - it may simply take a few years.

Tom DeMeo writes:

I think this is the wrong analysis.

When I started working, I was hired at a very low salary, and without any significant skills or experience, just a BS degree. I worked in a system with a bunch of others at the same level.

About 10 - 20% would dig in and show some promise and they were kept and moved up. After two or three such rounds, what was left was a solid bench of middle management. It took several years to move up.

This system started fraying in the 80's as workers realized jumping to a competitor speeded up the process. The implied contract started to fall apart as both sides realized the other side couldn't be counted on each other to see the process through. I actually think employers would prefer the old model. Its more predictable. Unfortunately, training an employee over several years provides doesn't mean that worker will stay when their skills are realized.

Companies have adapted by doing much less development and instead looking for labor that is fully baked, and there isn't that much work that can be done by brute force any more. Construction now requires work to be done in a careful and specific way in order for technological improvements to be realized.

I don't see how this is fixed unless we can restore worker development as a valid paradigm.

TMC writes:

Indeed has 4000 openings around Dallas. 745 are over $80k, more than I expected. These are very experienced project manager positions though for those with 10 and 15 years experience. Median looks like it's just over $45k.

AlanG writes:

Scott - you have identified all the key issues. I think you are placing too much emphasis on #1. Maybe 8 years ago, my daughter was a team captain down in rural NC working to build some houses with Habitat for Humanity. All the kids who were in their late teens and got a lot out of the 9 week project. Doubtless, all went on to college or were in college and interested in careers other than construction.

As you note, construction jobs vary by region and the jobs that are plentiful in Dallas today might dry up in four years.

Hazel Meade writes:

$26.50 / hour * 40 hours/week * 52 weeks /year = $55,000 per year.

Those people making $98,000 a year are either making a lot more per hour, or they are working really long hours.

Also construction is dangerous hard manual labor so your career length is likely to be limited by age. It's possible millenials want jobs that they can keep working at well into their 60s in a continuous career. Construction is more like something you do as a summer job or temporarily , it's not a long-term career.

Kevin Erdmann writes:

During prohibition there was a mysterious lull in employment for brewers.

DW writes:

There is a big difference between what a construction job pays and what the starting salary is for a construction worker with no experience. This is pretty much true in any career-type industry. I seriously doubt that $98,000 is a starting salary.

Scott Sumner writes:

brokilodeluxe, That salary appeared high to me too. I presume it's for very skilled labor, or maybe it includes lots of overtime.

Kevin, But no "shortage" of brewers.

Everyone, Lots of good suggestions. Thanks.

Jerry Brown writes:

Millennials are smarter than I realized- there are a lot of drawbacks to construction work.

A lot of the actual work is often physically demanding, to the point where maybe 40% of the population might be able to consider doing the work.

It can be dangerous. The working conditions are always changing and are often uncomfortable if not miserable. There is little job security and the industry is highly cyclical. And often seasonal. The skills developed are not always appreciated by society- it is not a high status occupation.

Even Jesus left the industry for another occupation. Not sure why I'm still doing it, but I am. There are some nice things about it that might make up for some of the negatives.

Kevin Erdmann writes:

If homes were selling for 20% more, would there be a "shortage" of workers? Something tells me builders would manage to find them.

I think these data fit well with the narrative that the "issue with uneducated white men" is not about "economic anxiety" but loss of cultural prestige.

In Europe, there long has been a disconnect between salaries and cultural prestige for blue collar vs white collar jobs. Millenials are, perhaps, becoming more European in their outlooks.

Philo writes:

Is there really significant monopsony power in the construction industry? That suggests that there are major barriers to entry into construction; is the problem government regulation?

Jay writes:

I'm skeptical of the millennial survey as I would be with any survey of peoples' life ambitions and then drawing conclusions from the answers. I'm sure in the same survey, very few said they want to become school janitors yet when age 23 hits and reality sinks in, I don't think they'll be a shortage of janitors when needed (another low status but relatively high paying public union job).

PaulS writes:

Aren't the construction jobs that actually pay well mostly subject to occupational licensing or to state, local, and union rules that function similarly? So: how much interstate mobility could there really be even if Tyler Cowen's "complacency" (i.e. reluctance or inability to relocate to fantastically expensive, hyper-crowded megacities) didn't exist? And how "available" are those jobs, really, when acquiring the certificates (and so on) entails a tremendous expense in time and money? (As has already been pointed out, on-the-job training has disappeared. For crying out loud, my local tech college offers a course in climbing utility poles!)

I wonder whether people who aren't temperamentally (or perhaps in some other way) suited to spending thousands of hours nailed down in classroom or "training" sessions - and well-heeled enough to afford those sessions - have just plain become economically useless. And given, say, the situation with adjunct professors, I also wonder even about those who are so suited.

Could there be a new reality coming into play that "we" - the societal "we" - simply need to face up to, even when it renders a good deal of conventional social and economic analysis useless?

Maybe in the long run it would even be "progress" of a sort if people no longer had to be judged by their economic utility? (But we are all dead in the long run.)

maynardGkeynes writes:

Don't get this: I thought monopsony means one buyer. Are there no other construction companies? By the same token, since so many millennials share the same disdainful attitude toward construction work, are they a "monopoly"?

Michael writes:

Not quite sure the monopsony story is complete as stated. Are there really barriers to entry into the industry? Otherwise, new firms should spring up who don't have legacy workers, so can hire for the going rate without incurring opportunity cost with existing workers. Homebuilders would be able to build, albeit at a higher cost, and gradually, higher wages would percolate into the entire industry.

Maybe there is a shortage of capital formation? (Why on earth would that be after a real estate crisis?)

Or maybe hourly wages only seem high because of a seasonal character of work (a bit like in tourism in many places). I'm not from the US -- was there by chance a change in benefits for seasonal unemployment? (Always trust the state to add distortions to the market)

john hare writes:

This subject is central to my company. I have a small concrete company in central Florida and labor is a major problem. Quality construction is not possible with non-skilled laborers,my company policy is "learn or leave." Skilled workers need years to learn trades properly. Some never really learn, hence "thirty year rookies."

It takes brains and some brawn to do the work, though far less brawn than when I started 4 decades ago. It also takes some ability to handle heat, cold, and other adverse conditions. Most people smart enough to do the work that are also physically able are able to find positions in other fields that are less demanding and sometimes better paid.

My top two guys are from Mexico and averaged almost $50k last year. In central Florida, that is considered very good. Modest overtime, maybe a Saturday a month. They both dropped out of elementary school and have no certifications, licences other than drivers, or other documents of skill. I went through dozens of guys finding the three that I have hired in the last few months. They are white, in their 20s, and make about 60% of the hourly rate of the skilled guys. It will take them years to reach the earning levels top two.

In my experience running this company over the last thirty years, People that enter construction in this area that are smart enough to do the work, have one or more strikes against them. Poor in school, criminal records, lacking social skills, no connections with people in better fields, and so on. Some of this applied to me 4 decades ago. People without the smarts to get good at a trade are a liability both financially and physically as they make preventable mistakes in quality and safety.

You want to address the construction worker shortage?
1. Quit penalizing people that try by hitting their drivers licences and violating probation for minor issues. Over a million suspended licences in Florida points to some serious issues.
2. Quit forcing companies to police their private lives through insurance regulations (drug testing) and various other intrusiveness that I dislike and cannot avoid.
3. Quit subsidizing people to take lower paying jobs and then penalizing them if they make too much money.
4. Quit telling your kids that manual labor is beneath them if they are not going to step up in fields that don't require hard work.
5. Allow some time for the industry to adjust as there is a serious lag between demand and capability of skilled workers.

Wallace Forman writes:

I'm confused. What's the evidence of the shortage? Prices went up? What does the monopsony model assume? That prices won't go up?

I remember reading all these stories a couple years ago about a bourbon shortage. And yet I never had trouble finding any for sale in liquor stores.

john hare writes:

@Walter,
My evidence is that it is very tough finding qualified workers, and often even subs around here. Some of the unit labor prices have doubled in three years and we sometimes still have trouble meeting schedules. If other contractors were doing better, they would have eaten our lunch by now.

Steve Verdon writes:

Monopsonistic labor markets...sooo...minimum wages then! :P

Glen writes:

Been a couple of decades but I was inolved in construction management (economic analysis). You could pay your workers in the bench or risk having them unavailable when you needed them. Because most of the work was cyclical and subject to change due to economics, it was usually prohibitively expensive to pay them while on the bench. You tended to pay them relatively well but only for work done. Construction is very physical and injury would prevent you from working at all.

Jerry Brown writes:

John Hare, everything about concrete is very heavy- as in very, very hard work. And there are skills involved that take time to learn along with the physical effort. And concrete needs to be done right the first time under a very limited time frame because it is very difficult to correct the mistakes. So why wouldn't those difficulties push the price way up for concrete labor? If your top guys are not even making 50k per year why would anyone in their right mind decide to make that their career?

It seems to me that you are hoping for people with very limited options to come work for you. Millennials are smart not to aspire to these jobs.

john hare writes:

Jerry Brown,
Everything about concrete is not heavy. Very very hard work is a meme a few decades out of date. It is hard relative to office work, but not against factory warehouse, or agriculture. The price of concrete labor in my local area is well above those other occupations. $50k is well above local average for blue collar.

Millenials with options do not come into construction on the average. The word is not smart, it is options. Some smart people made mistakes when younger, or had them made for them that limits their options.

I can't understand why anybody in their right mind would stay in a minimum wage job instead of construction.

john hare writes:

Jerry,
A previous reply went astray so I ask, who should do the work if you advocate avoiding it? Construction pays far higher than the local average, especially for people without education.

Glen writes:

@john hare

Don't know about your state but here a minimum wage worker will likely make just a little less marginally in net terms than a construction worker in terms of dollars and will almost certainly make nearly the same in terms of actual profit. Further, many people in minimum or very low wage jobs are trying to better themselves or hold out hope that they are still valued in their former professions (or in the profession they hope to go into).

Scott Sumner writes:

Jerry, Good points. It used to be more high status. My uncle was a construction worker and he lived in a nice house in a good area.

Kevin, The number of construction workers would rise, and the shortage of construction workers would also increase.

Luis, Good point.

Philo, No, even monopolistically competitive firms have market power, and there are no barriers to entry to monopolistically comp. industries.

Maynard, It's a monopolistically competitive industry.

John, Very interesting comment. Thanks.

Steve, Did you read the entire post?

baconbacon writes:
by $1/hour, then the true cost of that worker is not $27.50/hour, it's $27.50 plus $50, or $77.50/hour. At that price you may refrain from hiring the new worker, and keep looking for someone willing to work for $26.50/hour. When a reporter stops by, you tell her that you face a "shortage" of workers, even though there's someone willing to do the job for $27.50/hour. That's what monopsony is all about.

This is backwards. If true the implication would be that firms would rarely, if ever, hire new workers individually, but would double in size frequently. 1 new worker at 27.50 would cost $77.50 an hour, but 50 new workers at $27.50 an hour would cost $28.50 an hour.

Large companies would be especially susceptible, 1,000 person companies would never ever be able to hire one new employee profitably, but would easily be able to add 1,000, or 10,000 new employees! Small firms would have large advantages over big ones, but small firms have no monopsony power! Large firms (supposedly) gain it by dominating local labor markets, but to get there they have to hire lots and lots of people.....

I don't know of any data that supports this implication, but maybe it exists.

Reality is that firms don't have individual layers where everyone makes the same $ amount, and everyone knows what everyone else makes.

Alex Coventry writes:

Any empirical evidence for the monopsony argument? People are so reluctant to discuss income, and so strongly discouraged from doing so in a work context, that wage disparity between coworkers is probably quite common and has limited effect on worker morale most of the time.

Jerry Brown writes:

I think the monopsony argument might make sense but only in the context of the largest public and commercial construction projects and even then mostly only when union contractors and labor are involved. There is a whole lot of construction that does not fall into those categories.

Construction (at least in Connecticut) is dominated by trade groupings and contractors that specialize in different ,well, trades. On almost all new residential projects and most smaller commercial projects the general contractor on the project is going to be subcontracting out a large part of the work to companies that specialize in their fields, such as a concrete company to build the foundations and a plumbing contractor to do the plumbing. Some of these contractors will be required to have a specific license in their trade which restricts the supply of workers and contractors eligible to do that part of the project.

In general, the work is going to be project orientated with each subcontractor supplying a fairly small crew that is on site when their services are needed to perform their part of the project and then move on to another. So in general, the workers for the concrete company are not really going to know or care what the electricians, or the plumbers or the HVAC guys are getting paid. Or if they got a dollar an hour raise.

And except in the context of a binding union contract, a contractor would generally be able to offer project specific bonuses (or generous overtime rates) to members of the actual crews involved in that project if they found themselves short of labor. And since the work is usually project orientated, when the project is done, or the season changes, and the contractor doesn't need the labor, there is little hesitation to cut hours and lay-off the now extra crews.

No empirical evidence perhaps, but this has been my experience as a construction worker and a contractor in this part of the country for more than 30 years.

Tom West writes:

Scott, thanks for the explanation. I've seen cases of this in action, but where no-one could articulate why they wouldn't raise wages in order to attract some *desperately* needed workers.

At the time, it almost drove me batty when a particular low-level job was vital, but the company would not countenance paying the wage necessary to fill the position because that's just "not what people doing that sort of work are paid".

Now I understand where the policy might come from, even if no-one at the level I spoke to was capable of articulating it. Oft times it felt like we'd rather cut the productivity of everyone in the office by 20% than pay someone $13/hr when their job's pay grade suggested it was only worth $10/hr.

At that time, I just assumed that it was yet another example of culture > capitalism.

Jerry Brown writes:

John Hare @5:53 and 8:53,

My earlier reply to you reads more harshly than I intended. And in truth, most of my experience with large concrete pours is from 25 to 30 years ago as a laborer during summers while I was in college. Perhaps the work is easier now, all I can say is that the Symons forms I was hired to carry from a flatbed truck down into large holes in the ground (and back up again after) were very heavy. And that a full wheelbarrow of concrete probably weighed 350 pounds and was difficult to move over even level ground. And that a 3/4 full five gallon bucket of cement that had to be carried up four flights of stairs probably weighed close to a hundred pounds. And that the 20th bucket really felt like it weighed 250 pounds. And that 60lb jackhammers still weigh 60 pounds and beat you up, cover you with dust, and damage your ears and insides while you use them.

Of course as a laborer, I was far from top guy status on any of these jobs and probably got stuck doing the heaviest parts of the work. But at least the pay was good. I am just guessing but I would say the rate of pay exceeded $50k today. In 1986 as just a laborer (union) I was making $14 an hour straight time plus plenty of overtime on pours. A summer doing this easily paid for a year's tuition plus room and board at the University of Connecticut at the time. Plus some spending money.

My point is that while the work was extremely difficult, the wage differential was large at the time for those who could do the work. I don't think it is so much today. There are plenty of construction laborers working in the range of $14 an hour even today. Maybe the work isn't as hard or maybe less is expected of them, but it is easy to see why millennials might not aspire to a career in construction right now.

As for who will do the work? Well if nobody else is willing and it needs to be done, then you and the workers you find willing should be able to charge more for your efforts.


Jon writes:

Construction is a broad category, there is definitely money in the trades--being an electrician or plumber. You can work new-construction, pull reliable hours and pay and you always have the option to go work for yourself down the road.

http://www.payscale.com/research/US/Job=Electrician/Hourly_Rate
http://www.payscale.com/research/US/Job=Plumber/Hourly_Rate


Framing on the other hand is hard-work. Maybe 10 solid years after you have enough experience to earn well and before your body stops keeping up.

http://www.payscale.com/research/US/Job=Framer_-_Construction/Hourly_Rate

Then its up or out. Up can include home remodeling for those with secondary skills or just supervisory roles.

http://www.payscale.com/research/US/Job=Construction_Project_Manager/Salary

Keep in mind those are averages. Dallas pays a bit more than average -- +10K?

These are good jobs. When I hear people with college degrees taking jobs in the 25K-40K range, I want to cry.

john hare writes:

@Jerry Brown

I think face-to-face we would resolve any differences in our opinions pretty fast, mostly by clarifying terms and conditions that don't necessarily gel on electrons. Simons, wheelbarrows and buckets are definitely brutal. Now it's more often small forklifts or stinger cranes for one, and concrete pumps for the other two.

The two that I have making $50k dropped out of elementary school in Mexico, so I tend to think they do very well against their credentials and the local alternatives. In Connecticut, and most of the country, I'm sure that $50k is far less impressive.

@Glenn

People that show up as warm bodies don't do well which seems to match your observations. People with something on the ball tend to do far better. The numbers are also skewed by the lack of leaders coming into the industry. Anybody that shows some initiative is a crew leader in short order around here, and if they will hit the books slightly, superintendent or project manager.

My observations are local, and the word is that wages around here are some of the lowest in the state, and therefore the nation. I haven't checked. The more promising seem to head out for better paid areas or vocations before they put roots down as I did. Getting bodies is easy, brains, not so much.

Carl Kirsch writes:

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Lorenzo from Oz writes:

I read the concern about blue collar jobs as being mainly geographical. (Hence Kevin Williamson's infamous comment about the U-Haul solution and communities that deserve to die.) Michigan, Pennsylvania plus Wisconsin haven't been like Texas for quite a long time now.

mike davis writes:

Some data on the Dallas labor market (N=1).

We did a very major remodel about 18 months ago (adding several hundred square feet and redoing a lot of other stuff). Labor shortages were a real problem—subs didn’t show up on time and/or couldn’t finish on time because they didn’t have the people.

One thing that was interesting, though, was the extreme ethnic homogeneity of the subs. The demo crew was entirely older black men--youngest in his mid-forties and the oldest in his ‘60’s (and very proud of his age and ability to keep up). The plumbers were a family of white guys (fathers, sons and cousins). All the other crews were Hispanic.

This was probably more than just a matter of taste. Construction may seem simple but it is a very team-intensive activity. Language, culture and trust matter a lot. Even if an ambitious millennial wanted to get out of his mom’s basement and go to work with the framers, he would have a hard time getting a job—his Spanish isn’t that good and there’s no way he can convince his coworkers that he can be trusted to support his end of a roof beam suspended 20 feet above the ground.

I’m an econ-101 kind of guy and it pains me to say it, but labor markets are really complicated. Perhaps too complicated to adequately describe with our S&D models. (Which doesn’t mean I’m going to buy into the “new minimum wage” literature or rethink big chunks of macro, but I will take it more seriously.)

Hazel Meade writes:

I strongly doubt that monopsony exists in the construction industry.

Leaving homebuilding aside, there's a massive market in renovation, remodelling and rehabing older houses, which includes just about everything involved in home building and anyone can get into, even people who flip houses as a second job.

I wonder if the reason there's a "shortage" is because there as so many construction workers who have gone into business for themselves as house-flippers, where they can make more money than working for someone else.


Floccina writes:
As the Dallas Morning News notes, between 2012 and 2016, wages for Texas construction workers rose 21.2 percent, compared with 12 percent for all construction jobs in the U.S., and 2.2 percent for all jobs in the state. In Collin County, home to Plano and McKinney, construction workers make $98,000.

Is this more evidence that Texas is the best governed state in the US?

Anthony writes:

Your #4 is a big reason, too. I've heard of universities and large corporations either making jobs inside, or finding jobs with closely associated outfits, for spouses of people they wanted. Smaller companies and agencies can't do that.

Also, there's often a big skills mismatch. As the economy evolves, it gets more complicated and work becomes more specialized, which means fewer people with the appropriate specialization for the openings available. With very little loyalty on either side of the table, companies are afraid to train people only to lose them as soon as they're really ready to the job needed.

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