There will soon come a time when you will be hiring again, and the buzz is that labor is going to come at a cost because labor will be in high demand. On the flipside, others say labor will be inexpensive because jobs will be plentiful. Do you anticipate paying more or less for labor in the future? Why?
Definitely more. This industry has been depressed for so long that a good chunk of the labor force has already retrained for something different or moved away to find work somewhere else. Some are going back to school or are working more secure factory jobs. Those who are left have been working for 1990 wages for the past 3-5 years and are barely getting by. These people have been anxiously waiting for things to pick up so that they can demand a raise. We have been busy all summer and don’t anticipate things slowing for at least another month in Michigan (our home state). We are struggling to retain employees and have had little success hiring for the rates we need. On a project in another state, I was told by a subcontractor I used 2 years ago that his labor rate was going up 30%. He explained that he had been burned bad by GCs and bid jobs too cheap since then. He sounded desperate but felt that if he didn’t raise rates, he’d soon be out of business. Hard lesson learned, I guess.
—Bill Johns, Clinton Interiors Inc., Shelby Twp., MI
Absolutely. When the demand for labor goes up and labor becomes scarce, the labor force will take advantage to make up for the years that they have been forced to take below-average wages just to eat. They will go to work for the highest bidder. Once they realize they have the upper hand, it won’t be pretty for the contractors who have contracts based on low wage costs. It may be a perfect storm, too, when the manufacturers decide to raise their prices because of lackluster years of low profits or no profits. Add inflation to the equation and we have 5 to 10 years of this to endure.
—Mark Owens, Vice President, Bison Drywall, Inc., Reisterstown, Md.
I feel I will pay less for my labor needs in the future. With unemployment at an all-time high and with our government wanting to bring the troops home, where will their jobs come from? Their jobs have been filled by others.
—Anonymous
We are union and pay an established rate. Future contracts may increase rates due to wage freezes over the past few years.
We will be paying more.
—Jacksonville, FL
More. As the ex-pat labor pool shrinks, local labor will go up and also be less productive.
—Anonymous
Within the next 5 years we are expecting to pay less for labor. I don’t think the work is going to be as steady in Vermont.
—Giles Turgeon, President, Green Mountain Drywall Co., Inc. Wallingford, VT
I know I will have to pay more, only on account of being a union drywall contractor, and the wage increase will dictate the added cost. Fortunately for us, our 2011 has been very good. We secured work through next year and the angle we took on getting work also had to do with a strong labor pool—plenty of highly motivated workers. This paid off for us; in most cases, the risk-reward approach that was taken was based on lower profit margin but knowing how deep the labor pool was. Adding on the right workers for the most part either met or exceeded our production goals. Most of all, we didn’t get too aggressive in our daily output.
Less for labor in a much worse economic environment
—El Granada, California
As a pay-for-performance company, we have base rates that vary between $10-$20 per hour, plus job bonuses and benefits. We pay 80% of health insurance costs and provide disability and life insurance as well as 401K. While we expect to remain competitive at the entry level of all positions, I do not anticipate base rates to increase substantially over the next year to 18 months.
—Tom Johnston, President, J&D Basement Systems, “The Basement Doctor,” Reynoldsburg, OH
As the demand for qualified labor increases along with inflation coming along, this will cause companies to pay more for their labor to complete projects on time and within budget.
—Anonymous
About the same. The men who worked for me before the slowdown were happy with their pay and are looking forward to working for me again.
—Anonymous
Right now labor costs are still down 10-15% from 2007–2008 levels due to a huge shortage of construction in our region. They remain low, but I expect that to change as the unemployed get hired. I don’t expect wages to grow past pre-recession (depression?) levels, however.
—Don Harrington, Harrington Construction, Medford, OR
For union companies like us, wage rate increases are already set and pre-determined via collective bargaining agreement. In busy times, there would be scarcity of skilled and productive workers—this, in essence, increases labor cost because companies would have to take into consideration on their bids less productivity on the field.
—Amado Sanchez, Head Estimator, Group Builders, Inc. Honolulu, HI
I believe labor will be in demand as we start to see projects open up, which in turn will cause higher wages. We do anticipate paying higher wages for quality workers. Even entry level labor will more than likely cost more. This is in part to the illegal labor having retreated back across the borders. The challenge is to get the many legal workers off unemployment and back into construction trades. Unfortunately, the current administration has made it to attractive to stay on unemployment.
—Pat Hess, President, Holsinger Drywall Inc., Ft. Collins, CO
Common sense and logic will tell you everything you need to know about labor costs. It’s a supply and demand issue: higher demand will generate higher costs. We fully expect to pay more for our labor when the work load increases. If we don’t, our competitors will have all the labor and we will be left with projects running behind schedule.
—Anonymous
Same or less for rank and file. Probably a little more for good foreman or superintendents. Good people still hard to find.
—Anonymous
Obviously we will be paying more in labor cost. Federal Reserve printing currency will only create inflation in the areas of everyday living cost, as well as a higher rates of taxation at the federal, state, county and city levels. That said, to get Americans back to work would be a step in the right direction, and the added cost of labor is something the consumer will have to endure.
We’ll pay more in the future, and we should. We make more money when they make more money. They’ve been beaten down so low they can’t afford to live, and many good tradesmen have moved away to chase the dollar or left the trade all together.
—P.R., New Hampshire
Less, because I am an optimist and a realist. I don’t think job will come back for awhile in this country, if it does. The jobs that do come by will have so many GCs on the list that the jobs will be sold at cost.
—Anonymous
We perform installation and finishing of drywall, metal framing, acoustical ceilings and light commercial carpentry. I already see the labor force dwindling as of this email (9/22/2011) and people willing to work for less. I will not do that to my employees who have been loyal through this downturn. They have not had a raise for three and one-half years but haven’t lost ground on where we had them. I see labor staying where it is. I think the unions are hard-pressed to pressure the industry for more money. With commercial and residential inventories so high, why would or should they pay for new construction at the advanced wage pricing? Materials/manufacturing seem to have no stopping them, which just leaves labor to beat up on. That is my opinion.
—Tom Rothengass, T.A.K. Drywall Specialists, Inc., Elburn, IL
Many people have already found that inexpensive labor is usually poor or illegal labor. The better workers may have to start out below their comfort levels, but at some point they should be able to demand a fair wage or walk. After trying the “Low Bid” thing in 2010, I won’t do it again. My company and my employees deserve work based on quality, not low bid. Quality comes at a higher price and wage. Raise your prices guys. We need to all make money again.
—Barry Barbas, Glass Restoration Inc., Sarasota, FL
There is plenty of $10 unskilled labor. The problem is finding skilled labor at $20 per hour.
—Anonymous
We anticipate labor will cost more. Labor has left our market. We anticipate that it will return, however, it was cost us more in the short term.
—Anonymous
There will be some bargains out there due to the economic downturn, but you will need to spend more time than you would training personnel. I don’t know where all the skilled labor has gone. The only thing you see advertised are project managers and sales people. Where are the skilled machine operators and all-around mechanics? Do these people still exist or are they lost forever?
—Anonymous
The labor costs will probably hold steady or decrease due to the fact that the housing market is still dead. The number of carpenters who have crossed over into commercial construction has really hurt our market. The amount of their overhead is quite a bit lower since a lot of these guys have a pickup truck for an office and usually try to bring subcontractors who work for a piece rate rather than an hourly rate. The quality of work suffers quite a bit since everyone is trying to complete projects with unrealistic production rates. This may work in the housing industry where dependence on other subs is not as critical, but this will not work in commercial construction.
—Larry Hartley, PM/EST
Labor is already costing more simply because there are so few skilled tradesmen around. A lot of people are looking for jobs, but not many want to work in construction.
—Tampa, Florida
I anticipate paying less. While many have dropped out of the business altogether, there are a lot of people looking for any work and are very willing to learn the trade to do something. I am getting constant calls and people approaching me to see if I am hiring these days.
—Kevin, KL Drywall LLC
My thought is we will pay a premium. No new talent has been entering into the business for last 5-6 years. We are going to have an aging work force, and the next generation doesn’t want to do manual labor. Need to figure out how to hang and tape using an Xbox controller.
—Mark, MCI Paint and Drywall
This is an interesting paradox. Many field workers have decided to abandon construction and have moved on to other work—building maintenance, landscaping, retail—or have returned home south of the border, etc. We seem to have lost them for good, despite having trained them for the last 15–20 years in skills, safety, etc. Some old-timers in the office environment have either retired (in desperation or disgust) or moved on—or in some cases were unable or unwilling to embrace the new technologies of electronic estimating and project management and had to be released.
This leaves us with a dilemma. Do we hire new, untrained but presumably willing employees and begin to train them from zero, or do we look for seasoned employees who have been released by their former employers (with whatever bad habits they may have—especially the pieceworkers) —who have no or less of a sense of quality and safety?
We can hire new rookies and cope with their inadequacies and spend extra time training them and monitoring their quality and attitude toward their jobs, or we can hire seasoned employees who might have to be untrained and retrained. That’s a tough decision to make.
Sorta makes you wonder whether to stay the course. On the other hand, with the downturned economy having culled out some of the “bottom feeder” contractors, there might actually be opportunity right around the corner.
OK, to your subject—will we be paying more or less for help hereafter? My guess is “both.” We will hire people who think/hope that there is opportunity in construction and will start at the bottom. We will hire people with skills and experience that we need and who understand that what they earned formerly might not be what they will earn now. Then there are the few hangers-on who have skills and experience and the optimism that things will return to profitability and pleasure in this business. The former will settle for low wages and the latter will hope to earn what they earned formerly.
With the prediction that the economy won’t turn around until 2014—if then—and assuming this won’t be a double dip recession, there is little chance that salaries and bonuses seen during boom times will be available again soon.
—Robert A. Aird, Robert A. Aird, Inc., Frederick, MD
Same or less for rank and file. Probably a little more for good foreman or superintendents. Good people still hard to find.
—Anonymous
Sounds like a lot of Republicans colluding to rape the working man as badly as possible when he is hurting the most. It would take 5 years of a non-realistic boom to get labor prices back to 1999 wages. Those who have get richer while the honest workers get pillaged.
—Anonymous
Labor and labor costs are already becoming a problem locally. The labor is just now beginning to realize the shortage/demand and beginning to increase its demands. Trade companies are experiencing this push-back now and are caught between the general contractors trying to push labor cost down further and labor trying to push pricing up. Hispanic labor has migrated to states where the work is—Texas—leaving other states with a labor shortage for the little work still available.
—Atlanta, GA
MORE. Have you ever seen a professional sports team win a championship with the cheapest help? In future markets, surround yourself with the best team money will buy and you will be a winner.
—Gene Thibault, New England
Less in the short term unless I am behind the hiring curve, then I anticipate a short-lived spike in costs as many tradesmen are hired and demand is greater than supply. Then I think things will even out as the market adjusts, as it always does.
—Jim, Chicago IL
