|(Photo by Michael Goodman for ENR)|
The deepening slump in the private nonresidential markets and a slowdown in some key public markets is sending a growing number of construction workers to the unemployment line, but that is having little impact on wage hikes.
Through the first eight months of this year, the construction industry unemployment rate averaged 10%, according to the Bureau of Labor Statistics. That is slightly more than the 9.5% average for the same period in 2002 and well above 2000s 6.7% average. This translates into an average of 860,000 construction workers looking for employment each month, 60% more than during the same period in 2000.
"The strain on the labor market we experienced just a few years ago is completely gone," says Rod Johannsen, managing director of TDIndustries Ltd., Dallas. "There are a heck of a lot of people still on the street and pretty well qualified ones at that."
But while the growing ranks of the unemployed have eliminated labor shortages in most crafts, they are having little impact on new wage packages negotiated this year, according to several surveys.
So far in 2003, union workers have negotiated first-year wage and fringe benefit settlements averaging $1.36 an hour, a 4.1% increase, according to a survey of settlements by the Construction Labor Research Council, Washington, D.C. Last year, union workers also won a 4.1% increase, says CLRC. For the second year of multiyear contracts signed in 2003, unions averaged a 3.8% increase. The CLRC survey included 163 settlements covering 180,770 workers.
"Three-year settlements have been the most popular this year," says Robert M. Gasperow, executive director of CLRC. "The pattern toward even longer agreements, which had been growing in recent years, appears to have subsided." CLRC reports that laborers are taking in some of the largest wage increases. Settlements covering 44,711 laborers averaged 4.4% first-year increases and 4.1% second-year wage hikes.
"The largest number of settlements has been in the East North Central region where 76,514 workers won a 4.0% wage increase this year," says Gasperow. The largest regional wage increase tracked by CLRC was 5.0% first-year increase for 27,061 workers in Middle Atlantic states, which will be followed by another 4.9% increase next year.
Out of Work
Construction unemployment has risen sharply since markets started to turn down in 2001. In that year, the average monthly number of white- and blue-collar construction workers collecting unemployment benefits jumped 19%, which was followed by another 31% increase in unemployment during 2002, according to the Bureau of Labor Statistics. Through the first eight months of 2003, industry unemployment was running 4% ahead of last years pace. That is an average of 860,000 construction workers looking for work each month in an industry that employs about 6.7 million people.
Source: Bureau of Labor Statistics.
Higher unemployment also failed to slow wage increases for nonunion workers, according to a survey of 1,200 open- shop contractors with a total of 77,415 craft workers. Last year, the firms surveyed by Personnel Administration Services, Saline, Mich., granted their workers a 3.9% increase in their base wage. This year, the same group of contractors expect increase base wages about 3.6%.
"Usually, actual wage increases come in a little higher than what contractors had anticipated," says PAS President Jeff Robinson. "We did not see that this year." He thinks the looser labor market helped subdue actual wage hikes. "Fringe packages are up a little bit from the previous year, but nothing substantial, not like we have seen in the previous three to four years," says Robinson. "We would expect to see that upward trend given the increases in health-care costs."
Robinson says that this years survey indicates that labor shortages have disappeared. "In prior years, we would see increases far above the national average for electricians, pipefitters and mechanical trades, indicating there was a greater demand for these crafts," he says. But for 2002, annual wage increases tracked for eight crafts by PAS fell into a tight range of 3.7 to 4.2%. "This year, no one trade is standing out," says Robinson.
Summary: Cheap Money Heating Up Costs
Indexes: Tight Markets Squeeze Margins
Materials: Perfect Storm Blows Prices Sky-High
Equipment: Fighting Rising Insurance Rates
Insurance: Pressure Grows on Workers Comp