Tight Labor Markets Push Wages Up
Shaw Power Group/Jason Brod

Despite concerns that the nation’s economic woes could impact the construction industry, open-shop wages continue to rise at a steady rate to meet strong demand in certain sectors. Wages among open-shop journeymen jumped 5.1% in 2007 and they could rise another 4.8% in 2008, according to a survey by Personnel Administration Services, Saline, Mich.

While some sectors have slowed or flattened, the growing need to staff petrochemical and power projects is pressuring wage increases, says Jeff Robinson, president of PAS. “In areas around the country where we’ve seen a lot of powerplant work, we’re seeing some of the highest wage increases,” he adds.

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  • Alabama, Florida, Georgia, Kentucky, Mississippi, North Carolina, South Carolina and Tennessee saw a combined 5.4% increase in 2007 with another 5.2% forecast for 2008. Louisiana, Texas, Arkansas, Oklahoma and New Mexico tallied combined wage increases of 5.6% in 2007, with 5.4% expected this year. Within those regions, the power-intensive areas of the Gulf Coast are the prime spots for wage hikes, Robinson said.

    As demand for power projects ramps up, many generation companies and contractors are reporting a dearth of specific skilled craftspeople such as boilermakers, pipefitters and electricians. Journeymen in those crafts are among the highest paid in the Gulf Coast region, Robinson says.

    The increases come as the industry faces a wave of retirements. The Center for Energy Workforce Development estimates between 2007 and 2012 power-generation companies could lose nearly 8,500 pipefitters and pipelayers to retirement and attrition, about 43% of its workforce. About 30,000 lineworkers—more than 42% of the workforce—also could be lost during that time, CEWD reports. Overall, about half of the power industry’s 400,000 workers are eligible for retirement during the next 10 years, according to a study by the Carnegie Mellon University Electricity Industry Center, Pittsburgh.

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    Open-Shop Wage Rate for Journeymen

    Future demand continues to rise rapidly. Electricity consumption in the U.S. could grow by at least 40% by 2030, according to the Energy Information Administration. Among the solutions, companies are pushing for billions of dollars worth of new nuclear powerplants to be constructed in the coming years.

    “The power guys are all nervous,” says Liz Elvin, director of workforce development at Associated General Contractors of America. “Between the work that’s going on now, the number of proposed nuclear powerplants and the workforce facing retirement, no one seems to know who will build these projects much less who will repair and maintain them once they are built.”

    Demand has created a leveling of the playing field for open-shop and union workers, says Eddie Clayton, outage planning manager at Southern Company Generation, Atlanta. Along the Gulf Coast, the company has seen open-shop wages in certain crafts rise by 60% during the last three years. In many cases, open-shop craftspeople are demanding per diems and retention incentives. “Three years ago there was a big difference in pricing for union compared to open shop,” he says. “That delta has just about disappeared.”

    Southern Company recently surveyed the workforce in Alabama, Mississippi and northwest Florida and found all three states combined could not supply enough open-shop craftspeople for pending projects. As a result, projects routinely blend union and open shop to keep work moving. “We’ve been able in the last year or two to get more cooperation from the unions, recognizing they can’t man the jobs that used to be exclusive for them,” Clayton says.

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    Hourly Union Pay Scales, September 2008

    The pressure to man jobs will intensify. Clayton estimates that by 2014, Southern Company will need between 3,000 and 4,000 more craftspeople than it currently requires annually.

    The scenario stretches well beyond the Gulf Coast. To attract workers to its jobs in Ohio, Black & Veatch has offered 10% retention bonuses, payable when the person is laid off, said Richard King, vice president of labor relations at Black & Veatch. The company also is working with unions to ease jurisdictional issues in order to bring workers in from various unions to fill vacant positions.

    On the union side, company incentives are often limited by national maintenance agreements, King says. “You have to be careful of the ‘me-too’ clause,” he says. “If you have to bring in 100 guys from other locations and pay them subsistence, then you’re required to pay the other guys subsistence as well. That’s an avenue you can’t afford to go down.”

    It’s a similar scenario in other markets. Although King says Black & Veatch is “holding its own” in California, several new projects in the state could stretch the limits of available journeymen.

    “Wherever I go to meetings around the country, the message is the same: everyone is hurting,” King says. “With the [number] of power projects happening, we’re going to have a real problem.”