About half of the firms say they increased base-pay rates for craft workers, while 24% are providing incentives and bonuses to attract workers. Despite sustained demand, base-pay rate hikes are modest, says the Construction Labor Research Council, which tracks union construction labor settlements. So far in 2017, they have averaged 2.7% increases in the first year of contracts, up from 2.6% in 2016 and 2.5% in 2015.

“We keep assuming we’ll get wage pressure upward with the shortage of workers, but we have a few hundred settle­ments and our average is similar to the end of last year,” says Carey Peters, CLRC executive director.

Carpenters, cement masons and laborers have seen the biggest increases, all above 3% on average. Although Peters says the construction economy is “creeping up to 2005 to 2007 levels,” he doesn’t expect the current trend line to change. “We expect to see a continual straight line, with gradual upticks of 0.1% to 0.2% per year,” he says.

Merit-shop craftworkers have seen wage increases ease back, according to Personnel Administration Services. Among firms that plan to offer wage increases this year, craft workers could see an average hike of 3.22%, below the 3.32% average last year. “We anticipated something around 3.6% in 2016, so that was a little surprising to us,” says PAS President Jeff Robinson. Initially, employers forecast they would offer increases of 3.49%, but these were ultimately 0.17% below that estimate, he says.

Robinson says highway, heavy-civil and municipal contractors offered the highest increases—3.8%, 3.7% and 3.5%, respectively although there was softening in industrial markets, especially on the Gulf Coast.

But he projects that, with new demand, a wage boost will occur next year. “If anything, [the rate] may jump with the devastation from the recent hurricanes,” he says. “Once things start to gear back up [in those regions], that could drive wage rates up.”

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Hot Markets

In California, wage pressures already are being felt. “The demand is unprecedented, unlike anything I’ve seen in 30 years,” says Mark Breslin, CEO of United Contractors, a union-affiliated contractor group in California with about 450 company members. Breslin notes that, while private-sector work led the way out of the recession, public work has caught up. Both markets are “advancing simultaneously,” causing a big spike in demand, he notes.

“Skilled people can write their own ticket now,” Breslin says, adding that some union trades are being paid above scale. Tom Holsman, CEO of AGC California, agrees. “Apprenticeship programs can’t keep up with demand,” he says.

Breslin says his organization brought in 600 applicants with previous experience to its job fairs this year. “We are trying to … get employers to take more affirmative steps,” he says. “We’re at capacity. We need a new mousetrap. This is an immediate, urgent economic priority.”

Robbie Hunter, president of the State Building & Construction Trades Council, says that, while manpower is tight, he is not seeing shortages. “We still have people on waiting lists who want to get in,” he says. “We have the ability to expand, if the work is there.”

Big project labor agreements (PLAs) also have been signed—including a 10-year agreement signed last month with the port of Los Angeles to cover an estimated $780 million of anticipated projects, that awaits an OK from the city council—and with municipalities such as  Stockton. Despite demand, Hunter says average annual wage increases are in line with national trends. “The pay raises we see are between 2.5% and 3%,” he says.

But settlement of a late summer, week long strike of concrete and gravel truck drivers in King County, Wash., may set a high standard for Seattle-area bargaining next year. Jamie Fleming, a spokeswoman for Teamsters Local 174, says the drivers and concrete companies, led by CalPortland, reached a four-year contract settlement that includes “record-setting wage increases, increases in pension contributions and full maintenance of benefits for health care over the entire length of the contract.”

The agreement also includes “language that protects Teamster work in King County from being undercut by drivers brought in from outlying areas at lower wage rates,” Fleming says. With most union bargaining agreements in Seattle’s busy market expiring next June, the agreement “raises the bar for everyone.”

Wendy Novak, CEO of Associated Builders & Contractors of Western Washington, notes that, with union firms able to subcontract to the open shop when union halls are empty,

“jurisdictional fights between unions claiming the same work” and pension trust-fund withdrawals also have become major issues. With a severe local worker shortage, “everyone is fighting for the same workforce,” Novak says.

Backlash?

John Stiffler, executive secretary-treasurer of the St. Louis Building and Construction Trades Council, says seven bargaining contracts settled this year “all sustained our joint labor-management investment in training,” adding that all member trades are “reporting 90% employment.” 

Missouri was one of three Midwest states this year—also including Wisconsin and Iowa—to enact right-to-work legislation that would limit PLAs, union wage rates and influence on public works.

But an AFL-CIO push prevented it from taking effect in August. Stiffler says more lthan 300,000 petitions were gathered —three times the number needed—to place the measure before state voters in 2018. “That tells us Missouri citizens really don’t favor ‘right to work’ and see it as nothing more than a way to lower middle-class wages and benefits,” he says.

In New York City, open-shop contractors continue to erode union dominance in high-rise construction. “New York is a right-to-work state, and we live in a capitalistic society,” says Ken Colao, CEO of contractor CNY Group. “The non-union trades are … open to change and innovation. As they increase in size and resources, they are increasing capabilities.” But, he concedes, “there are differences in how certain non-union trades must be managed and supervised.”

Gary LaBarbera, president of the Building and Construction Trades Council of Greater New York, says, however, that, in recent bargaining for operating engineers, laborers and insulators, “positive adjustments were made” to make union contractors “more competitive in the residential sector.”

Market observers are watching for future impacts of a revised tax abatement law for developers enacted in June that incorporates affordable housing units and prevailing wage rates into higher-end residential construction projects in the city, a revision of the "421a"  tax incentive that expired last year when real estate firms, unions and state politicians could not reach compromise on terms.

Both union and non-union advocates are claiming victory, Developers see new complexities in the revision.

"The 421-a changes require higher wages but not necessarily union wages except for the largest projects. This will make union contractors more competitive but does not guarantee they will get the work," says Kenneth Fisher, a construction attorney at Manhattan-based CozenO'Connor. "Expect to see no decrease in open shop projects but with more work for the trades who are willing to work with the contractors to get the jobs. " 

Last month’s passage of a new city construction-safety law that requires workers on many projects to have 40 to 55 hours of safety training—well above minimums required by federal law—could become another labor battleground.

Developers claim it favors union construction workers and contractors and creates obstacles in hiring non-union forces—often disadvantaged business enterprises and day laborers—who are more likely to require fresh training to qualify.

Training requirements will be phased in through 2020. The new law applies to workers on building projects of five stories or higher.

One key complaint of developers is that union employers will be credited for training received as part of union apprenticeships. But union chief LaBarbera says any union safety training taken more than five years before the new rules took effect will require workers to take a refresher course. “So, it’s a little    disingenuous [to say] we’re being grandfathered,” he observes.

The safety law "will give the unions a short term edge as it is phased in," says attorney Fisher. "So until enough nonunion workers are trained to meet the demand, contractors may have to rely on union trades. Of course, the hope is to improve safety on all jobs."

In Massachusetts, the healthy construction sector has given unions a bargaining chip at the negotiating table.

Three locals recently signed contracts for four-year durations, including plumbers, gasfitters, pipefitters and sprinkler fitters. State building-trades chief Frank Callahan Jr. says the 74 local unions in Massachusetts are starting to see an uptick in wage growth. But that growth is not always keeping pace with other project costs, such as materials, real estate and legal fees, he says.

“People are doing better at the bargaining table for a total package,” he says. “But we’re still seeing a significant amount … going into health-care cost increases and other benefits.” He says state unions “have been able to meet the demand for skilled labor.”

In the mid-Atlantic region, Steve White, director of Affiliated Construction Trades, a division of the West Virginia State building trades, says most newly negotiated contracts are one-year extensions.

But the gas industry is poised to drive an increase in industrial construction activity in the state. “Wages will be rising just because of the demand,” he says, citing need for pipefitters, electricians and crane operators, “They are scrambling all the time to get people, adding people to their training programs,” White says.