All economic signs signal that residential construction is beginning to take off from a historic low point that it had reached in recent years, far below levels that should be easily sustainable in a healthy economy. NAHB estimates that real residential fixed investment grew by 12% in real terms in 2012 for the first time since 2005 and will grow another 15-16% on top of that in 2013 and again 2014. But even that would leave real residential fixed investment lower than it was in any year from 1996 through 2007.
The turnaround presents new challenges for the construction industry. The Housing Market Index (HMI) surveys conducted by NAHB in January and March 2013 indicate that labor shortages are quickly rising on home builders’ list of the most significant problems. More than half of all home builders surveyed in January confirmed that they expected cost and labor availability to be one of the most significant problems faced by builders in 2013. This stands in sharp contrast with the situation as recently as in 2012 and 2011 when only 30 and 13 percent of surveyed NAHB members, respectively, reported cost and labor availability as their most prominent concern. More than half of all home builders surveyed in March reported that labor shortages over the past 6 months caused them to pay higher wages and subcontractor bids and, consequently, raise home prices. Fifteen percent of respondents had to turn down some projects and nine percent lost or cancelled sales as a result of recent labor shortages. The Job Openings and Labor Turnover Survey (JOLTS) data from the Bureau of Labor Statistics show that the month of January had the second highest number of unfilled positions in the last 17 months.
This study examines where construction workers come from by analyzing the most recent 2011 American Community Survey (ACS) from the Census Bureau and compares the findings with the results from the 2004 ACS, the last time the NAHB Economics conducted a similar analysis. The results show that immigrants have been an important source of new recruits to the construction industry—accounting for a large share of the overall labor force. The inflow of foreign born labor into construction is cyclical and coincides with the overall housing activity. Their share was rising rapidly during the housing boom years when labor shortages were widespread and serious. But even during the severe housing downturn and a period of high unemployment the construction labor force continued to recruit new immigrants to partially replace native and foreign born workers leaving the industry.
Particularly, immigrants are concentrated in some of the trades needed to build a home, like carpenters, painters, drywall/ceiling tile installers, brick masons, and construction laborers – trades that require less training and education but consistently register some of the highest labor shortages in the HMI surveys.
Where Construction Workers Come From
According to the 2011 ACS, the share of immigrant workers in the US labor force now stands at slightly above 16 percent. The reliance of the construction industry on foreign born workers is even greater. Immigrants now account for 22 percent of the construction work force.
Their share was rising rapidly during the housing boom years, when labor shortages were widespread and severe across construction trades. It increased from 20 percent in 2004 to almost 23 percent in 2007 (see Figure 1). As of 2011, it stabilized around 22 percent and the number of immigrants in the construction work force returned to the 2004 level of around 2.2 million. By comparison, close to 1 million native workers left the construction labor force as their number declined from 8.8 million in 2004 to 7.9 million in 2011.
Figure 2 illustrates where immigrant construction workers come from. The majority, 53 percent, come from Mexico. An additional 31 percent come from other countries in the Americas. And even though the share of Mexican workers declined slightly since 2004, the increase in the share of immigrants from the rest of Americas offset the declining share of Mexico-born immigrants. Together, they account for 84 percent of the immigrant construction labor force. Europeans make up 8 percent, and an additional 7 percent come from Asia.
Table 1 breaks down the immigrant construction labor force by year of arrival to the United States. Not surprisingly, one out of four immigrants currently in the construction industry (or 573 thousand workers) came to the US during the housing boom years, from 2000 to 2005, when labor shortages across construction trades were widespread. More than half of these workers, or close to 300,000, arrived from Mexico. Immigrants that arrived from 2006 to 2011, when construction job vacancies became limited, account for about 245 thousand construction workers, or around 11 percent of the construction labor force – a 57 percent decline compared to 2000-2005. Out of these, 113 thousand workers arrived from Mexico.
The numbers in Table 1 are likely to underestimate the true inflow of immigrants since immigrants who left the industry and even the United States during the housing downturn do not show up in the 2011 construction labor force estimates. Nevertheless, the estimates capture the sharp fall in the number of new immigrants arriving to work in the US construction industry that coincided with the unprecedented housing decline. It is worth pointing out that even during this period of high unemployment and limited construction trade vacancies, the construction industry continued to recruit new immigrants even though at a much slower rate. The 2011 ACS shows that more than 25,000 new immigrants arrived in 2010, a year prior to the survey, to join the US construction labor force. By comparison, that number was five times larger and exceeded 135,000 in 2005, according to the 2006 ACS.
The analysis highlights two findings:
The immigrant flow into the construction labor force is highly cyclical and coincides with the overall housing activity
Even during the severe housing downturn, the US construction industry continued to absorb new immigrants but at a much slower rate, most likely, to partially replace a larger number of native born and immigrant workers leaving the industry.
Characteristics of Immigrant Workers in the Construction Labor Force
The further analysis of the ACS data looks at characteristics of immigrant workers in construction attempting to understand why the construction industry attracts a high share of foreign born labor. The ACS data show that the construction industry relies heavily on labor that requires less training and education. As shown in Table 2, 21 percent of construction workers do not have a high school diploma and an additional third of the construction labor force did not study beyond high school. Immigrants who arrive to the United States to work in the construction industry are more likely to be drawn into lower skill trades since roughly half of them do not have a high school diploma and additional 27 percent did not study beyond high school. By comparison, only 13 percent of native born workers in the construction industry did not graduate from high school and more than half of them went to college. As a result, immigrants represent more than half of the lowest skill (no high school diploma required) construction labor force, while their overall share in the construction labor force is 22 percent.
The 2011 ACS data also show that the construction industry attracts younger immigrants with half of them age 38 and younger, while the median age of the native population in the construction labor force is 43. The median age of immigrants participating in the US labor force outside of construction is 41. Immigrants who arrived to the US since 2000 and joined the construction labor force are even younger with half of them under the age of 31 while the median age of newly arrived immigrants in the labor force outside of construction is 33.
Immigrants in Construction Trades
According to the government’s system for classifying occupations, the construction industry employs workers in over 330 occupations. Out of these, fewer than 30 are construction trades, but they account for two thirds of the construction labor force. The other third of workers are in finance, sales, administration and other off-site activities.
Immigrants account for 28% of all workers in construction trades. Their presence is particularly large among construction occupations needed to build a home, such as carpenters, laborers, painters, roofers, brick masons, drywall/ceiling tile installers, etc. The two most prevalent construction occupations, laborers and carpenters, account for about 30 percent of the construction labor force. More than a third of all construction laborers and one out of four carpenters are of foreign born origin (see Table 3).
Table 3 shows that immigrants are concentrated in trades that do not require years of education and training. Immigrants account for almost half of drywall/ceiling tile installers and tapers, a trade where 44 percent of workers do not have a high school diploma. More than a third of all carpet/floor/tile installers and painters did not finish high school, immigrants account for 43 percent of workers in these occupations. The trades with low presence of foreign born labor, such as electricians, construction and building inspectors, first-line supervisors, boilermakers, elevator installers – tend to recruit better educated workers. Only 4 percent of construction and building inspectors and 7 percent of electricians did not graduate from high school.
There are three construction occupations that are not very common but immigrants account for more than half of these trades – rail-track laying/maintenance equipment operators, plasterers/stucco masons and hazardous materials removal workers. Around 43 percent of workers in the latter two trades do not have high school diploma.
Table 4 presents the top 15 most common non-construction trades in the building industry. The majority of them are management, office and sales occupations. These trades seem to recruit workers with more advanced education and higher skills as share of workers with no high school diploma in these trades is minimal (with the exception of drivers and welding/soldering/brazing workers). The immigrant presence in these trades looks less relevant. While the overall share of immigrants in the construction labor force is 22 percent, their share among construction and miscellaneous managers – the top two most common non-construction trades in the industry - is 11 percent, it goes further down to 10 percent among chief executives, and to 9 percent among general and operations managers.
The Census data, therefore, highlight that immigrants in the construction labor force are concentrated in trades that do not require years of education or advanced skills. It turns out these trades also tend to have more vacancies and labor shortages. According to NAHB’s monthly HMI surveys, construction trades with the most consistent labor shortages are framing crews, carpenters and bricklayers. About 30 percent of surveyed builders were still reporting some shortages of labor in these trades in June 2012, even though the shortages were not nearly as severe as in the midst of the housing boom. Nine months later, in March 2013, reported labor shortages got worse across all trades but particularly among framing crews and carpenters, with more than a half of respondents reporting shortages of framing crews and carpenters-rough subcontractors.
Immigrant Construction Workers across States
Regional analysis of construction labor force provides additional insights. More than a third of all immigrant construction workers reside in five states: California, Texas, New York, New Jersey and Florida.
In California, Texas, District of Columbia and New York immigrants account for more than a third of the construction labor force (see Figure 3). In New Jersey, Florida, Nevada, Arizona, Maryland and New Mexico, more than a quarter of the construction work force is of foreign born origin. Interestingly, reliance on foreign born labor continues to spread outside of these traditional immigrant magnets and is evident in states like Georgia, North Carolina, Connecticut, Virginia, Illinois, Colorado, where immigrants now account for more than 20 percent on the construction labor force. While most states draw the majority of immigrant foreign born workers from the Americas, Hawaii relies more heavily on Asian immigrants. European immigrants are a significant source of construction labor in North East and Midwest (see Table 5).
The last column of Table 2 highlights the uneven losses in the construction labor force that took place across states since 2007. More than a third of all building industry workforce, native and foreign born workers included, left the industry in Arizona. Losses of similar proportions took place in Nevada, Idaho, Utah, Florida and Oregon where about 30 percent of all workers left the industry. The construction workforce of Georgia, Minnesota, Alabama, California, South Carolina, Colorado, and Arkansas saw declines of 20 to 25 percent. All above mentioned states, with the exception of South Carolina and Alabama, registered drastic declines in immigrant workers as part of the overall declines in the construction labor force. About half of all immigrant workers left the building industry in Arizona, Nevada and Idaho. The remaining states on the list lost more than a quarter of immigrant construction workers since 2007.
While most states saw their construction work force shrink, the building industry of North and South Dakota, fueled by the local oil boom, continued to absorb new workers through 2011 but almost exclusively native-born. The relatively small construction work force of Washington, DC also continued to expand through the housing decline, most likely capturing some misplaced workers from neighboring Maryland and Virginia.
In summary, analysis of the 2011 ACS data highlights the significant presence of foreign born labor in the construction work force across the United States. They are concentrated in low education, low skill positions. Even during a recent period of high unemployment and severe housing downturn, the building industry continued to recruit new foreign born labor although at a much slower rate. The distribution of immigrant construction workers is not even across the US, with some states drawing more than a third of their construction workers from abroad. States that traditionally rely on foreign born labor but lost its significant share during the housing downturn are most likely to experience difficulties in filling out construction job vacancies once home building takes off.
The ACS surveys households rather than businesses and, consequently, covers self-employed workers. Counting self-employed is particularly important in the construction industry where they traditionally make up a larger share of the labor force.
The ACS does not report employment data separately for residential and nonresidential construction, but different types of construction can require similar skills and, therefore, often draw workers from the same labor pool. As a result, workers’ movement between the residential and nonresidential is flexible for many trades.
Note, that managers, heating, ventilation, air conditioning, and refrigeration (NVACR) mechanics and installers are not included in the construction group.