Do We Have Too Many Construction Workers?

Do We Have Too Many Construction Workers?

Do We Have Too Many Construction Workers?

A blog about business, finance, and economics.
Aug. 25 2010 11:29 AM

Do We Have Too Many Construction Workers?

David Rosenberg threw up a chart yesterday in his daily breakfast note that really stuck out. It is the ratio of construction workers to housing starts from the 1950s to today. It's not too surprising that the number went up very high during America's housing boom in the middle of the last decade, nor that the number began to come down once the recession hit. What is surprising is how little it has come down by its historic norm:

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Now, obviously, one reason that the ratio is so high is that its denominator—housing starts—has dropped so low. In 2009, according to the Census Bureau , a measly 583,000 new housing units were built, a 73% drop from the all-time high of 2,155,300 units in 2005. A drop that steep has no precedent in modern American history. Possibly, that is all this chart has to tell us. Rosenberg's take is: "This could easily mean that we see 3 to 4 million construction jobs being lost going forward, barring a major revival in the housing market, which isn’t happening." That sounds drastic to me, though I see how he gets there.

But I have a different question: If they are not building and remodeling new houses, what are all those construction workers doing? (Obviously some work in commercial construction, but let's assume that those numbers are in line with what they have been throughout the period covered by this chart.) 

Part of the answer to the question: A lot of them are doing nothing. According to the Bureau of Labor Statistics (BLS), in July, 17.3 percent of the nation's construction workers were unemployed , the highest rate by far of any of the 15 or so categories measured by the Bureau. This gets to the question that I have been grappling with in a couple of recent stories : Why do construction workers remain construction workers when there is so little construction going on? Why don't they take up some other profession? There are stock answers that apply to most professions: Workers don't want to move to where work might be (and these days can't sell their house for a decent price, even if they did want to); workers believe their profession will revive; and the like.

One aspect of construction work that might be germane here is that a very high percentage of workers in the construction sector own their own businesses. The BLS says , for example, that 44.9 percent of painters and paperhangers are self-employed, as are 32 percent of carpenters, and three other subcategories are above 20 percent. It's reasonably easy to see how the self-employed tolerate reductions in hours, and the degree of autonomy they enjoy is probably not widely available in other fields—especially without training. 

Which brings me back, once again, to the question of skills, training, and mismatch. Writing in the New York Times in February , Harvard economist Edward Glaeser noted: "The New Dealers came up with a lot of projects that required close to no specialized skills (think the Civilian Conservation Corps ), 75 years ago.  But today, good investments in technologically advanced infrastructure will depend on highly skilled workers, and they aren’t the ones that are disproportionately unemployed."

James Ledbetter is the editor of Inc. and the host of Panoply’s podcast Inc. Uncensored.