Week of July 31, 2006
Front Page
Coast to Coast
Housing Forum
Politics & Government
Economics & Finance
Tips
Business Management
50Plus Housing
Multifamily
Remodelers
Construction Safety
Building Systems
Education
Green Building
Research
Building Quality
Regulation
Legal
Labor
Building Products
TV
Endowment
Association News
House Votes to Revitalize FHA Single-Family Insurance
Bill Would Lift Multifamily Loan Limits in High-Cost Areas
States Clamping Down on Illegal Immigrant Workers
Register for SLGA Conference by Friday, Aug. 4 and Save $50

Housing Short-Handed Without Immigrant Workers
By Hugh Morton

Perhaps no issue in recent American politics has had so much misunderstanding and misinformation surrounding it as has the subject of illegal Hispanic immigration. Unfortunately, no other recent issue has evoked as much emotion and ire.

To gain a true understanding of this issue, one must first recognize that there is a serious shortage of labor in many of the basic industries of our economy — particularly in the construction trades.

When I started my home building business in 1992, I found it was easier to sell houses than it was to build them. I discovered early on that there was a significant shortage of labor in the home building industry, especially in the more arduous sweat trades. Moreover, coming from a career in finance, I was perplexed not only at the shortage but at the quality of labor in the industry. The expanding housing market of the mid-1990s only made this shortage more acute.

To fill this labor void, in true supply-and-demand fashion many Hispanic workers began to cross the border. This was especially true in the construction industries, where most work is accomplished through the use of trade subcontractors. This scenario provided a fertile opportunity for legal immigrant trade contractors to offer their services to builders and other general contractors while employing workers from their families and villages back in Mexico, most of whom had come here illegally.

Builders who were struggling to find quality roofers, concrete finishers, bricklayers, drywall hangers, framers, stucco applicators, etc., found the immigrant trade contractors a godsend. Desperate to meet deadlines and quotas, field subcontractors simply ignored the fact that many of the employees of their new immigrant subcontractors were here illegally.

For the most part, the work ethic of the Hispanic workers was excellent and they worked hard to send money back to their poverty-stricken families in Mexico and elsewhere. While these workers were technically illegal, there just didn’t seem to be victims in the scenario. Moreover, the Immigration and Naturalization Service (INS) seemed to look the other way — presumably because they understood how badly immigrant labor was needed in our industry. As the housing market boomed over the next decade, so did the influx of illegal Hispanic workers.

Contrary to common belief, illegal immigrants have actually replaced few qualified American workers. In most cases, they supplemented American workers and provided the labor for an expanding housing market, particularly in the growing Sunbelt states. Indeed, without the presence of immigrant labor, the housing boom of the past decade would not have happened — certainly not to the degree and manner in which it occurred.

The Myth of Lower Wages

Unfortunately, many Americans seem to have the mistaken belief that illegal immigrant workers have become a large part of the construction work force because they are a cheaper source of labor, thereby enhancing builders’ profits. The truth is that such workers have actually saved builders very little money.

When Mexican roofing contractors, for example, started showing up in the mid 1990s, we were paying $18 to $20 per square (10 ft. x 10 ft.) to install roofing shingles. Since we were begging for roofers, we gladly paid the immigrant contractors the same rate.

We were paying 85-cents per square foot in that era for labor to finish concrete slabs. Since we were also begging for competent concrete work, we readily paid the Mexican contractors the same rate.

The only case where we deviated from our standard pay rates was for bricklaying. We were paying $250 per 1,000 bricks, but the Mexican bricklaying contractor wanted $270. After looking at the quality of his work, we agreed to pay his rate.

The cost of their labor really wasn’t the issue. They provided the availability and quality of labor that was sorely needed in the industry.

It is true, though, that while immigrant workers haven’t actually reduced our labor costs, they have, through their sheer numbers, acted to moderate wage inflation in the construction fields during the past decade. Whether this is good or bad depends on one’s perspective. For the new home buyer, it has been highly beneficial. To a Federal Reserve attempting to control inflation, it can also be considered a positive. Labor unions and certain employees, however, might have a contrary opinion.

Immigrants Are Main Source of Labor

Over the course of 10 years, immigrants became the dominant source of labor for the construction trades. At the same time, construction became an increasingly lower career preference for most young Americans. Indeed, in a recent survey of high school seniors, construction ranked next to last out of 232 career options.

Many Americans still want to deny, though, that there is a labor shortage in our economy. In fact, the main factor preventing a resolution of the illegal immigration issue appears to be the refusal by many in the media and in Congress to accept the premise that there is a serious shortage of labor in many of the undesirable hard labor industries of the American economy. It is not clear whether they don’t actually understand this shortage or whether they deliberately choose to ignore it because it undermines the logic of many of their arguments for sending all the illegals home, or alternately, for attacking those who employ them.

The send-them-home crowd is of the mistaken opinion that if contractors simply paid higher wages, Americans would flock in droves to fill manual labor jobs in our industry like nailing on roofing shingles or hanging drywall. If this is true, where were those workers in the mid-1990s when we were begging for them?  Furthermore, why are all the Americans currently employed in food service and retail sales passing up jobs in construction where they could increase their wages significantly?

Looking at the issue from a macroeconomic perspective, it is estimated that there are 7 to 8 million illegal immigrants currently employed in this country in fields such as construction, agriculture, poultry processing, textiles, hospitality and food service. In an economy nearing full employment, where will we find workers to replace all of them should they be successfully sent back to Mexico? The replacement workers aren’t just standing in soup lines. They will of necessity have to come from other industries.

Assume, hypothetically, that trade contractors are able to raise their prices to enable them to pay hourly wage rates in the range of, say, $25 to $30 per hour from the current $10 to $20 range. Assume further that this rate attracts American workers from banking, computer fields, Internet-related industries, telecom industries and more. Wouldn’t the current employers of these trained workers then have to bid up their wages to keep them on board?  Wouldn’t this bidding war set off rounds of wage-induced, cost-push inflation and the dislocation of labor resources? And wouldn’t low-preference industries like construction still lose out in the long run?

The Current Strategy

The current strategy of the anti-immigration group is: (1) to secure the borders; (2) go after the employers of illegal immigrants; and (3) then talk about a guest worker program.  The border, indeed, needs to be secured. Too many non-workers have come here seeking welfare and other benefits not available in their own countries.

But attacking employers before setting up a guest worker visa program is not only backwards and illogical, but it is a recipe for economic disaster. Attempting to remove all illegal workers before establishing a legal means for them to stay here would have disastrous consequences for many of our basic industries. Housing — the nation’s largest single industry whose activity accounts for a full 17% of GDP — would be severely crippled, especially so in Atlanta and other active Sunbelt markets.

The possible economic consequences to our national economy are far more serious than most Americans seem to understand. New York Mayor Michael Bloomberg was right on target when he said our economy would be a shell of itself without immigrant workers. Our industry’s labor shortage is actually worse now than 10 years ago because even fewer young Americans have the will or skills to work in construction. To successfully remove all illegal immigrant workers from the construction industries would have catastrophic consequences.

It seems rather foolish to bankrupt hundreds of thousands of American businesses by eliminating their labor resources and then leisurely decide how best to replace their laborers. It would be much wiser to secure the border, establish a workable guest worker program and then, if employers don’t follow the rules, go after them.

The Current Proposal Has Flaws

Many who are opposed to a temporary guest worker program say it won’t work. They say immigrant workers won’t go home at the end of a three-year period as proposed in the recent Senate bill. On that point they are probably correct. The immigrant workers will not want to leave at the end of three years and their employers will not want them to leave.

It would be far better to issue a two-year visa and renew it at the end of two years if the immigrant is still employed, has obeyed our laws and has paid his income taxes. At the end of another two years, renew the visa again if the same conditions are met. A plan like this would gain the support of the business community, which is an essential ingredient to the success of any guest worker plan.

Many critics say, though, that this will in a sense make the workers permanent guests. So what if it does?  If we need 8 million workers, what difference does it really make if they have been here three years or six years? We will still have 8 million Hispanic workers. Where is the significance of their faces changing every three years? Where is the wisdom of sending home workers at the end of three years who have become proficient in their jobs, who have begun to learn our language and who have proven to be acceptable guest residents and then replacing them with new unproven workers who must start all over. Consider also the administrative burdens of processing 2 to 3 million workers coming and 2 to 3 million workers returning each year — assuming they voluntarily agree to leave.

Many Americans cringe at this suggestion, saying that it amounts to a semi-permanent form of amnesty. They say we can’t reward this past behavior. They say it sends the wrong message to other potential immigrants.

But if we are going to secure the border and begin controlling worker presence here, why do we care what message it might send across the border? The message they need to receive is that the border is secure and if they are going to come here they need to do it through the proper channels of the worker program.

The Construction Industry Needs a Worker Program

The construction industry needs a viable, intelligently designed work visa program that will provide a legal basis for immigrant workers to be in this country. We don’t need to complicate it with a permanent amnesty provision or a path to citizenship. We don’t need to provide them with welfare or unemployment benefits. If they are no longer employed or decide to retire, they should be sent home. If they commit any felonies, we should also send them back.

It is not unreasonable to also require that any new applicants for the worker program have bona fide American employers to sponsor them before they are permitted to cross the border. Placement services would love this opportunity. Most importantly, this would match the flow of immigrants to the level of labor that is actually needed.

It would certainly be acceptable to require publication of job offerings for Americans to consider, but please don’t let the labor unions try to set wage levels. It is best to rely on the free market. By making the immigrants legal, they will be even better able to negotiate their own wage rates.

If we had done this 10 years ago, we wouldn’t now have so many illegal immigrants among us. We don’t need to put this off any longer.

©2006. All Rights Reserved.

Hugh Morton is a past president of the Metro South Chapter of the Greater Atlanta Home Builders Association and the founder and president of Peachtree Homes and PTH Development Corp., which build homes and develop subdivisions on Atlanta’s Southside. Peachtree Villages, the company’s first town home community, was one of the five winners of NAHB’s 2005 Innovation in Workforce Housing Awards, which recognize outstanding examples of communities that provide decent and affordable homes for nurses, police officers, school teachers, retail workers and the like near areas where they work.

Morton serves on the boards of directors of NAHB and the
Home Builders Association of Georgia. He was one of several small business owners who participated in a July 25 roundtable discussion in Atlanta with Commerce Secretary Carlos Gutierrez on the Administration’s proposal for comprehensive immigration reform.

 
NBN Tools
Print This Article Subscribe to NBN
E-mail Editor Print ALL Articles Manage Your Subscription

   
 
Find and manage projects right from your desktop.
Get your company listed in the new McGraw-Hill Construction Directory.
 
   
 
The GSEs and Housing Affordability: A Necessary But Not Sufficient Condition
Freddie Mac Keeps America's Eggonomy Stable. Enroll In Eggonomics 101
 
   
 
GM NAHB $500 Exclusive Offer
Great DELL Products and Great Prices
Save Up to 30% on UPS Shipping