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Editorials 2019-May-24

Labor bottleneck

BACK in the day, some claimed that raising the minimum wage to the federal level would significantly reduce the need for foreign workers.

But now that the federal rate applies to the NMI, there is still a need for foreign workers for certain job categories such as construction. Hence, the new “solution,” some say, is for the government to mandate further wage increases. However, to paraphrase Kevin D. Williamson, although certain government officials and other politicians sometimes seem to confuse themselves with God, they cannot speak reality into being. “Let there be higher wages in the NMI even though the miniscule local economy can’t afford to pay what the U.S. or the world’s largest economy can.”

In any case, if paying “higher wages” is the “solution,” then there should be no labor shortages in the U.S.

“Nationwide,” the New York Times reported in April, “the average wage of nonsupervisory workers in residential construction hit $25.34 an hour in January. That’s over 6 percent more than a year earlier, close to the steepest annual increase since the government started keeping track almost 30 years ago. Pay is taking off even among those in less-skilled construction trades.”

And yet according to builders interviewed by the NYT, their labor force is shrinking. “The problem for builders is that the recovery in home building has outpaced the growth of the construction labor force. Housing starts have picked up to a pace of 1.2 million a month, more than twice as many as at their trough in April 2009. The number of nonsupervisory workers in residential construction, by contrast, has increased by only 40 percent since hitting bottom in 2011, to about 530,000.”

Immigration — often illegal — has long acted as a supply line for low-skilled workers, the NYT report added. “ ‘The recent shortage of immigrant workers is impacting housing and housing affordability,’ said Jerry Howard, chief executive of the National Association of Home Builders. Phil Crone, who runs the association’s Dallas chapter, said the labor bottleneck was adding about $6,000 to the cost of every home built in the area and delaying completion by two months. Were it not for immigrants, the labor crunch would be even more intense. In 2016, immigrants accounted for one in four construction workers, according to a study by Natalia Siniavskaia of the home builders’ association, up from about one in five in 2004. In some of the least-skilled jobs — like plastering, roofing and hanging drywall, for which workers rarely have more than a high school education — the share of immigrants hovers around half…. For all the fears of robots taking over jobs, some economists are worrying about the broader economic fallout from a lack of low-skilled workers. And businesses across the economy are complaining that without immigration they will be left without a workforce. ‘It is good for wages to go up, but if labor is at a point where employers can’t hire, it is reducing growth,’ said Pia Orrenius, an economist with the Federal Reserve Bank of Dallas…. Immigrants make up almost a third of workers in the hotel and lodging industry and over a fifth of workers in the food service industry, according to the Brookings Institution. There are over a million immigrant workers in the direct-care industry — home health aides and personal-care aides tending to the sick and the frail. That amounts to about one-fourth of the total, said Robert Espinoza of PHI, a nonprofit group that does research and advocacy for direct-care workers.”

All this in a nation with a population of over 300 million and an economy and wage rates that are the envy of the world.

Well documented

IN June 2018, The Wall Street Journal reported that “Young People Don’t Want Construction Jobs. That’s a Problem for the Housing Market. Disinterest in construction work is contributing to a labor shortage that has meant fewer homes built and rising prices — possibly for years to come.”

The report noted that “some economists say the construction industry could attract more workers if builders raised wages further [that is, more than $25 an hour] to better compete with other industries. But builders say that rising land, material and regulatory costs are already squeezing their margins, and if they pay workers more it will raise the price of homes beyond what many people can afford.”

“The dearth of construction workers across America has been well documented,” the WSJ report added, “but accurately measuring it at the local level has been more challenging. Mr. Romem, the economist, used job listings data from Greenwich.HR to drill down to the state level. He found that states hit hardest by the housing bust saw on average the greatest decrease in the share of young workers between 2005 and 2010. Delaware and Vermont lost the largest share of young workers, followed by states such as Maryland, California and Arizona. States where cost of living are high, such as Massachusetts, New Jersey and California, have the worst overall shortages of construction workers, as measured by the number of online construction job postings that stayed up for 45 days or longer in 2017, according to Mr. Romem’s analysis. Those states lost tens of thousands of workers during the economic downturn, and many never returned. Workers retired, retrained for careers in energy and other sectors, or were immigrants who returned to their home countries. The industry has failed to replenish its ranks with newcomers even as construction has boomed.”

The ‘real problem’

AS in most public-policy controversies and debates, immigration/workforce issues are resolved not by common-sense considerations, but by the politics of the moment. And right now, the U.S. remains deadlocked on immigration/workforce issues. It may get worse in 2020, when the politics of a presidential election year comes to a boil.

“Politics stink,” PJ O’Rourke once wrote. “Think about how we use the word ‘politics.’ Are office politics ever a good thing? When somebody plays politics to get a promotion, does he deserve it? When we call a coworker a ‘real politician,’ is that a compliment? Politics stink.”

And so now the welfare and the future of the NMI are at the mercy of politicians thousands of miles away, where the Commonwealth has little say, if at all, even in policies that directly affect the local people.