Construction boom has led to higher pay but shortage of skilled laborers, job delays
BRUCE ASATO / BASATO@STARADVERTISER.COM
Honolulu’s thriving construction market is the nation’s third-fastest-growing construction market, according to the Associated General Contractors of America. Above, workers are on the job at the Keauhou Place development in Kakaako.
BRUCE ASATO / BASATO@STARADVERTISER.COM
Elijah Scott works at the Keauhou Place job site as a worker with Hawaiian Dredging Construction Company in Kakaako. The Honolulu metro area was the third fastest growing construction job market during the past 12 months according to an analysis by the Associated General Contractors of America.
BRUCE ASATO / BASATO@STARADVERTISER.COM
David Lau, a superintendent with Hawaiian Dredging Construction Company, on the job site for Keauhou Place.
Elijah Scott, 22, is only a carpenter’s apprentice, but the latest construction boom has put a six-figure income within his grasp.
The promise of high pay, steady raises and the chance to build a solid career enticed the former grocery store and UPS worker to take the carpenter’s math test and complete the union’s three-day boot camp. His starting pay was $17.56 — that’s more than $36,000 a year for consistent 40-hour workweeks — and it’s only gotten better from there. For every 1,000 hours of on-the-job training, he gets a $3 raise even though he’s still in carpenter’s school. The automatic wage hikes stop once he reaches journeyman status, where the hourly pay is roughly $44 plus an extra $18 for fringe benefits like medical, dental, 401(k) and vacation.
“I was drawn to this job because it’s one of the best and quickest career paths. The journeymen are really making money; they are living really good,” said Scott, who hopes to join their ranks in the next four or so years. “With benefits, most are looking at over $100,000 a year.”
Hawaii industry estimates show that Scott is among hundreds of union construction recruits entering the market annually. But even with aggressive recruiting centered around the promise of record wages for journeymen, the industry is having a hard time meeting the demand for skilled labor. On average it takes recruits at least four years to become a journeyman.
The mix of commercial-private projects and public projects such as the rail has resulted in worker shortages, especially in Honolulu, which recently was named the nation’s third-fastest-growing construction market by the Associated General Contractors of America.
Unfortunately, this distinction follows the Great Recession, which displaced thousands of Hawaii construction workers. It also comes when construction firms across the nation are having difficulty filling key craft and salaried construction jobs. The association estimates that 86 percent of 1,358 construction firms across the nation are facing worker shortages.
Project delays
Local construction firms and subcontractors have stepped up recruiting — even bringing journeymen out of retirement or from the neighbor islands or the mainland. They are offering better pay, benefits and bonuses. Still, some projects are having trouble filling jobs. As a result of the worker shortage and the boom in general, Hawaii developers are looking at higher overall project costs and delays. While the big projects are still coming, some might undergo cost-saving modifications or begin construction later than anticipated.
The challenges aren’t surprising. Kenneth D. Simonson, chief economist for the Associated General Contractors of America, said construction employment statewide and in Honolulu was at a record high in April. Construction employment in Kahului-Wailuku-Lahaina also was at the highest April level since 2008, he said.
Labor shortages
According to the association, construction demand in Honolulu alone added 5,000 construction jobs between April 2015 and April 2016. The 20 percent year-over-year increase in industry jobs meant 29,500 construction workers were employed this April in Honolulu. But it still wasn’t enough to fill the 500 to 800 construction jobs required to complete the International Market Place, which is slated to open in August.
“We used all the local construction workers that we could get our hands on,” said Allen Shaffer, DCK Worldwide senior superintendent. “We brought some specialty skills in from the U.S. mainland. We tried to keep that at a minimum because we know local jobs are important, but so many construction jobs are breaking that we’ve run out of people.”
Association officials have called for new career and technical school programs and other workforce measures to offset nationwide labor shortages.
“Few firms across the country have been immune from growing labor shortages in the construction industry,” Stephen Sandherr, CEO for the Associated General Contractors, said in a news release. “The sad fact is too few students are being exposed to construction careers or provided with the basic skills needed to prepare for such a career path.”
Ron Taketa, executive secretary-treasurer of the Hawaii Regional Council of Carpenters, said that’s only partially true in Hawaii, where there are enough local apprentices. “The shortage is with the journeymen, who left the trade in the downturn,” he said.
Between April 2008 and April 2010, the Honolulu metro area lost 5,100 construction jobs — nearly 1 out of 5. Taketa estimates that the carpenters union lost about 23 percent of its members between 2008 and 2013. Taketa said members took voluntary wage cuts from 2009 to 2011, but even that couldn’t get some developers to pull the trigger.
“We were about 40 percent unemployed on Oahu, 65 percent on Kauai, 67 to 69 percent on Maui and Hilo, and about 90 percent on Kona,” Taketa said.
Now, he said, the challenge is getting skilled workers to come back to an industry that they remember as a far cry from today’s boom.
“With each upturn we recover less members. Our membership is still down about 20 percent. We probably could put another 200 to 300 members to work easily,” he said.
David Lau, 40, a superintendent at the Keahou Place construction site, said the need to recruit construction workers remains constant despite industry ebbs and flows.
“We’ve got a lot of younger guys coming into the market now, but they don’t always know what they are getting into,” said Lau, who has worked in the local industry for two decades. “The money’s really good but it’s really hard work. Only about half of them will probably stay. We’ll need to keep recruiting so we continue to have enough journeymen.”
Christine Camp, president and CEO of Avalon Group, a real estate development and brokerage services firm, said getting and keeping skilled construction labor has been challenging in an environment where a confluence of rail and commercial work has created a construction boom that’s churning on all cylinders.
“Usually, public works happens in downtime to keep people working, but rail started and took our capacity for concrete, steel, cranes and operations,” she said.
Price spikes
Camp said construction increases in other states also have made it difficult to import skilled labor to fill the gaps left over from the last recession.
“The contractors are addressing it by bringing in more workers, and the unions are training as fast as they can,” Camp said. “It’s a great time to be a construction worker. It’s a great time to be a developer, too, but higher costs and delays have to be anticipated.”
Shaffer said the International Market Place planned to stay on time by hiring shift workers to go six and seven days a week.
“The local unions have gone out of the way to help us,” he said. “We’ve got all 17 involved. With all the new work starting, it’s more difficult to find people in the trades. Everyone’s talking about how to attract apprentices and journeymen.”
Camp said recruitment can’t be ignored since labor shortages have begun to cause price spikes that give developers pause.
“We had a small project that was over budget by 30 percent. We chose not to put it on on hold, but our tenants couldn’t believe the costs,” Camp said. “Here everyone is focused on the larger jobs. If you’ve got a small job, no one shows up to bid or they throw out crazy numbers.”
Rising costs
Economists say the premiums are driven by rising labor and material costs.
“Real labor earnings in (Honolulu’s) construction sector grew by 2.2 percent in 2012 and 2013, followed by 4.5 percent in 2014, and they have surged in the first half of 2015 by over 9 percent,” said Carl Bonham, executive director of the University of Hawaii’s Economic Research Organization. “The last time this happened was in 2005 when real earnings grew by 15.9 percent for the whole year.”
Jeff Merz, a Honolulu-based urban planner, said lack of construction workers and materials has temporarily weakened the momentum for new projects.
“The dearth of cranes and concrete at Ala Moana Center and in Waikiki has made it hard for the little guys to make their margins,” Merz said. “I look out of my Waikiki condo and I see 20 cranes from my living room window.”
He said he knows of a few environmental reviews that were pushed back because of the tight market. “It’s not just worker shortages. Costs are very high, too,” Merz said.
Camp said Honolulu’s construction costs have risen about 1 percent a month since the second quarter of 2013. “We started to see a huge amount of construction activity in 2012. If you had not priced or started your project by 2014, you were starting to see increases, and nearly all were double digits.”
27 responses to “Construction boom has led to higher pay but shortage of skilled laborers, job delays”
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As we can see from reading the article, the rail project is a victim of the construction economy with labor and material shortages increasing the cost. Now we see that it has been unfair to blame the rail planners for the rail cost to be underestimated. The rail team is doing the best it can and is doing an excellent job under the circumstances. We have made amazing progress with rail and cannot stop now. We should lobby the feds for more funding to help with the cost overruns which are due to supply and demand market dynamics beyond our control. The cost is what it is and we need to finish rail as planned because it is needed for our better future for our children and grandchildren.
The plan was to make money off of the TOD and the idoits at HART knew that, but didn’t plan for it….what did they expect to happen? Did they think the construction industry was going to build the train first, then move to the high rises?
ukuleleblue wrote: “we see that it has been unfair to blame the rail planners for the rail cost to be underestimated. The rail team is doing the best it can and is doing an excellent job under the circumstances.”
Just what is your definition of “an excellent job”? Because HARTis a half a decade behind schedule, billions over budget, the FTA is backing away as fast as they can, they haven’t even started the hard part yet, and Mayor Kirk Caldwell is holed up in a “undisclosed location” hoping this mess will magically blow over.
And you may think it’s “unfair” to blame Mufi Hannemann, Kirk Caldwell and their team of rail insiders who generated these false estimates, but let me remind you that former Governor Linda Lingle commissioned a analysis for a tiny fraction of what Oahu citizens paid that DID accurately predict this debacle. It wasn’t that it couldn’t be done, and done cheaply, it was that that Mufi Hannemann, Kirk Caldwell and their team of rail insiders were intentionally misleading taxpayers and voters.
Please explain how Mufi, Kirk, and HART got it so wrong yet Governor Lingle got it right for a tiny fraction of the cost. Then we can judge these “victims” and the “excellent job” their doing.
The only victims here are the struggling local families who are having to pay for the waste,, incompetence and greed of HART and Mayor Caldwell’s cronies. That you have the gall to suggest that the money gobbling HART is the real victim in all this is comically out of touch and disgusting. What is wrong with you?
And while you’re at it, you still haven’t told us where it is that you live not he mainland and what your connection is to this awful mess of a rail project. Why is that?
BS Gruber comment
ukuBS got his marching orders from SA/HART late last night with a heads up that this Sunday edition would have much for him to try to defend.
I agree. Looks like the feds are starting to think this way.
The Party Line!
Uku-bs: The Rail is the “Construction Boom”. Massive rip-offs and big payouts. Shut it down now then the headlines would be reading different.
You got it backwards. Rail was a part of the federal “plan” to get the US out of recession by creating jobs, problem is, the economy took care of itself without such massive public “welfare” projects. So instead of providing a reason to justify building rail, rail is no longer needed as a public “welfare” or public works project since the economy is already booming. And, by the way, just because the construction industry is booming doesn’t mean the regular people are making more money too, my Companies certainly aren’t.
Unsustainable.
in 4 years there will be too many journeymen and not enough jobs.
exactly. construction is a boom/bust industry. Maybe you might eventually make journeyman, but you’d better save half your income during the boom years in case you’re sitting the bench for 2-3 years during a recession. Speaking of which, we’re due for the next one…
bob, correct we’re almost overdue. And, if it comes this year the next President can blame Obama. Hawaii is not a right to work state and with unions, costs are always higher.
I saw an ad for plumbers in Seattle. They were offering a $50,000 singing bonus, a free vacation and $200,000 a year, sounds OK.
A young person needs a six figure income in Hawaii just to make ends meet.
What? Where’d you get that factoid, wrightj? If you’re talking about a single wager earned supporting a non-working spouse and four kids that will go to college sans scholarships, plus buying a home, I’d say you’re right. But not everyone is entitled to afford to buy a home, particularly in one of the highest-priced real estate markets in the nation. And for many-years both spouses have had to work in order to live modestly. The big problem is college where over inflated professors’ salaries and top heavy administrations have made it unaffordable for many. Especially if your dream is to have a big family. Dream all you want, but when you awaken it’s reality that stares you in the face.
Jeff Merz might want to look up the definition of “dearth” in the dictionary.
Dearth means shortage, so it appears he is using it correctly. The shortage of cranes is making it too expensive for small contractors to lease them. I don’t see a problem with his usage of the word or his observation.
When pay goes up, we we aat full employment. The state just needs to train more people to fulfill that need. That’s the way on economy shouldemployment. The state just needs to train more people to fulfill that need. That’s the way on economy should work.
These people may be slightly overpaid for their skill levels.
I wonder about that all the time seeing basically kids walking out from the Kakaako/Ala Moana area in fluorescent t-shirts…they look really really young and probably banking a whole wad of cash…at the moment. What happens when the boom busts? They have a lot of cash but few have the know how to make that cash last.
supply And demand.
Do the research….almost all public high/middle schools in Hawaii have dropped their vocational “shop programs.” All equipment and tools were discarded and turned into regular traditional classrooms. Therefore, all students that are interested in vocations such as carpentry, welding, architecture, electronics, automotive and graphic arts are denied have the opportunity to be exposed to the different vocations. Hence the shortage for trained technical workers in the NEI.
Thy can do that in community college. Let’s make community college free.
Why are you so driven to take and spend other people’s money
Construction labor is too expensive in Hawaii. That is why house prices have skyrocketed and Kakaako condos cost are in the millions of dollars.
I meant to say that is is a big reason but not the only reason.
Soon those construction cranes will be coming down and none going up, which means there will be a glut of workers with no jobs.