Testimony of Kenneth Simonson

May 17, 2022

I. Introduction

Chair Burrows and Commissioners, thank you for inviting me to testify on this vitally important topic. My name is Ken Simonson. I am the chief economist of the Associated General Contractors of America (AGC), a position I have held since 2001.

AGC is the leading association in the construction industry, representing more than 27,000 firms, including America’s leading general contractors and specialty-contracting firms, many of which are small businesses. Many of the nation’s service providers and suppliers are also associated with AGC through a nationwide network of chapters. AGC contractors are both union and open-shop and are engaged in the construction of private and public infrastructure, nonresidential buildings, and multifamily housing—every type of structure other than single-family homes.

II. Impact of the pandemic on construction employment

The construction industry overall has rebounded strongly from the steep job losses it incurred from February to April 2020. In those two months, payroll employment in the sector tumbled by 1.1 million jobs or nearly 15%.

By April 2022 construction firms employed 7,628,000 workers, seasonally adjusted, according to data the Bureau of Labor Statistics (BLS) posted on May 6. This total virtually matched the industry’s pre-pandemic peak employment of 7,624,000, seasonally adjusted, in February 2020.

In contrast, total nonfarm payroll employment in April 2022 remained 1.2 million employees or 0.8% below the February 2020 level.

However, the industry’s recovery has been very unevenly distributed between residential and nonresidential construction. Residential construction firms—comprising homebuilders and specialty trade contractors, whether working primarily on new homes and apartments or additions and renovations—employed 3.2 million workers as of April 2022, an increase of 165,000 or 5.6% from February 2020. Nonresidential construction firms—those operating primarily as nonresidential building and specialty trade contractors and heavy and civil engineering construction firms—employed 4.5 million workers in April 2022, a shortfall of 161,000 or 3.5% compared to the February 2020 total.

But current employment levels and recovery rates don’t describe the picture fully. AGC members almost universally say—and data confirms--that nonresidential construction employment is being held back by a lack of qualified candidates, not a lack of job openings. Five out of six respondents reported having a hard time filling positions in the 2022 AGC of America-Sage Construction Hiring and Business Outlook Survey, which AGC conducted in November and December 2021.

BLS’s latest Job Openings and Labor Turnover Survey (JOLTS), posted on May 3, tallied 415,000 unfilled positions in construction at the end of March. That was a 20% increase from March 2021 and, by far, the largest March total in the 22-year history of the series. The number of openings even exceeded the 388,000 employees hired in construction in March, implying that contractors would have hired twice as many employees as they were able to.

Two other data points suggest the number of available workers is far short of what employers would like. The construction sector’s unemployment rate in April was 4.6%, not seasonally adjusted, the lowest April rate since that series began in 2000. (Because employment in construction varies over the course of the year due to weather conditions and other regularly recurring events like school opening dates, it is more meaningful to compare not-seasonally-adjusted data for a given month with the same months in other years than with other months.) And the JOLTS report tallied only 87,000 layoffs and discharges in March, not seasonally adjusted, a 29% decrease from March 2021 and the smallest March total, by far, in the 22-year history of this data. This is a further indication that contractors have plenty of backlog and do not need to lay off workers when a project ends.

While the JOLTS and unemployment figures do not distinguish between types of construction, nonresidential as well as residential construction appears to be growing and to have ongoing demand for additional employees. Two private monthly surveys support this view.

The Architecture Billings Index, the American Institute of Architects (AIA)’s measure of the share of architecture firms with rising vs. falling billings compared to a month earlier, has signaled that billings have been rising, on balance, for 14 consecutive months. AIA says such readings are correlated with a rise in nonresidential building construction 9-12 months later.

Dodge Data & Analytics, which independently collects detailed information about projects, reported on May 6 that its Dodge Momentum Index “moved 6% higher in April” from March and 18% higher from the April 2022 reading to a level “just 5% shy of the all-time high set in the fall of 2021.” Dodge says the index is “a monthly measure of the initial report for nonresidential building projects in planning shown to lead construction spending for nonresidential buildings by a full year.”

In addition to these indications that demand for nonresidential building will remain robust, there will soon be a large and sustained increase in demand for workers to rebuild and expand infrastructure. The Infrastructure Investment and Jobs Act (IIJA), which President Biden signed into law on November 15, 2021, authorizes $1.2 trillion of spending on a wide range of infrastructure projects over five years. Compared to an annual current spending rate of $1.6 trillion on all types of construction, that implies an increase of roughly 15% per year. A commensurate increase in employment would amount to more than 1.1 million additional workers in construction each year.

In short, construction firms are busy. They are hiring as many workers as they can, and they have good reason to expect they will need more workers in the years ahead. Unfortunately, they face significant obstacles in hiring.

III.       Challenges to expanding construction employment

The construction industry has long experienced difficulty recruiting qualified workers. There are added challenges in the current work environment.

Historically, construction has offered an excellent career path to jobseekers, whether newly out of school or looking for a different occupation. Entry-level jobs do not require an expensive college degree, credential, or capital investments. High schools, community colleges, and workforce development agencies formerly offered career and technical (or “vocational”) education and training that enabled jobseekers to get hired quickly. Unions, companies, and associations, such as AGC and many of AGC’s 89 chapters, offer training that permits workers to expand their skills and move up.

The industry offers ample opportunity for advancement, whether within firms, across a region, or across the country. Countless owners, executives, and senior managers of construction firms have worked their way up or started their own firms after entering the industry at the lowest rung.

However, the older versions of “vocational education” also limited opportunities for many. High-school girls were directed to “home economics” or “secretarial” classes, while “shop classes” were exclusively for boys. Guidance counselors and parents further steered female students away from construction training and careers, whether for hourly craft or salaried positions.

As old-style vocational education fell out of favor and lost funding, programs for construction careers failed to keep up with the skill sets and occupations the industry needs. Thus, even as school systems may have become less discriminatory in segregating students by gender, they offered fewer opportunities for any students to prepare for construction careers.

There is a wide spectrum of construction crafts, as well as office jobs. But many construction craft jobs share certain characteristics. They must be performed onsite, at a predetermined starting time but sometimes with extended shifts. The jobsites may require being transported in a group to a remote, offroad location or require considerable time to exit (for instance, from a tower crane or tunnel). Some jobs require a high degree of physical strength or reach. These features tend to limit the pool of women applicants, particularly among women who need more flexibility regarding work sites or hires, for instance if they are the primary caregivers for children who require preschool or after-school care or for other dependents.

The pandemic has brought a number of changes to the economy and the labor market that make it even more challenging for some women to seek and remain in construction craft jobs. The shutdown of schools and daycare facilities, along with an increase in working-age adults with covid or lingering symptoms that required care at home, forced many more family caregivers (predominantly women) to forgo jobs that required onsite presence at fixed hours with little chance of sudden departure from the worksite. At the same time, many other opportunities have opened up in other industries that offer flexible hours and/or location for working, thus making it even harder for construction to compete for these workers.

IV. Recent demographic changes in construction employment

In light of these challenges, it is noteworthy that the female share of construction employment has increased in recent years, albeit marginally. BLS data show that after averaging 9.1% of total construction industry employment from 2010 to 2017 (and fluctuating narrowly between 8.9% and 9.4% per year), the percentage of employees who are women rose to 9.9% in 2018, 10.3% in 2019, 10.9% in 2020, and 11.0% in 2021.

The share of Blacks in construction industry employment has also increased in recent years as the tight labor market has led employers to cast their nets more widely to attract and retain employees. Blacks constituted 5.6% of construction industry employment from 2010 to 2016 (ranging between 5.1% and 6.0% per year). The percentage averaged 6.2% in the past five years (ranging from 6.0% to 6.4%).

V. Industry initiatives

AGC chapters and member companies are taking a number of steps to make more students, jobseekers, and individuals not currently in the labor force aware of the opportunities that construction offers and to provide a more welcoming and inclusive work environment. Chapters and firms are working with individual schools, school districts, community colleges, and entities focused on workforce development or re-entry. Many of these programs have the potential to increase the industry’s diversity more rapidly. (See Appendix for a set of examples from one state.)

To actually get prospective workers to choose and stick with construction, the industry must both project and practice an attitude of inclusivity and equity. AGC members recognize that success in construction requires constant teamwork that is impossible without mutual respect and support.

To foster an environment that will attract a more diverse workforce, AGC of America is asking construction industry leaders to make a public commitment to building diverse and inclusive workplaces by taking the Culture of CARE pledge. The Culture of CARE pledge has four pillars:

• Commit to hire and pay based on skill and experience, regardless of ability, age, ethnicity, gender identity, nationality, race, religion, sex or sexual orientation
• Attract prospective employees, suppliers and subcontractors by creating inclusive workplaces that are free from harassment, hazing and bullying
• Retain high-performing employees by identifying and removing barriers to advancement
• Empower every individual to promote a culture of diversity and inclusion

Culture of CARE helps companies be more proactive and intentional about creating a culture where every employee feels valued, safe, and welcomed by providing resources to address common diversity- and inclusion-related challenges in the construction industry. Resources include sample HR policies, toolbox talks on mental health and suicide prevention, racism, sexism, and creating a Culture of CARE; and a company assessment to help companies establish benchmarks and measure progress related to diversity and inclusion efforts.

To date, more than 700 companies have taken the Culture of CARE pledge, including AGC of America and 35 AGC chapters, other national industry associations, and unions. 

VI. Federal actions needed

The industry has stepped up its efforts to become more diverse, inclusive, and equitable. But the federal government needs to do more.

Ending the higher education funding bias

The country continues to face a higher education bias, as evidenced by inequities in federal workforce and education funding. It is estimated that workforce education programs receive only one-fifth the funding of academic college programs. 

The nation’s higher education programs have neither collaborated with industry to identify occupations with openings, nor to prepare students for in-demand jobs. The construction industry and the greater economy have an interest in ensuring that higher education investments are productive and have a responsibility to hold schools accountable for preparing students for career opportunities while spurring innovation.

Reforming higher education policy by making high-quality, shorter-term education and training programs eligible for federal Pell Grants would help reverse the skills gap, correct education funding inequities, and provide job training and credentialing opportunities that are in high demand. The bipartisan JOBS Act, or H.R. 2037, is one legislative initiative that could help make a tangible impact on this problem.

Congress must also increase Perkins career and technical education (CTE) funding. The Perkins program is the biggest federal funding source to high schools and post-secondary vocational training programs in the country. Despite modest funding increases in recent years, the level and need of funding still has not kept up with inflation and rising demand.

New Regulatory Challenges to Workforce Development

A. Government-Mandated Project Labor Agreements

On February 4, 2022, President Biden signed a new Executive Order on Use of Project Labor Agreements (PLA) for Federal Construction Projects. When in effect, this order will require every prime contractor and subcontractor—with limited exceptions—to engage in negotiation or agree to PLAs on federal construction projects valued at $35 million or more. As it stands, this executive order does not require PLAs on federal aid transportation projects. However, it does permit the U.S. Department of Transportation (USDOT) to do so. AGC neither supports nor opposes contractors’ voluntary use of PLAs on government projects or elsewhere but strongly opposes any government mandate for contractors’ use of PLAs. 

The use of government-mandated PLAs hurts both union and open-shop contractors and their employees, particularly entry-level employees who in recent years are more likely to be from historically under-represented populations. Government-mandated PLAs would:

• Likely include union security clauses that require all craft workers to pay either union dues or an equivalent amount of union agency fees, whether or not the workers have any interest in union representation. This may deter workers from applying for, or accepting an assignment on, a PLA project, exacerbating already-challenging labor supply conditions.
• Normally require contractors to make contributions to union-sponsored fringe benefit funds. But an open-shop contractor’s regular employees probably won’t receive any benefits from those funds because of the plans’ time-based vesting and qualification requirements. To continue providing benefits for such employees, the contractor must contribute to both the union benefit funds and the contractor’s regular benefit funds. The cost of such double payments can make the contractor’s bids uncompetitive.
• Act as a barrier for the hiring of small businesses, including minority- and woman-owned businesses, and the fulfillment of small-business utilization goals. Such businesses are largely open-shop and are among those least able to make the above-described changes that a PLA requires.

For these reasons, among others, government-mandated PLAs would likely exacerbate workforce challenges, not improve them.

B. Local Hire

The IIJA includes a local-hire provision that allows geographic or economic preferences for construction labor workforces. Recently, USDOT has signaled a desire to impose preferences for projects that include local hire requirements. While the construction industry is committed to recruiting more individuals, particularly from disadvantaged areas and communities, into construction careers, there is evidence that these policies have not had the intended effect in areas where they have been imposed.

Unfortunately, it is the industry’s experience that local-hire policies rarely result in long-term construction careers. They fail to attract people to the industry and instead allow local school systems, education policies, and elected officials off the hook for failing to better match curricula to in-demand vocational skills.

Rather than offering across-the-board requirements that do not adequately help attract, educate, and retain a skilled, diverse, and safe construction workforce, Congress and the administration should instead:

• Focus on increasing CTE funding and track the effectiveness of existing workforce programs, especially those with federal funding sources; and
• Support industry-led programs like AGC’s Culture of CARE . The Culture of CARE program is focused on making construction workplaces more inclusive and welcoming for all workers.

VII.      Conclusion

I thank the Commission for the opportunity to testify today. I appreciate its continued efforts to ensure a diverse, inclusive, and equitable working environment, where harassment and discrimination are not acceptable. I look forward to answering any questions you may have.

Appendix: Construction industry initiatives in South Dakota

South Dakota is one of many examples of the ways in which AGC of America, its state and local chapters, and member companies are striving to increase diversity and inclusiveness in the industry.

AGC through its local chapters focuses on Workforce Training Programs that impact local communities. The AGC of South Dakota has collaborated with the state Department of Transportation to utilize grant funding to develop a Commercial Drivers License (CDL) Training Program that allows the industry to recruit new drivers and increase the skills of its existing workforce. Through this program the chapter helps members to train and provide the required classroom training for CDL candidates and provide marketing resources to attract candidates to the industry.

The AGC of South Dakota has three Federally Registered Apprenticeship programs that allow workers to achieve journey level certification in Carpentry, Concrete Finishing & Heavy Equipment Operation. 

In addition to dealing with the industry’s immediate workforce training needs, the South Dakota highway and building chapters focus heavily on attracting the next generation of construction workers through Construction Career Camps. The camps expose students to the opportunities in construction during their middle and high school years. In the current school year over 600 students received exposure to the industry through camps all across the state. The industry also operates a special camp called Pizza, Pop & Power Tools that focuses on 8th grade girls. These girls are given a hands-on experience in equipment operation, carpentry, welding, finishing concrete and using power tools.  That program impacted close to 300 8th grade girls in South Dakota this school year. 

The innovative Construction Career Academy allows 16- to 18-year-old students to earn and learn during the summer months. The students are matched with a construction employer that pays them to attend classes and work under supervision on our jobsites. These students can apply their experience toward the Youth Apprenticeship Program and eventually move on to one of the state’s Federally Registered Apprenticeship programs. 

In total, these programs provide a variety of experiences and exposures for demographic groups that historically have been under-represented in construction.