Home for Everyone: Construction Industry Capacity

Are there enough workers to build the homes we need?

The construction industry will play an essential role in ensuring that the Commonwealth meets its target of adding 222,000 new homes by 2035. Whether it’s building ADUs, duplexes, and mixed-use apartment buildings, or repurposing publicly owned properties or privately-owned commercial space, the construction workforce is a key player in meeting this goal. Do we have enough skilled labor and contractors to deliver all those homes? The Commonwealth needs to add at least 20,000 homes to the available stock each year,  just above the average of 19,000 units per year added between 2010 and 2020. However, the number of new units added each year has slowed since 2020, with the state only adding 15,000 units in 2023. With the new opportunities created by rezoning, financial incentives, and other efforts to unlock production, there may be more demand for building than there are firms or workers to deliver. That may be good for skilled workers and construction firms, but it will drive up the cost and delay the delivery of much-needed homes.  How will changes in construction technology and standards drive the need for new skills and industry models? What opportunities are there for increased productivity in the construction industry, so that the Commonwealth can achieve its goals even if the supply of labor is constrained?  How can EOHLC and Healey Administration ensure that efforts to build housing also create good jobs for all kinds of residents all across Massachusetts?

In this report we explore recent trends in the construction industry, the residential construction subsector, and the core occupations that support home building. Building homes is one of many goals that the Commonwealth is reaching for that will rely on growing our construction labor force. Meeting green energy goals, investing in public infrastructure will often draw on the same workforce. Thus, we start by exploring trends in the overall construction industry. It also true that the construction workforce often crosses state boundaries, therefore we focus on trends in Massachusetts, but look at broader trends in the Northeast and U.S. overall. This section provides a high-level overview and recognizes that a deeper consideration of trends in the industry and workforce may be appropriate to encourage growth in the industry that supports the goals of the Commonwealth. 

Industry trends

There are several challenges in understanding the full picture of the construction workforce. The first is that a large share of the workforce is self-employed. Data on these businesses is readily available from the U.S. Census Bureau’s Nonemployer Statistics (NES) that leverages business income tax records that the Internal Revenue Service (IRS). Data on firms with employees and the employed workforce is from the Bureau of Labor Statistics. Further complicating matters is the fact that there are incentives for general contractors and other players in the construction industry to misclassify construction laborers as self-employed or pay laborers in cash to avoid regulations that would drive up the total cost for the general contractor[KS1] . Most industry data sources rely on data from unemployment insurance (UI) covered firms, leaving self-employed persons out of many statistics on industry employment such as the Quarterly Census of Employment and Wages. The nonemployer statistics are collected from non-UI administrative data. [KS2] Particularly among occupations without certifications or training requirements, undocumented immigrants are often participating and may be willing to work under difficult conditions. Thus, official estimates of the workforce may understate the actual size of the workforce and to the extent that these factors vary over time the relationship between the size of the workforce and the output of the workforce (housing units) may be inaccurate.

The construction industry contains four major subsectors; residential building, nonresidential building, heavy and civil engineering and specialty trades. Residential and nonresidential building are sometimes grouped together under building construction and as their names imply, deal with construction of homes versus commercial and industrial spaces[1]. The heavy and civil engineering industry is focused on large infrastructure projects such as roads or utilities. Specialty trades is a broad group of construction firms whose skills may be of use to the other construction industries, but not to any one specifically. Specialty trade contractors include businesses such as electricians, plumbers and roofers.[2]

In 2023, there were 172,544 employed workers in the Massachusetts overall construction industry, of which 36,000, or 21 percent worked in building construction. [ti3] [MM4] [MM5] Employment in building construction was divided evenly between residential building construction and non-residential building [ti6] [MM7] [MM8] [MM9] [MM10] [KS11] [KS12] [MM13] construction, with each industry having approximately 18,000 jobs (see figure below). Since 2012, when Massachusetts and the nation were still recovering from the great recession and the foreclosure crisis, through 2023, [KS14] the construction industry has grown from four to five percent of total employment across all industries. Residential building construction employment has increased significantly from 12,900 to over 18,400 or 43 percent. Over the same time, residential building construction has remained consistent as a share of the construction industry. In 2023, it made up approximately 11 percent of total construction employment and it remained at roughly this level for over 10 years.

Employment in the specialty trade contractors subsector, which includes a variety of skilled trades, such as electricians and plumbers[ti15] [MM16] [MM17] [KS18] , is also essential to residential construction. Employment in this subsector makes up a much larger share of industry employment and can support construction activity of all types, not just building construction.  This subsector has seen even more significant growth since 2012, rising from 79,400 in 2012 to 121,400 in 2023, an increase of over 53 percent.

Source: U.S. Bureau of Labor Statistics QCEW Data via Lightcast[MM19]

As mentioned earlier, self-employed workers are a major part of the residential construction industry. According to the Census Nonemployer statistics for 2022, the latest year available, there were over 15,000 self-employed workers in the Massachusetts residential construction industry, compared to around 18,500 people working for employers in the residential construction industry that year. Thus, self-employed workers were approximately 45 percent of the industry in 2022.  Since[MM20] [MM21]  2019, residential construction self-employment has grown 7 percent statewide, which is slower than employer residential construction jobs, and slower than the growth in residential construction non-employer in the U.S. overall, which was 10 percent. [KS22] 

 

Trends in core occupations

How [KS23] we defined “core” occupations

• We developed the list of core construction occupations by filtering a list of all occupation titles that were included in the NAICS categories 236 – Construction of Buildings, 237 – Heavy and Civil Engineering Construction, and 238 – Specialty Trade Contractors. Then, occupations were ranked by share of total jobs in the 2361 – Residential Building Construction sub-industry at the state and national levels.
• Occupations were excluded from the core list based on low representation in residential construction in relation to other industries, additionally, managerial, clerical, and administrative occupations that were deemed non-essential to on-site building construction or were deemed easily transferrable between industries were excluded.
• The final list of twelve core construction occupations in relation to residential building construction includes: Carpenters (47-2031); Construction Laborers (47-2061); First-Line Supervisors of Construction Trades and Extraction Workers (47-1011); Electricians (47-2111); Painters -- Construction and Maintenance (47-2141); Helpers – Carpenters (47-3012); Operating Engineers and Other Construction Equipment Operators (47-2073); Cement Masons and Concrete Finishers (47-2051); Drywall and Ceiling Tile Installers (47-2081); Plumbers, Pipefitters, and Steamfitters (47-2152), Roofers (47-2181), and Construction Managers (11-9021).

Historically, construction occupations have provided a path to the middle class and a high standard of living, especially for non-college educated male workers.[3] In part this is due to the high number of union jobs in the industry. According to the Bureau of Labor Statistics, 15.4 percent of employed individuals in the construction and extraction occupations are members of a union, well above the national average of 9.9 percent of all wage and salary workers in the U.S.[4] While in many ways construction occupations remain a source of solid middle-class jobs in Massachusetts, there is wide variation among construction related occupations when it comes to wages[ti24] [ti25] [KJ26] [MM27] . For example, [INSERT WAGES FOR A FEW CORE OCCUPATIONS]. There have been an increasing number of “professional” occupations in the industry. Two out of the top five fasting growing core construction occupations in Massachusetts between 2012 and 2023 are first line supervisors (141% job growth) and construction managers (83% job growth). These occupations have high wages at $___ and $___ respectively. Other more traditional occupations have also experienced growth. [ti28] [MM29] [MM30] Employment has grown steadily in the following occupations:  operating engineers and other construction equipment operators (96%), plumbers, pipefitters, and steamfitters (83%), electricians (56%), and cement masons and concrete finishers (54%). Wage growth has been greatest for cement masons and concrete finishers, their wages are up 35 percent after adjusting for inflation. All other occupations have seen more modest wage growth at levels at or below 10 percent [ti31] [MM32] or in some instances declines after adjusting for inflation.

Source: U.S. Bureau of Labor Statistics Occupational Employment & Wage Statistics

[ti33] [MM34]

The steady growth in residential construction and the core occupations, which was interrupted briefly by the pandemic, nicely mirrored the trend in housing units and building permits in the Commonwealth prior to the pandemic, however that positive correlation was interrupted by the pandemic and has not yet been reestablished. While employment in construction has continued to increase since the pandemic, housing units and permits have been flat.

According to data from the EOLWD, the construction of buildings industry, of which residential construction is a part, is projected to grow four percent between 2022 and 2032, compared to six percent for all industries. This change is driven by growth in specialty trade contractors subsector, which is also projected to grow six percent in the period. It seems unlikely that this projected rate of growth will be sufficient to meet the demands of building 222,000 new units over the next decade.

To achieve the statewide goal of 220,000 more units between 2025 and 2035, and assuming 2024 housing permits reflect the 2010-2023 average units permitted. The state will need to permit at least 20,000 more units of housing every year, well above the 2010-2023 average[ti38] [MM39]  of 13,533 units permitted units reported annually. [MM40]

In 2023, 24 percent of the construction workforce was 55 years of age or older, compared to 26 percent of all industries statewide. While construction is younger than average, these demographics mean that nearly 1 in 4 workers are nearing retirement age in construction. However, Residential Building construction is older, with 30 percent of the workforce age 55 or older.

One potential avenue to help grow the construction industry could be through attracting workers who have historically been underrepresented in the industry. For example, 16 percent of the overall Construction industry is female, compared to 51 percent of all industry employment. While a  higher share of workers in residential construction are female, at 21 percent of workers, only 15 percent of Specialty Trade Contractors are female. In both subsectors there is significant room to increase the number of female workers in the industry. Similarly,  only 18 percent of Construction Industry Employment is BIPOC (Black, AI/AN, Asian, NHPI, two or more races or Hispanic or Latino) compared to 30 percent of total industry employment. Notably, a lower share of workers in residential construction are BIPOC, 16 percent and only 18 percent of specialty trade contractors are BIPOC.

Construction has an average turnover rate (separations/jobs). Across all industries the turnover rate was 57 percent. In 2023, separations in the Construction industry were 58 percent of total employment, indicating that more than half of construction employment turned over in that year. Out of 172,500 jobs in the industry, there were over 100,000 separations. The turnover rate was lower for Residential Construction, at 54 percent, suggesting that once workers are established in the subsector, they may be more likely to stay than other subsectors.

A potential risk to the construction workforce is related to federal changes in immigration policy. The Construction Industry has a large share of employment that is non-citizen. In 2023, the ACS 1YR PUMs dataset shows that 21 percent of Massachusetts workers in construction occupations [ti41] were not U.S. citizens. This varies by occupation, with more than half of hazmat workers, masons and roofers not having US citizenship.[ti42] [MM43]  In contrast, only 10 percent of the overall labor force is non-citizen in Massachusetts. Research about the Secure Communities program found that the large-scale deportation of undocumented immigrants led to overall declines in construction industry employment. Some, but not all, of the jobs left vacant by deported workers were filled by US citizens, leading to an overall reduction in labor, a corresponding decline in the number of higher-skilled jobs in the construction industry, and a slowdown in home construction.