America’s Growing Labor Shortage
President Trump approved the Keystone XL pipeline on Friday, and good for him, but will there be enough workers to build it? That’s a serious question. Many American employers, especially in construction and agriculture, are facing labor shortages that would be exacerbated by restrictionist immigration policies.
Demographic trends coupled with a skills mismatch have resulted in a frustrating economic paradox: Millions of workers are underemployed even as millions of jobs go unfilled. The U.S. workforce is also graying, presenting a challenge for industries that entail manual labor.
Construction is ground zero in the worker shortage. Many hard-hats who lost their jobs during the recession left the labor force. Some found high-paying work in fossil fuels during the fracking boom and then migrated to renewables when oil prices tumbled. While construction has rebounded, many employed in the industry a decade ago are no longer there.
A January survey by the Associated General Contractors of America found that 73% of firms had a hard time finding qualified workers. More firms identified worker shortages as a big concern (55%) than any other issue including federal regulations (41%) and lack of infrastructure investment (18%). Demand and salaries for subcontractors (e.g., carpentry and bricklaying) are going through the roof.
On the current demographic course, the shortage will worsen. The average age of construction equipment operators and highway maintenance workers is 46. When middle-aged workers retire, there won’t be many young bodies to replace them. Most high schools have dropped vocational training, and more young people are enrolling in colleges that don’t teach technical skills.
The farm labor shortage is also growing, which has caused tens of millions of dollars worth of crops to rot in the fields. Farmers can’t get enough H-2A visas for foreign guest workers, some of whom have migrated to higher-paying occupations. Workers also often arrive late due to visa processing delays by the Labor Department. The undocumented workforce has shrunk as more Mexicans have left the country than have arrived in recent years.
The Western Growers Association reports that crews are running 20% short on average. Boosting wages and benefits—many employers pay $15 an hour with 401(k)s and paid vacation—has been little help. Instead, employers are cannibalizing one another’s farms. In 2015 the country’s largest lemon grower Limoneira raised wages to $16 per hour, boosted retirement benefits by 20% and offered subsidized housing. But now vineyards in Napa are poaching workers from growers in California’s Central Valley by paying even more.
Some restrictionists claim that cheap foreign labor is hurting low-skilled U.S. workers, but there’s little evidence for that. One Napa grower recently told the Los Angeles Times that paying even $20 an hour wasn’t enough to keep native workers on the farm.
A new paper for the National Bureau of Economic Research concludes that terminating the Bracero program, which admitted seasonal farm workers from Mexico during the 1940s and ’50s, did not raise wages of domestic workers. Meantime, a 2014 study found that Arizona’s E-Verify mandate on employers reduced “employment opportunities among some low-skilled legal workers.”
This isn’t surprising since producers have responded to the worker shortage by shifting to higher-value crops that require less labor. As a result, imports of some fruits and vegetables, especially processed and canned varieties, have increased. Tomato sauce imports increased by about a quarter in the last three years. Since the 1990s, imported frozen vegetables—particularly asparagus, broccoli and cauliflower that require high levels of labor to pick and cut—have more than tripled.
Dairies and slaughterhouses are also facing stiff competition from Canada and Mexico. And consumers are paying more for products that can’t be substituted by imports (often for seasonal reasons). So the worker shortage is hurting U.S. employers, low-skilled workers and consumers.
President Trump would compound the problem by reducing legal immigration or deporting unauthorized immigrants whose only crime is working without legal documentation. Low-skilled immigrants (those with 12 years of education or less) are estimated to account for nearly a third of the hours worked in agriculture and 20% in construction.
If President Trump wants employers to produce and build more in America, the U.S. will need to improve education and skills in manufacturing and IT. But the economy will also need more foreign workers, and better guest worker programs to bring them in legally.
Appeared in the Mar. 30, 2017, print edition.