Labored Thoughts

Updated Study in Indiana Points to Rising Demand for Workers

by Craig Barner

An updated and expanded report on the labor supply in the construction trades in Indiana suggests that nagging shortages of craft workers are growing.

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The Indiana Craft Labor Study estimates that the average shortage for labor will be 10,593 in 2008 and 13,455 in 2009 based on the existing labor supply of about 133,000 workers annually.

Business leaders in the Hoosier state are mindful of the issue, says Douglas Morris, vice president of facilities for Indianapolis-based Clarian Health Partners Inc., the parent of Methodist Hospital, Indiana University Hospital and Riley Hospital for Children, three hospitals that merged in 1997 to form Clarian. The organization has expended at least $750 million for construction projects since forming and has three major projects in progress.

“I would say there is definitely a concern,” Morris adds. “You see (Indiana Gov. Mitch Daniels) make announcements to try to bring new business and industry to Indiana. Each of those businesses looks at what it costs to build facilities and whether they can be constructed and delivered when needed.”

The report was commissioned by the Indianapolis-based Indiana Construction Roundtable Inc., a nonprofit made up of buyers of construction services, and conducted by Raleigh, N.C.-based FMI Corp., a management consulting firm and investment banker. The results were released in December.

The report is the fourth overseen by the ICR since the first was done in 2003 and the first ever that takes a look at labor statewide rather than only in central Indiana, the most populous area.

“I know our owners are particularly concerned about skilled trades,” says Gary Price, president of ICR.

Shortage to Hit Most Trades

The shortage is expected to affect each of 14 trades studied as part of the report, with the biggest expected in laborers (2,178 in 2008 and 2,721 in 2009); interior and framing carpenters (1,222 and 1,548); and electricians (1,128 and 1,373).

Clarian encountered trouble finding drywall finishers for the $225 million Clarian North Medical Center, which was completed in north suburban Carmel in 2005, and iron workers for the $235 million expansion of the Riley Hospital for Children under way in Indianapolis, Morris says. Both times trades professionals were found to complete the work, including itinerant workers or “travelers.”

“There are labor shortages in virtually every trade,” adds Bill McCarthy, president of Pepper Construction Co. of Indiana. “We have to watch it carefully.”

The call for workers is being heard but only partially. From 2004 to 2007, about 12,500 Indianans were added to the construction workforce, again in the 14 crafts studied. But over the same period, the demand rose by 26,750 workers.

As a result, Hoosiers represented 93% of the workforce in 2007. Three years earlier, the number was 98%.

“Owners have an interest in not having a lot of travelers doing their jobs,” the ICR’s Price says. Naturally, they wish to be good corporate citizens by giving jobs to Indianans and keeping income tax revenue in the state.

Up or Down Construction?

Driving the projected shortage is an expected increase in construction activity, especially in nonresidential construction.

But different conclusions from other sources can be found about whether construction activity will increase. Moreover, Indiana is not insulated from reverberations in the Midwest and national economy low consumer confidence due to the worsening economy, continued high oil prices and political uncertainty.

Nevertheless, the study projects that $16.7 billion of nonresidential and infrastructure construction will be put in place in 2008, up 12% from the $15 billion it says was put in place in 2007.

The method to come up with the demand forecast included several elements, Price says. At least 16 resources were used for data, including six in the federal government; local business journals, newspapers and Web sites; and F.W. Dodge data. (Dodge and Midwest Construction are both properties of the McGraw-Hill Cos.)

Specific project announcements that were in planning or construction were reviewed to determine their status. And, telephone interviews were done to support assessments on construction.

“We did quite a bit of interviewing and surveying on the ground level,” Price adds.

However, a pessimistic outlook for construction demand emerges from McGraw-Hill Construction. McGraw-Hill is projecting a 5.8% decline in starts in Indiana, from an expected $13.5 billion in 2007 to $12.7 billion in 2008.

“The McGraw-Hill guy might be factoring in the possibility of recession,” Price adds.

Regardless of whose projections prove accurate, a number of mammoth projects are coming that will significantly change the face of the Hoosier state.

Among the biggest are the $3.8 billion, 10-year plan called Major Moves that will quadruple annual new road construction with the money obtained from the leasing of the Indiana Toll Road for 75 years; a $3 billion upgrade and expansion of the BP Amoco facility in Whiting; and three automotive projects (Honda, Toyota and Getrag Transmission).

These projects come on the heels of other behemoths under way several chronicled in Midwest Construction or on the brink of starting, such as the $1 billion Indianapolis International Airport expansion, $500 million Lucas Oil Stadium and $500 million convention center and Marriott hotel.

The abundance of work is being felt at contracting firms like Pepper. The backlog is higher than the same time a year ago, McCarthy says, though he did not have a figure immediately available.

“We have to be careful about this as we look forward and anticipate that there will be more demand for labor than the supply for some periods of time,” McCarthy adds. He says that currently, the company employs about 100 to 150 field laborers and is staffed to meet commitments.

Workforce Development Ongoing

The ICR is engaging in a numerous key workforce development activity, including a diversity initiative. The goal is to increase the number of under-represented groups in construction so the labor supply goes up.

The program awards points to contractors who hire women and minorities and to participating ICR owner-members who consider these firms for work.

In addition, ICR staff have visited every public school in Indianapolis to entice teens to consider construction as a career.

Finally, the group encourages efforts from national program, such as the National Association of Women in Construction and the ACE Mentoring Program, an effort to entice teens into the trades.

“It is my opinion that the providers of labor have been too conservative with the knowledge provided them in the last four years,” Price says. “It is disappointing to me that we’re still looking at the level of shortages we’re looking at.”

SIDEBAR

Forecast Labor Shortage (total supply less total demand; nonresidential construction)

The projection is that every major craft will experience a shortage in 2008 and 2009

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