Home builders have been hit hard by the downturn in the U.S. real estate market, and an economic report released this week by the Anderson Forecast at the University of California, Los Angeles, asks, “Where are the unemployed construction workers?”
The report, by economist Jerry Nickelsburg, points to a statistical anomaly — while demand for housing is down in Los Angeles County, and permits and prices are down for new homes, the data suggest that employment in residential construction is not falling. How can this be?
“There is either something wrong with the data and it will all get better when revisions come in, or the data are missing something, or general contractors are happy to keep their idle workers on the payroll,” Nickelsburg states in the report.
The most likely scenario is that the data is missing the unemployed workers, according to the report. And a possible contributor is that undocumented workers do not appear in the data.
“They are the ‘trabajadores escondidos,‘ or hidden workers. They are not on payrolls so they do not appear in the Payroll Employment Survey nor in the Unemployment Insurance Claims.” He also states, “The official unemployment rates are understating the unemployment, as they are unable to count the hidden workers.” And these workers have been an important force in the industry.
At the Pacific Coast Builders Conference in San Francisco last month, a panel on “Immigration, Labor and the Future of the American Workforce” focused on the importance of immigrant laborers to the home-building industry. “No matter where you stand in the debate, make no mistake about the importance of immigration, both legal and illegal, to the home-building industry,” according to a panel discussion. “In California, Nevada, Arizona, Colorado, Texas, Georgia, Florida, and Illinois, immigrant labor (overwhelmingly Hispanic) represents anywhere from 30 percent to 50 percent of the construction workforce.
“As Congress considers legislation that could dramatically disrupt immigration flow, the potential consequences are enormous — shrinking the labor pool, driving up wages, and reducing demand for new homes.”
The Anderson Forecast report cites a Pew Hispanic Institute estimate that between 12 percent and 20 percent of the undocumented workers in the United States are employed in the construction industry.
Nickelsburg notes that there are some ways to attempt to gauge the impact of the construction downturn on the population of “hidden workers.” Immigrant communities residing in the United States tend to send money back to their home countries, and the report notes, “In Mexico this flow of money has become so important, amounting to $23 billion in remittances from all sources and countries in 2006, that the Banco de Mexico collects detailed data on it.” El Salvador, too, tracks data on the remittances.
And based on research of these remittances, there was a sharp drop from first-quarter 2006 to first-quarter 2007 in the remittance growth rate in Mexican states from which Los Angeles County draws much of its unskilled and semi-skilled work force, the report found.
“As the residential construction industry cuts back on the amount of home building being done the first thing it does is to stop going out and hiring the marginal workers. These are the day laborers who are no longer needed, and this is where the hidden workers are most often found. So we have found the rest of the unemployed, the trabajadores escondidos, through the evidence trail they have left in the money they were unable to send home,” Nickelsburg states in the report.
Builders are not taking the immigration issue lightly. A group of about 1,250 home builders, representing the National Association of Home Builders trade group, marched on Capitol Hill earlier this month in a lobbying effort, calling for changes to a much-debated immigration bill that the Senate had opposed, among the group’s other legislative priorities. The immigration legislation has since been revived and is being reworked to attract more votes.
The National Association of Home Builders launched a letter-writing campaign earlier this year to urge legislators to pass immigration reform measures. The letters ask that the legislation address “border security, a new employer verification system, a program to address legal immigration into the U.S. in the future and a plan to deal with the 11 million to 12 million illegal immigrants who are already there,” according to a report by the Nation’s Building News Online, an online publication of the builders’ group.
Jerry Howard, executive vice president for the association, stated in a letter published in the May 31 issue of the Wall Street Journal that the immigration reform legislation, S. 1348, was viewed by builders as “counterproductive because it contains onerous provisions regarding employer liability and responsibility for subcontractors.”
The letter also states that “the law could be used to unfairly prosecute an employer who unknowingly hires an illegal alien; general contractors could be held responsible for the legal status of employees hired by subcontractors; the program to provide a future flow of immigrant workers for the construction industry is unworkable; the new, mandated electronic verification system is untested; and the new record-keeping requirements are unduly burdensome, especially for small businesses.”
The trade group’s lobbyists pushed for amendments to the immigration reform act, which stalled on June 7 but could return to the Senate floor this week.