Construction in San Jose: Crisis & Opportunity

March 2018

Construction in San Jose: Crisis & Opportunity

Growing Our Local Middle-Class Construction Workforce

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Silicon Valley is facing a crisis of inequality. Even in a roaring economy, many of the region’s major companies are not creating jobs that pay enough to live on. Two out of every five households are in economic distress.

If our region continues along this path, employment projections show that middle-wage, family-supporting jobs will continue to shrink. In Santa Clara County, the majority of job openings over the next 10 years are projected to pay either less than $40,000 per year, or more than $100,000 – with less than one-third in middle-wage, family-supporting jobs.

Construction is one of the highest-growth industries with potential to produce good jobs for working-class San Jose residents– if both the private and public sectors make the choice to invest in the local workforce. Over the next decade, construction jobs in Silicon Valley are projected to increase by 23.7%; almost twice as fast as total employment, which is projected to grow by only 13.5%.

Construction is the second-fastest growing industry in Silicon Valley. But will these be family-supporting jobs for local workers?

However, a critical driver of greater economic inequity in our region is the massive infusion of development capital and the high expectation investors have on the return of their investment. Some large developers, particularly in the residential market, are basing their financial projections on the use of a low wage workforce to help meet expected returns for their investors. Thousands of low wage workers are now building homes none of them can afford to live in.

Construction has become a bifurcated industry, split into two business models: the “high-road” model in which companies compete on productivity, efficiency, timeliness and quality of work, and the “low-road” model in which companies compete primarily by paying their workforce as little as possible. This dichotomy means that whether or not employment growth produces family-supporting careers depends on which road we, as a region, decide to take.

Construction is a two-tier industry.

As a result of the two-tier character of Silicon Valley’s construction industry: The low-road construction model creates working poverty.

This disparity tends to impact workers of color the hardest, especially in the nonunion sector, which makes up approximately 70% of construction employment in the Bay Area. Among construction workers employed in Santa Clara County:

  • Latino workers are paid, on average, 38% less than white workers.
  • Asians are paid 52% less than white workers.
  • African-Americans are paid 38% less than white workers.

The Latino community is particularly affected by this pay gap because Latino workers are hugely over-represented in the construction workforce. In Santa Clara County, 16% of all working Latino men are employed in construction. Yet Latinos are routinely under-paid for their work. Closing the pay gap would increase income for Latino construction workers and their families by $387 million annually.

Another consequence of the low-road model is an unusually high dependence on importing temporary workers from outside the region, often from areas where blue-collar construction wages are significantly lower. In Santa Clara County’s construction industry:

  • Non-local workers are hired for 37% of all positions.
  • Out of the region’s 78 major industries, construction ranks #1 in commute time.

Economic data show that over the long term, the low-road approach not only shortchanges workers, but harms the health of the regional construction industry and supporting businesses. The “race to the bottom” approach has, over time, produced both an under-supply of local, skilled labor and a reduction in labor productivity. This decline in productivity is closely associated with a 25% decline in wages for California’s blue-collar construction workers over the same period.

With over 13,000 construction job openings projected over the next decade, Silicon Valley faces a choice: invest in hiring and training locally, to create career pathway jobs that lift up the middle class; or pursue the race to the bottom, pushing further towards poverty-level, insecure jobs that expand the inequality gap.

Communities, workers and businesses across the United States face a similar choice; in response, they have developed tools designed to increase equity, ensure safety and quality of work, promote high-road career opportunities, and expand the training pipeline for a skilled construction workforce. This toolbox includes:

  • Prevailing wage standards
  • State-registered apprenticeship training programs
  • Apprentice hiring requirements
  • Local and targeted hiring of under-represented communities
  • Pre-apprenticeship recruitment pipelines.

The scale of demand in Silicon Valley’s construction industry represents a tremendous opportunity to transform thousands of jobs into middle-wage careers – and transform thousands of lives by expanding pathways into those careers. By applying these tools to ensure workers are paid fairly, create a level playing field for contractors, and expand career pathways, our region can take advantage of this construction boom to invest long-term in training the workforce and expanding opportunities.

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