Why Contractors Are Working For Themselves
Where Did All the Workers Go?
This is a question with an answer that may vary from state to state. Here in Houston, Texas it is not much of a mystery. It first happened in the mid ‘80s. It happened again midway through the first decade of this century for a similar reason—money.
Seasoned mechanics, and anyone that has been in this business as long as I have, can remember how bad the economy got in the mid-’80s. Construction almost came to a halt in most parts of the country. Our local union folded, and many other unions in Texas failed as well. Nobody had work, so union dues could not be paid to support the cost of operating the local. Perhaps this was collateral damage that trickled down, as it always does.
After the strike in 1981 by the Professional Air Traffic Controllers Organization, organized labor changed. If you are old enough to remember, the guy living in the White House at the time gave a stern ultimatum to the union members, “Return to work within 48 hours or face termination.” This is the first time I can remember the government flexing their muscle over organized labor.
Our pay scale in 1984 was $18.68 per hour. With the lack of jobs available, and with the little bit of work out there, cost cutting measures started taking place. We settled for $14.90 per hour to work, and within a couple of months it dropped to $12 per hour. People were offering to work for less just to keep working. Finally the decline stopped at $10 per hour, but we were only getting 25 to 30 hours a week.
There were some parts of the country that had work. We were forced to travel to find a job. Many traveled to Atlanta or Augusta. I went to Augusta and had three job offers before noon the day we got there. Many mechanics had roots and family or did not want to travel. They got out of the seasonal construction work and found work doing anything else. Steady paychecks are very important when raising a family. One foreman at the shop I worked at went to work for a large firm as an apprentice millwright for half of what we were making, but he had three kids. Today he is making twice as much as any lather or plasterer in Houston.
We All Wanted More
Let’s fast forward to the early ’90s when the economy was finally picking up. There were jobs popping up everywhere. The pay rate started to climb. We were getting close to $15 per hour but still almost four dollars less than we made years earlier. By the mid-1990s we were back to $18 per hour. Ten years of rising living costs and we were back to square one. We all wanted more. I wanted to be the first lather in the city to make over $20 per hour. I was at the top of my game and could outwork almost anyone. In many parts of the country that is not a good wage. In Houston, it was a good rate 20 years ago. By the late 90s the pay had increased. Still at $18.50, I wanted more. After all, the cost of a truck doubled, and a good pair of boots cost more too. Everything was going up except our wages.
In 1998, with wages stuck, I convinced my wife that we should try our luck as a contractor. She knew bookkeeping, and I knew how to run and bid jobs. We would get rich—so we thought. Hind sight is 20/20. We started with one job. The first thing we did was put the word on the street that we paid $20 per hour. I could get manpower anytime I wanted because nobody paid that and some would jump ship for anything above what they were making. Eighteen years ago that was not bad money and we were the highest paying shop in town. Soon, one or two other shops followed. Work was plentiful. Manpower was easy to find. The higher wages cut into our margin a bit because we still had to be competitive on bid day, but we always had manpower.
Into the first part of this century, growth, manpower and workloads were good. Even with the catastrophic events of that September day in 2001, projects were being built. The Texas market experienced good backlog of projects even though other parts of the country had started a down turn. We expanded in 2007 with the purchase of a building and property. We were riding a wave, yahoo. The funny thing about a wave is eventually they come crashing down. In 2011, everyone was feeling the pain. What had been going on across the United States was now in Texas.
Texas may have been able to sustain the downturn better if every contractor across the United States didn’t show up one morning to take what little bit was out there. Projects that would normally have four to five general contractors bidding would have 25 to 30. Some general contractors started hiring skilled mechanics to perform work in house. Others would want to purchase the material and sub-labor only. Wages started to suffer again. We cut pay by 10 percent across the board. We struggled to keep people busy. That has proved to be the last straw and leaves us where we are today. Many found work in the oil patch—it was robust—others went into refineries and plant work. A man could take one of these jobs, start at the bottom and make more than a plasterer.
No License Required
Texas is a right-to-work state. This gives anyone the right to work, union or not. It also gives employers the right to terminate without cause. Some of my colleagues in the ASTM think we are a bit backwards down here—maybe yes. One thing I’m not in agreement with is the state does not regulate any craft or trade that is not a life or safety profession. If you are a mason, stucco guy, rocker or concrete placer you do not have to have a license. Many states require a license for all crafts. In some states you can’t put up a fence without one.
With wages stuck back at $16 to $18 per hour, many people elected to take the same chance I did in 1998 so they could make more money. Face it, $35,000 to $40,000 in Houston is not bad because housing and the cost of living are reasonable, but back when I started, a new pickup truck was less than $15,000 and a pair of Red Wings sold for $70. Mechanics with good experience, and of any trade, could go into business just like I did. This is true for licensed crafts as well. All you need to do is file a DBA with the county clerk, open a commercial bank account and bid jobs. Easy as cutting pie, right? There are some people that might agree and others may not.
The construction industry, at least in Texas, has failed to keep up with the rising cost of living. The unions that are left continue to train people and negotiate higher wages for their membership. This has also taken away from the trades that do not require licensing because all union members get the same rate of pay regardless what shop you work for.
Changing the Guard
Everybody wants to succeed and make the best life for their family that they can. This prompted an exodus of construction workers that were stuck at a wage rate to find other employment. Many others started contracting. This taxed the workforce that was left. Bigger shops soon found themselves short of manpower. Higher pay did not attract people either, but we tried. It cost us money because you still had to be competitive on bid day. We would lose work to the cheaper bid or have to cut into our margin to a point we were just passing money from one hand to the other. The problem was the other hand is out the window and the profits went into the breeze of overhead. Today, with so many people competing for the work that’s out there, even the newer contractors have found themselves short of workers. I have had a few men that went out on their own. I can’t blame them because I was one of them years ago.
When I started my career, a small percentage of contractors shared 80 percent of the work. Today, that 80 percent or more is shared between all the newer contractors. Many jobs are left at a lower bid price than I care to work for. This is because even though they pay less money to their guys, they keep them busy. This is not always easy to do. The kind of work I compete in is schedule driven. If a job falls off the schedule, we are compelled to increase manpower or hours. Sometimes you catch up, the next one is not ready and now you have a hole in your schedule. One or two days at the house and your workforce is gone.
Back in the day, there were no Hispanic lathers in Houston and very few Hispanic plasterers. That was true in many trades. In today’s industry, there are very few others left that are not Hispanic. That’s not a bad thing because they fill a void in the workforce. These guys are hardworking, dedicated to their craft and proud of their work.
So the next time a general contractor asks you, “Where are all your guys?” you can tell them they are working for themselves or they found work paying more than you could afford to pay. Owners and developers always want a reasonable budget to build. No, I’m lying, they want cheap. The cost of building has risen very little in the wage department, but material has more than doubled in my career.