While it’s hard to avoid the latest headlines in the morning about what President Trump did the night before, there are some common themes that have been pervasive throughout Trump’s 2016 campaign, and into his actual presidency into 2017.
Among these more relevant themes to us, is what Trump is really going to do around our country’s infrastructure, and what this could mean for the construction industry overall – beyond the infamous Mexican-border wall that seems to capture most of the headlines.
The key question being posed: “Is Trump good or bad for the Construction Industry?” Well so far, it seems to be both a “yes” and a “no.”
- Net overall: the proposal includes both potential positives and negatives for the construction industry.
- There are lots of cuts. This include: a 13% reduction in the Department of Transportation’s budget; elimination of the Transportation Investment Generating Economic Recovery (TIGER) grant program which funds discretionary road and rail projects; a $1 billion reduction for the Army Corps of Engineers; and getting rid of the Federal Transportation Administration’s capital investment program – reallocating responsibility to the local states where these projects are located.
- A big Mexican-border wall. No surprise here, the U.S.-Trump has requested $1.5 billion dollars for the project this year, and $2.6 billion in 2018. No mention of Mexico funding.
So while the U.S.- Mexico wall will certainly provide numerous bid opportunities, there are over 50 very large and critical FTA infrastructure projects that will need to find funding elsewhere. Many are holding out for more details of Trump’s plans before putting it in the good vs. bad bucket. There will also be a great deal of variance on how this question could be answered as it really ‘depends’ on the kind of construction you are talking about, and perhaps if a government project you are working on is part of these project cuts or fund reallocation.
OSHA and Construction Regulations
Trump’s own experience in real estate and development, and his promise of reducing regulatory pains and costs in the industry were an important part of his campaign platform that resonated with many leaders in the construction space. Back in November, the Associated Builders and Contractors Association stated that Trump’s “background in real estate and development made him very familiar with the obstacles to economic growth ABC members face.”
According to more recent communications, there is an assumption that under Trump, the Occupational Safety and Health Administration (OSHA), will take a ‘lighter’, more business-friendly approach compared to his predecessors – and help employers comply with regulations rather than hitting them with stiff penalties and citations. Considering OSHA increased their fines on average by 78% last year, this could be a welcome change.
What’s unique about Trump as pertains to OSHA, is that he has had personal dealings with this organization by the very nature of his own development and construction businesses. As a construction company, it’s tempting to put all this in the ‘good’ column.
Labor Shortages & Fear of Deportation
While most seem to support Trump’s business policies of reduced regulation and lower taxes, his immigration reform and travel ban appear to be raising some red flags for the construction industry. In particular there is concern around these policies exacerbating an already big problem related to trade labor shortages.
Bloomberg recently reported that “the homebuilding industry has been heavily dependent on foreign-born workers for some time, and it’s already four years into a shortage of framers, roofers, drywallers and painters.” This is consistent with one homebuilder who recently complained that his labor shortage had almost doubled his delivery time for single-family homes, from 90 days at the height of the last building boom to 150 days currently.
The construction industry is ranked 3rd in unauthorized workers, or approximately 20% of construction workers being categorized as ‘undocumented.’ The concern is that if these workers are removed from the labor pool, that the result could likely cause wages to double in the short-term, and put tremendous pressure on construction firms that are already having to deal with shortages and a very low unemployment rate hovering around the 2% mark.
While the final verdict will not be out for some time, Trump’s policies and overall presidency is sure to have a significant impact on the overall construction industry over the next few years. It will be difficult to determine if these changes are good or bad until long after they take effect. Most likely, some will be good, and some bad. The hope however, is that the net impact will be positive, and that our industry will be able to grow with confidence, and at a consistent, healthy rate.