Tim Long (left) and Ezequiel Fregoso of Lawrence engineering Group in Fresno collaborate on a relocation of a maintenance yard in Tulare County.
Written by Edward Smith
As record-low unemployment surges across the country, the number of available workers has decreased along with it. Development has nearly reached pre-recession numbers and construction demands have inundated firms with work.
For small businesses in the Central Valley trying to manage their current workflow and looking to grow, trying to find labor means competing against larger firms across the state in wages and benefits for a workforce still recovering from losses during the Great Recession.
“Everyone’s trying to get their projects in the ground now before the economy goes down again,” said Ryan Carlson, partner and principal for the Lawrence Engineering Group in Fresno. “It’s a good problem to have, but it’s still a problem that needs to be managed.”
Carlson’s mechanical engineering firm has been trying to fill a position for a drafter for the past six months, but has not found a qualified candidate.
“What do I have to offer people, what do I have to be paying?” Carlson asked. “What used to be an entry-level job, which would be 15 bucks an hour, I see a lot of them offering 18, 19, 20 bucks an hour.”
Those kinds of wages were reserved for more experienced applicants in the past, according to Carlson.
Those are the employees that many firms need right now going into this development boom.
In the Central Valley, construction growth is peaking right now at 9 percent over the last 12 months, according to Ernie Goss, research faculty with Fresno State. The Craig School of Business puts out the San Joaquin Valley Business Conditions Index, which analyzes the economy at-large as well as its intricacies on a month-to-month basis. That 9 percent is a rate the economy hasn’t seen since before the recession, Goss said.
Along with that growth is a hiring rush. According to Goss, employment in the Central Valley grew “significantly” versus the rest of the country at a rate of 2.7 percent over the past 12 months compared to 1.6 percent in the U.S. While unemployment in Fresno County has been a couple points higher than the rest of the country – 8.7 percent versus 3.9 percent in August, according to the Bureau of Labor Statistics, hiring trends have shifted and brought the Valley closer to the rest of the country in terms of labor demands.
“It is a bit surprising that you can find electricians and you can find plumbers,” said Goss. “That strength is a bit surprising for me.”
In a poll of businesses the Craig School conducted in May, excluding government jobs, almost four out of 10 businesses said finding qualified labor would be the biggest challenge to success in 2018.
“I would say it’s always hard to hire people to come to the Central Valley,” said Carolyn Halajian, human resources director for Paul Halajian Architects, Inc. in Fresno. “We have not gotten a single employee who did not grow up here.”
While Halajian said there are advantages to hiring people familiar with the area, doing so has limited them to hiring straight out of school.
“Hiring a person with 5-10 years of experience is not easy,” Halajian said.
The architectural firm was looking into hiring a mid-level experienced architect to stay competitive during this booming economic cycle, but they “didn’t get many bites.”
“I think we’re just going to wait because I don’t think it’s completely necessary right now,” said Halajian. “We’re going to stick with what we’ve got and see how it goes.”
The construction industry lost millions of jobs during the recession at a time many were needing to move forward with their careers, according to Josh Sherfield, president of Quiring General, LLC, a general contractor in Fresno.
After the jobs returned the workers didn’t, leaving many firms with employees either getting ready for retirement or just getting into the profession.
When work began drying up, so did the programs at Fresno State and Cal Poly, two key recruitment sources for the firm.
Fresno State has begun ramping up again and he says this freshman class is the largest at the college for a number of years.
“That’s good for our future, but we’re not going to see the fruits of that for several years,” Sherfield said.
Carlson has the same outlook. The current pace of construction has been going on for about 18 months now and Carlson anticipates it continuing for another year or two. And it takes the same amount of time to train someone coming straight out of school.
That creates an employee’s market, where business owners compete for labor.
Firms like Lawrence Engineering Group and Paul Halajian, Inc. are turning down work due to the sheer volume.
“We could all work 18 hours a day all week long, but that is not conducive to keeping an employee,” said Carlson. “We’re very careful to manage that and that is keeping us back.”
That could mean contract dollars lost to outside firms.
But getting workers to meet those needs from outside the area is expensive.
Firms can’t charge clients what they can in the Bay Area or in Los Angeles, and thus can’t offer the medical or retirement benefits that large firms can.
Even considering the low cost-of-living, “no one likes taking a pay cut,” said Carlson.
Paul Halajian Architects offers a full benefits package and 401k through a human resources company to make their salaries on par with Fortune 500 companies, said Halajian. Even still, they’re considering another costly program to give them an additional edge. “It’s not just enough to have a job in a place you can afford,” she said.
But implementing even higher wages or benefits to bring people over comes at a time material costs have gone up and productivity in the industry has been stagnant, according to Sherfield.
Employers rely on productivity to increase wages without increasing cost to clients, and in the construction industry, the lack of skilled labor has tempered efficiency. On top of that are safety regulations and material costs.
“You want to be able to increase wages further to try and attract more people to the industry, but you’re held back by what the economy can afford,” said Sherfield.
He is hopeful, however, about the rise in career technical education from places like Fresno State and Fresno City College. But, Sherfield fears, for newcomers to the industry who have known nothing but a booming industry, they may have come to expect this labor demand to be the norm in terms of wages and job availability. “It’s a cyclical industry, that could be a little bit of a concern long-term and what that’s going to do,” he said.