Deconstructing the Crisis in Construction

On August 3, former Chairman of the Council of Economic Advisors for the Obama administration, Austan Goolsbee, sat down with Jon Stewart on The Daily Show to discuss the importance of construction jobs in America. Stewart proclaimed that the outsourcing of construction jobs is impossible, but unfortunately, we do not inhabit that universe. American policymakers need to enact policies that will increase the number of jobs in the construction sector, not outsource them. The best method for achieving this goal is to create the proposed infrastructure bank, because more resources allocated to economic infrastructure will increase the overall number of construction jobs.

According to the Bureau of Labor Statistics, the U.S. construction sector contained 7.7 million jobs in January 2007. By January 2010, the number of construction jobs in the country had plummeted 29% to 5.5 million — roughly 61,000 jobs were lost per month from January 2007 to January 2010. The number of construction jobs in the country today has leveled off near the 2010 figure. Construction sheds jobs at a faster pace than state and local government, which lost around 23,000 jobs per month between August 2009 and August 2011.

The crisis in construction stresses the importance of creating more construction jobs, but policymakers seem content with outsourcing construction jobs. Foreign Policy contributor Clyde Prestowitz wrote about California’s plan to outsource the construction of the San Francisco-Oakland Bay Bridge. Apparently, Shanghai Zhenhua Heavy Industries Company possesses the ability to complete the arduous project and the ability to complete it at a low cost.

However, outsourcing the Bay Bridge project has failed to produce any cost savings. The National Steel Bridge Alliance (NSBA), discussed the problems in their July 2011 newsletter. The Chinese firms incurred cost overruns of $5.2 billion and currently find themselves three years behind their own schedule. The financial strain is only tightened by the cost of outsourcing around 2,500 manufacturing jobs, as the workers pay taxes and receive less public assistance like unemployment insurance and food stamps. California has also used public money to send 250 trainers to China, which increases the human capital of Chinese workers.

Many regard the performance of the Chinese engineers and construction workers building the bridge as substandard. Mactech Engineering and Constructing, the firm hired by the California Department of Transportation (CalTrans) to inspect the Bay Bridge construction, found numerous problems with the bridge, including various welded panels that tested poorly. Despite catching numerous safety hazards, Mactech’s contract was not renewed after it expired in December 2008. CalTrans stated it deemed Mactech’s standards for testing welded panels too strict. But when did it become a punishable offense to have strict standards for public safety? America does not need to outsource construction jobs to China so they can create a substandard bridge.

America’s infrastructure continues to crumble while our construction workers remain unemployed. President Barack Obama laid out his new stimulus plan, which includes an infrastructure bank. The $10 billion bank lowers the cost for private investors to endow in infrastructure projects. The infrastructure projects include: highways, sewage, airports, rail, etc. Senators John Kerry (D-Mass.) and Kay Bailey Hutchinson (R-Texas) sponsored the legislation, while AFL-CIO and the Chamber of Commerce both support it. America’s infrastructure desperately needs real actions and real solutions.

The American Society of Civil Engineers’ 2009 Report Card of America’s Infrastructure specified the need to spend around $400 billion per year in infrastructure spending over the next five years in order to fix America’s infrastructure. Although Obama’s plan allocates only $10 billion towards the infrastructure bank, it may attract a great deal of private capital. White House official Gene Sperling said, “I think 10-1 is actually conservative … I think many people think – including some on our jobs council, and some of our business leaders – that you could get 20-1 bang for your buck.” Instead of outsourcing construction jobs, Congress needs to pass this sensible idea so we can begin to rebuild our crumbling infrastructure and end the jobs crisis in construction.

Photo Credit: Wikimedia Commons

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Matty Robin

Matty is a senior at the University of Central Florida double majoring in Economics and Political Science. He has written an undergraduate thesis on the Iranian Revolutionary Guard and currently works on research projects involving the economic dimensions of Central Asia and the Middle East.

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