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Former Fed Reserve Banker: Houston Will Need ‘Mexican Labor’ To Rebuild After Harvey

As much of the Houston metro area remains submerged in the wake of Hurricane Harvey, economists are turning their attention to the enormous cost of rebuilding America’s fourth-largest city and energy industry capital.

When all is said and done, the storm could wreak $50 billion in property damage and lost economic output, according to an estimate from the Greater Houston Partnership and Moody’s Analytics. That figure could be as high as $75 billion for the entire southeast Texas region.

To restore all of that lost value, Houston will need to add thousands of workers to its construction industry labor force. According to Richard Fisher, the former president of the Federal Reserve Bank of Dallas, the city needs to open its arms to immigrant workers if is to fully absorb and recover from Harvey’s destruction.

“All these business will have to be reconstructed,” Fisher told The Wall Street Journal. “That’s an enormous opportunity, but you can’t rebuild Houston without Mexican labor.”

Some construction industry groups worry there aren’t enough immigrants workers in Texas and across the U.S. to staff the rebuilding effort. In July, the National Association of Home Builders (NAHB) reported that a majority of its members were facing labor shortages in 11 of 15 construction sub-fields. The shortage is particularly acute in carpentry-related fields: about three-fourths of all NAHB members reported shortages in framing, rough and finished carpentry.

The labor shortages have been felt most acutely in Texas, where the building industry is dependent on illegal immigrant labor. More than a quarter of all Texas construction workers are illegal aliens, according to a Pew Research study from November 2016. Of the nearly 1.7  million illegal immigrants residing in the state, about 400,000 work in the building trades.

The construction industry workforce took a huge hit during the housing crisis in 2008, when many workers shifted into other industries or, in the case of immigrant laborers, returned to their home countries. Texas builders also blame the Trump administration’s crackdown on illegal immigration for deterring would-be laborers from seeking work in the U.S., exacerbating the shortage.

There are indications that the construction labor shortage in Texas may be overstated. A July report from the Center for Economic and Policy Research (CEPR) shows plenty of slack in the construction labor market, despite declining unemployment in the economy as a whole. The CEPR study looked at data and found that there are 3.3 unemployed construction workers for every 2.5 job openings, a much wider gap than the all-sector average, which has 1.2 unemployed workers for every 1.3 job openings.

This labor market slack at least partly explains why construction industry wages are growing more slowly than wages across all sectors. For June 2017, inflation-adjusted wage growth was 0.61 percent for the construction sector compared to 0.8 percent for all jobs, according to CEPR’s analysis of Bureau of Labor Statistics wage data.

These figures suggest there are unemployed or underemployed workers whom Texas builders could recruit to rebuild Houston. Part of that strategy could also include offering higher pay to match wage growth in other sectors of the economy.

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