Housing shortage – whatever happened to the workers?

James Wickham: There’s a lot of building to do: Ireland needs a housing building programme, a renewal of infrastructure, investment in public transport especially in Dublin. Meanwhile, office construction is already growing (count all those cranes). It’s hardly surprising that firms are trying to persuade emigrants to come back home. Who’s going to do the building?

There is already a skill shortage: craft, technical and professional workers are in short supply. It’s not just that many emigrated, it’s also that training has almost stopped. In the crisis firms stopped taking on apprentices and let apprentices go before they finished. Is this inevitable?

A pro-cyclical industry

Nearly everywhere, the construction industry is pro-cyclical. When the economy is growing, employment in construction grows faster, and when the economy slumps, employment in construction crashes. The Irish experience in the last boom and bust was however an extreme case. Notoriously the final stages of the boom were driven by housing construction. In 2007 there were 89,000 housing units completed, in 2013 just 8,300 (Forfas 2013). Figure 1 shows employment in construction as compared to total employment in Ireland between 1998 and 2015:
Figure 1 Employment: construction and all sectors, 1998-2015

Source:  CSO Statbank (QNHS)

Firms would be more likely to provide training if construction demand was less prone to these wild gyrations. A state-funded national housing building programme, such as many European countries (including Ireland) have had in the past, can smooth the peaks and troughs. By contrast, if housing construction purely depends on the market, firms will be compelled to focus only on short-term profits. Worse still, if building regulations are loosened, as also happened in Ireland, then there is downward pressure on standards. Disasters like Priory Hall are pre-programmed – and there is less need for trained workers.

The same is also true of infrastructure. This involves big projects (e.g. Luas). They take a long time to plan and a long time to carry out. However, the more projects are not part of any long-term programme, the less incentive there is for firms to invest in developing the necessary skills. Once the project is completed, the workers move on to another job, leave the industry, or emigrate. The skill base within firms and within the industry as a whole is weakened. Firms do not build up specialist expertise with which they can compete in export markets – and tackle the next project more efficiently.

All of this has been exemplified by the sad story of rail construction in Ireland. The first Luas lines were proposed, stopped, re-started. DART Underground – the one project that would really dramatically enhance Dublin’s public transport – was abandoned even after millions had already been spent on planning.

Hollowed-out building firms

Training has also been undermined by changes in the organisation of the industry itself. Research in TASC’s working conditions in Ireland project showed how the firms in the industry have been hollowed out. The industry has always had a lot of small firms, casual labour and self-employment. Sub-contracting has always been extensive. However, in recent years sub-contracting chains have lengthened.

Especially in the crisis firms cut the number of their direct workers as much as possible. Firms became project managers, assembling different groups of sub-contractors. General operatives and labourers are still employees, but now work for an agency which places them on the site. More than ever before, craft workers are hired as ‘self-employed’. Or to be more precise, they are now ‘bogus self-employed’. They are still working for one employer, they are still told what to do, but now in tax terms they are ‘self-employed’. Since the firm now has few employees, it’s hardly surprising that they hardly have any apprenticeships.

According to the Construction Industry Federation, there were 4,400 apprentices in construction trades in 2015, as compared to 23,000 at the end of 2007. In other words, in the crash employment in construction was more halved (see Figure 1), but the number of apprenticeships was less than a quarter of the peak! While employment in the construction industry is pro-cyclical, training in the construction industry is pro-cyclicality on steroids! International research shows that effective training policies do have to be shaped by employers’ needs and employers’ knowledge. In Ireland however apprenticeship is dependent almost entirely on the short-term needs of employers – and like all simple-minded market solutions, that is hardly a basis for national policy.

Rebuilding Ireland means not just physical construction, it must mean rebuilding and developing knowledge and institutions – a planned house-building programme, long-term capital investment programme, and training systems that are not depend on the short-term vagaries of the market.

Reference:

Forfas. (2013). Ireland’s construction sector: Outlook and strategic plan to 2015.


James Wickham is Director of TASC.