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Win-Win; Tax Abatements and Sustainable Craft Careers

Recently, City of Houston Mayor, Sylvester Turner, and City Council passed a new ordinance encouraging developers, who apply for tax incentives designed to stimulate development of multi-family residential buildings, to provide workers with livable wages, to offer affordable or workforce housing assistance, to offer paid internships to low-income students and jobs to ex-cons re-entering the workforce, and to create middle-skill jobs that don’t require a college degree.  I congratulate Mayor Turner and City Council for taking a measured approach to encourage development, while also seeking to create career opportunities in the craft trades.  However, there is much more to this story if this is to be a win-win for the City of Houston, developers and the craft workers who construct their buildings.

Currently, for a number of complex reasons, the craft workforce of the commercial construction industry is unsustainable and inefficient.  More craft workers are leaving the industry than joining it.  To be more specific, baby boomers are retiring and the construction industry is not attracting candidates to a career in the craft trades from the millennial generation to replace them.  This is largely due to poor employment practices, which include improperly designating the craft worker as an individual subcontractor thereby breaching the traditional employer-employee relationship in order to avoid the payment of employment taxes such as social security, the elimination of traditional employee benefits and cessation of craft training for most trades.  As a result, because an untrained workforce lacks the craft skills to deliver quality construction efficiently, the labor component of construction projects has increased approximately 400% since the early 1980s, and yet the hourly wage for craft workers has not come close to keeping pace.  For instance, a carpenter earned $15 per hour in 1981.  Today, a carpenter earns approximately $16-$17 per hour.  Further, construction schedules are longer and the quality of construction is lower leading to higher building maintenance costs and shorter building lifecycles.  In short, everyone in the process loses – the owner who paid for the construction of the building, the craft worker who built it and the community itself, because with lower wages comes less disposable income.

The cause of this problem is rooted in the inherent nature of the construction business where a contractor must be low bidder in order to win work.  Consequently, many contractors have taken a win work at all costs perspective, which has caused them to compete to the lowest common denominator thereby reducing craft workforce standards.  This has resulted in the elimination of craft training and the improper misclassification of what were once employees as subcontractors.  The end product is a craft workforce whose wages have not kept pace with the cost of living, and who have not been taught the craft skills to work efficiently and successfully thereby discouraging the millennial generation from having an interest in a craft career, which was once a pathway to a middle-class lifestyle.

However, there is an organization of building owners, general contractors, specialty contractors and industry trade associations that has developed an owner-driven strategy to solve this problem.  That organization is Construction Career Collaborative, or C3 for short.  C3’s principles are Financial Security, Health and Well Being of the Craft Worker, Safety Training and Craft Training.  C3, founded in 2009, has a board of directors diversely comprised of three owners’ representatives, six general contractors, three specialty contractors, one architect and three industry trade association executives.

C3’s owner-driven strategy requires that the construction companies contracted to a project achieve C3 accreditation.  Requirements for accreditation specify that each company pay its employees by the hour and not by the piece. Each company must compensate its craft workers for any overtime pay earned as specified by federal law.  Each craft worker must be an employee, not a subcontractor, and receive a W-2 Form at the end of the tax year, not a Form 1099.  Each company must provide worker’s compensation insurance for its workforce.  Each craft worker must have received OSHA 10 safety training and each field supervisor OSHA 30 safety training.  In addition, and very importantly, each accredited company must pledge to support the development and delivery of craft training for the construction trades.

The end result is a vision, when achieved, which is a win-win for all involved in the process.  Craft trades flourish because trained, experienced craftspeople populate the construction industry.  Wages and benefits grow as true craftspeople are in high demand because it is a recognized fact that highly skilled craftspeople produce top-quality work, more efficiently, with less rework in less time. Young people recognize the opportunity and are drawn to a fulfilling career in the craft trades thereby eliminating the craft workforce shortage.  Job sites are safer.  Construction companies compete on a level playing field for work.  Owners benefit from more compact construction schedules, shorter punch lists and more efficient, higher quality buildings with longer lifecycles, which cost less to operate.

Owners who currently subscribe to the C3 mission include M.D. Anderson Cancer Centers, Texas Children’s Hospital, Memorial Hermann Healthcare System, Jones Lange LaSalle, Hines, Museum of Fine Arts – Houston, Greater Houston Partnership and the Archdiocese of Galveston-Houston.

Additionally, C3 joins other notable groups and organizations in pursuit of a solution to the craft workforce challenge that exists today; organizations such as Greater Houston Partnership with its UpSkill Houston workforce initiative, Texas Gulf Coast Workforce Board, the many community colleges in the region, United Way and Neighborhood Centers, just to name some.

In the C3 formula, all parties are winners.  Tax abatements offered by the city stimulate quality construction projects paying wages that produce a middle-class lifestyle which attract young people to a career, and not just a job, thereby creating a sustainable craft workforce.  All of these ingredients mixed together create a synergy that attracts new companies to invest in this region because Houston is perceived as a thriving community with a robust workforce and, as a result, a great place to do business.

Chuck Gremillion
Executive Director

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