According to classical economic theory, when supply of labor or anything else gets tight in relation to demand, the price of that commodity gets driven up. As prices rise, so do incentives for greater production of the commodity in short supply, whether it be labor or materials. Thus, as pay scales go up, the trades ought to become more and more attractive as a career option.
PAS, Inc., of Ann Arbor, MI, publishes an annual survey of open shop craft compensation that I believe to be
the most credible data of its kind available. To some extent their figures show that the laws of supply and demand
are indeed at work. As the smaller chart shows, open shop craft compensation has steadily increased throughout
the latter half of the '90s, as well as the early years of the decade. In fact, the gap between union and nonunion
pay scales steadily narrows. Union wage scales, not tracked by PAS but as reported by the Construction Labor
Research Council, have been rising 3.0% to 3.5% per year throughout the 1990s, compared with 4%+ gains
registered by open shops.
Good News, Bad News
This is the good news. The bad news is that when you look at the dollars and cents of trade wages, shown in the larger chart, it becomes apparent that the construction trades still have a long way to go.To get a feel for annual income, multiple the hourly wages shown for different categories by 2,000. This approximates the number of hours worked in the course of a year by an hourly trade worker. Thus, $20 an hour x 2,000 would equal a $40,000 annual income.
As you can see, very few of the categories project to even a $40,000 annual income-which itself isn't all that hot for jobs that require as many as four or five years of intensive training to master. PAS shows that the average PHC journeyman or service worker makes around $33,000 a year.
PAS's data is corroborated by various other industry compensation studies. For instance, our sibling publication for the HVAC industry, The News, recently surveyed readers and found that 72% of HVAC service technicians and 80% of installers earned less than $40,000 a year. The biggest income category was between $25,000 and $35,000, encompassing 40% of service techs and 42% of installers. Only about a tenth of service technicians earned $50,000 or up. This in an era when work has been booming for an extended period.
Is that enough to get talented young people excited about coming to work in an industry characterized by
tough physical labor, dangerous working conditions and marginal benefits? If you had career options in this or
other fields that pay more for less effort, is this the path you would take?
Benefits Package
Benefits are no great bargain either. PAS tracks the fringes as a percentage of total compensation. Many industries in the modern working world offer benefits packages amounting to 20-25% of total compensation. As you can see, most PHC fringe rates fall below 20%.A close reading of the PAS data reveals some signs of encouragement. For instance, you'll note in the small chart that the 1999 wage gains represent anticipated increases. I went back and checked last year's data and learned that the actual wage increases measured for 1998 surpassed the estimates in all categories, as follows.
This could be a sign that the marketplace is in fact being nudged a little faster toward the kind of pay scales that might eventually resolve the imbalance between supply and demand. It's just that the pace seems painfully slow.
PAS's data can be misleading if taken too literally, especially in the categorical breakdowns. For instance, a few areas actually show wage decreases from the previous year. These are most likely statistical artifacts stemming from a small data base or different firms responding to the survey. In general, their data tends to conform with other industry compensation studies, as well as anecdotal evidence of field conditions. Many contractors have told me that the pay scales reported here are pretty close to the norm in their area.
The company's annual "Merit Shop Wage & Benefit Survey" contains much more information than reported here. It spans 174 pages and includes breakdowns by region, by types of work, detailed benefits packages and a host of other data. It can be obtained for $330 from PAS by calling 800-553-4655, or via their Web site at www.pas1.com/pas.
The company also publishes a variety of other construction industry studies covering executive, management
and shareholder compensation practices, a benefit survey for contractors, performance appraisal practices,
incentive plans, job descriptions, and consulting engineer/design salaries.
