Choose one of the case studies from the first six chapters of the text (any chapter case study of your choice).
Please submit a written analysis between 2-4 pages, double spaced, in APA format. What did the firm do right? Or what did they do wrong? What could they have done better to improve the overall circumstances?
Case 5.1 Trying to Build When Nobody Wants to Work
The U.S. residential construction contracting industry includes about 160,000 establishments (single-location companies and units of multi-location companies) with annual revenue of about $425 billion. Companies in this industry construct and renovate residential buildings. The industry includes general contractors, who build on land owned by others; operative builders, who build on land they own or control; and specialty trade contractors, such as plumbers and electricians, who often work as subcontractors for residential construction contractors.68
Housing demand is driven by population and economic growth. Demand for new residential buildings can change rapidly, depending on the economy and interest rates. From 1986 to 1991, annual U.S. home construction dropped 40%; from 1995 to 2005, it increased 75%; and from 2006 to 2011, it fell 65%. As the economy has recovered from the Great Recession in the United States, demand for housing has strengthened and prices have increased. In local markets, changes in demand can be even more severe.69
Home building is a key driver of the American economy, said Granger MacDonald, chairman of the National Association of Home Builders (NAHB) and a home builder and developer from Kerrville, Texas. Housing creates new income and jobs, purchases of goods and services, and revenue for local governments.70
Thats the general industry backdrop as the number of potential homebuyers in the Denver (Colorado) area increases and the supply of homes for sale continues to fall. Fierce competition pushes home prices higher at one of the fastest rates of any local market in the nation. Denvers average sales rate would normally be about 15,000 homes per year, and the market is now operating at just over half that rate.71 With all of this demand, why is there such a low supply?
Housing industry veteran Gene Myers says he could be adding 50% more homes if he just had the people to build them. After weathering more than one recession, not to mention the worst housing crash in history, Myers says he has never seen anything like this. Especially the fact that it seems like were at capacity at such a low level of actual absorption [sales], said Myers, CEO of Thrive Home Builders, a midsized, privately owned builder in Denver. In previous recessions, when weve recovered, we tend to see prices go up and labor starting to get tight after weve recovered to at least an average absorption.
Thousands of construction workers left the industry during the recession, many of them heading to the energy sector. The assumption was they would return when energy lagged and homebuilding recovered. Employment of construction laborers and helpers was projected by the Bureau of Labor Statistics to grow 13% from 2014 to 2024, faster than the average for all occupations. Laborers and helpers work in all fields of construction, and demand for these workers would mirror the level of overall construction activity.72 They did not. The labor shortage in building actually worsened in 2016a surprise to most analysts.
Labor is the top concern among the nations builders, according to an NAHB survey, and worry over its cost and availability is growing. We thought wed see a flow back of workers from the energy sector, said Rob Dietz, chief economist with the NAHB. The labor shortage has basically grown and accelerated. Its the top challenge in the building industry right now.
These jobs, Americans dont want, Myers said. We have a hard-working Hispanic labor force here in Denver that really is the foundation for the construction industry.
Dietz points to both an immigration and a generational challenge. The workforce is aging, with the typical age of a construction worker now 42. More Americans are going to college now, and so they are less likely to pursue a career in construction. Simply put, young Americans do not want to build houses anymore and would rather have white-collar, college-based, technology-driven employment. That leaves the construction business to immigrant laborers.
Immigrants make up about a quarter of the overall construction workforce, but that share is likely higher for residential homebuilding, partly due to a large number of undocumented workers. Builders say they make sure their contractors are legal to work, but they have less control over the subcontractors who often move from site to site. Even that group is shrinking, as President Donald Trump tries to impose travel bans and threatens to build a wall between the United States and Mexico. There is a fear to get out into the labor force, I thi
