(Bloomberg View)—Just about everyone agrees that the U.S. has huge infrastructure needs. The consensus is so broad that there's hope that regardless of who wins the election, we may finally get a bill out of Washington that addresses it. The problem is that 2017 appears to be the worst time in a generation for an infrastructure bill.
As with most things pertaining to construction these days, the challenge begins with labor. On Hillary Clinton's campaign website, she pledges that in her first 100 days she'd seek an infrastructure bill that would create "tens of thousands of jobs." This would be a disaster.
First of all, there aren't enough workers to accommodate that vision. In September, there were the fewest number of unemployed construction workers for any September going back to the year 2000. The added demand brought about by a large federal infrastructure bill would create a construction labor shortage more acute than we've seen in decades.
Second, these federal plans aren't occurring in a vacuum. Many states and local governments have their own infrastructure measures on the ballot next month. If many pass, that will create demand for untold thousands of construction workers. Here in Atlanta, where the construction of Mercedes-Benz Stadium and SunTrust Park is wrapping up, builders have been grappling with the crowding out caused by those two mega-projects for a while, raising construction costs for the industry as a whole. And logistically, how would projects be prioritized when federal, state and local governments are all competing for resources?
Third, because of elevated costs brought about by a tight construction labor market and continued growth from the housing sector, money won't go as far as it would in a softer market. Today, $275 billion of infrastructure spending might buy only 70 percent of what it would have in the aftermath of the great recession. Infrastructure spending would have been a terrific idea in 2009. But that window is gone. Construction wage growth is approaching levels unseen in decades.
Unfortunately, given a constrained construction labor force, the choice right now is between building housing for millennials -- the largest adult generation in American history -- or building infrastructure for the country. We cannot have both without finding tens or hundreds of thousands of construction workers not already in the industry, a labor pool possible only through greatly increased immigration. Any large infrastructure spending right now would only serve to keep rents high and keep millennials in their parents' basements.
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