New NAHB research shows that despite the slowing of immigration inflow, the share of foreign-born workers in the US construction labor force remain at record high levels but showed no growth in 2017 and 2018. Immigrant workers now account for close to one in four workers in construction. The share of immigrants is even higher in construction trades, reaching 30%.
While the entire US labor force has become more dependent on foreign-born labor with its share rising from less than 15% in 2004 to 17% in 2018, the reliance of the construction industry on foreign-born workers is greater. Immigrants account for almost a quarter of the construction work force. That share was rising rapidly during the housing boom years, when labor shortages were widespread and severe across construction trades. It increased from less than 20% in 2004 to almost 23% in 2007.
Even during the housing downturn the share of immigrants in construction remained relatively high, fluctuating around 22%. In 2013, as the home building industry started its slow recovery, immigrants started to return to the construction industry and the share of immigrants in the construction labor force started to rise again. By 2016, the share exceeded 24%, the highest level recorded by the ACS. The share of immigrants in construction stabilized at these record high levels with no further increases in 2017 and 2018.
The story behind the rising share of immigrants in the construction labor force during the housing recovery is twofold – an unusually slow, delayed and reluctant return of native-born workers and a much faster and robust comeback of immigrant workers. Close to 1.7 million native-born workers left the construction labor force during the housing downturn, and the vast majority on a net basis, over 1 million, had not returned to the industry as of 2018.
2015 became the first year since 2006 to register a rising number of native-born workers in the construction labor force, while the number of immigrants started to rise two years prior. As of 2018, the number of native-born workers remained 11% below the cyclical high reached in 2006, while the number of immigrants now returned to the 2006 level and approaches 2.7 million.
Even though the flow of new immigrants into the construction work force picked up since the housing recovery got underway, it is now significantly smaller in level terms compared to the housing boom years. Just over 44,000 new immigrants entered the construction industry in 2017. This is a substantial drop even compared to the previous year, when over 67,000 new immigrants joined in. In comparison, over 130,000 new immigrants were joining the construction labor force annually in 2004 and 2005.
The 2017 noticeable drop in the number of new immigrants in construction may seem puzzling given favorable economic conditions. Over the last 15 years, the time span these data are available, the annual flow of new immigrant workers into construction remained highly correlated with measures of new home construction, especially new single-family starts. The number of new immigrants in construction rose rapidly when housing starts were rising and declined precipitously when the housing industry was contracting. The response of immigration has been quite rapid, occurring in the same year as a change in the single-family construction activity. The surprising drop of 2017 in the number of new immigrants in construction most likely reflects a change in the US immigration policy that took place during the first year under the new administration.