On Nov. 15, President Biden signed a $1.2 trillion infrastructure package—the Infrastructure Investment and Jobs Act—providing historic funding levels to improve public works, including roads, bridges, highways, internet access and the power grid, as well as to mitigate the effects of climate change.
(The bill does not include funding for social policy, which is covered under separate legislation known as “Build Back Better.”)
This is one in our series of industry-focused snapshots analyzing the impact of the legislation.
What the $1.2 trillion Infrastructure Investment and Jobs Act means for construction: A rising tide lifts all boats. And so the thinking goes around infrastructure investment headed for construction projects, which have recently seen an imbalance favoring residential work as commercial jobs slowed during the pandemic. The Infrastructure Investment and Jobs Act will result in a five-year net new investment of $550 billion, which alone won’t create equilibrium, but we expect it will lead to less hesitancy around jobs in the nonresidential space. This includes the harder-hit hospitality and office sectors, as these public infrastructure projects with secured funding help to reduce competition in other nonresidential work. We expect backlogs to refill and contractors to expand their service offerings.
Specific allotments for construction: The $550 billion net new investment covers a broad range of infrastructure buildout, from transportation to broadband networks.
Further categorizing the net new investment, transportation spending, accounting for approximately 50% of the net new spend, is allocated as follows:
The big picture: The new legislation offers construction a sustained capital infusion over the next five to seven years that will provide longer-term opportunities for growth, while helping to shore up America’s aging infrastructure.
But to capitalize on the windfall, the industry must find ways to offset a shrinking labor pool. Contractors must find innovative ways to attract talent—whether through vocational partnerships, in-house training, higher wages or other incentives. And amid increasing pressure to offset climate change, the industry will need to moderate its own practices and move toward lessening its impact on the environment.
In the short term: Every $1 billion of infrastructure investment requires 3,000 construction workers. That’s a tall order for an industry already facing a prolonged labor shortage that the pandemic has worsened. There were 344,000 open U.S. construction jobs in August—the most recent month of available government data—38% more than the five-year average of 249,000 monthly openings.
The labor shortage could be further exacerbated by federal government vaccine mandates as construction worker vaccine rates continue to remain low; only slightly more than half of construction workers have their shots, compared to about 80% in occupations overall, data from the Construction Center for Research and Training shows. Meanwhile, supply chains and materials prices remain volatile, with steel, copper and fabricated metals all currently inflated. Pricing volatility makes it difficult to bid on jobs.
Questions that frame the path forward:
- Will the Biden administration lay out clear incentives that encourage the building industry to work toward carbon neutral operations?
- Will the promise of new opportunity around infrastructure promote a wave of technological innovation in an industry slow to adapt but faced with ongoing labor challenges?
- As funding allocated to the states (representing $433 billion) does not cover necessary funds for all infrastructure gaps, how will states prioritize projects to be funded and communities served by these projects?
- How will the infrastructure package be funded? Will it lead to higher tax rates on wealthy individuals? What alternative funding sources may be tapped?