What if the future of the construction industry looks a lot like the decades-long change in manufacturing? Automation has increased productivity, reduced costs, and improved quality in the construction industry. But technological changes that displace human labor in the construction industry could have devastating impacts on workers, families, and the U.S. economy in the future. What are the impacts to the Midwest?
A new report by the Midwest Economic Policy Institute (MEPI) and the Project for Middle Class Renewal at the University of Illinois, The Potential Economic Consequences of a Highly-Automated Construction Industry: What If Robots Turn Construction into the Next Manufacturing?, explores the future of the building trades in the age of automation.
There has been a growing concern among many workers, experts, and elected officials on the effects of construction positions becoming less reliant on human labor. Automation, artificial intelligence, and technological advancements are already improving productivity and reducing costs on construction work sites. More and more contractors are investing in technology, machinery, and robotics to address shortage of construction workers across the nation. Over time, millions of blue-collar construction workers across the nation may become replaced or displaced as the industry becomes more reliant on automation. This change will be gradual, but the effects of displacing workers from middle-class jobs will impose significant costs on the economy.
McKinsey & Company, a management consulting firm, has estimated the percent of tasks in each occupation that can be replaced by robots. The report found that 49 percent of all construction tasks can be done by a robot, with higher automation risks in specific construction occupations.
Using McKinsey & Company estimates and data from the U.S. Bureau of Labor Statistics, the new MEPI report estimates that 2.7 million construction workers could be displaced or replaced by automation by 2057 across the United States. Construction worker displacement could reduce labor income by $127.5 billion (in current dollars). In addition to the jobs gap in construction, another 498,000 jobs and $45.4 billion (in current dollars) in economic output would be lost in the United States due to lower consumer demand.
What would the impacts be to the Midwest specifically?
This report highlights five Midwest states. After considering both projected industry growth and technological advancements, it is estimated that in 2057 the number of construction trades workers could actually shrink to 105,000 in Illinois, 76,000 in Indiana, 44,000 in Iowa, 53,000 in Minnesota, and 55,000 in Wisconsin. By 2057, construction labor income could be $6.2 billion lower in Illinois, $3.2 billion lower in Indiana, $1.8 billion lower in Iowa, $3.0 billion lower in Minnesota, and $2.7 billion lower in Wisconsin (in current dollars) due to automation.
Many former blue-collar construction workers whose jobs become displaced by automation would find employment in other occupations. The five most common new occupations for workers who separate from the construction trades are currently in transportation and trucking; manufacturing production; building and grounds cleaning; maintenance workers; and food and restaurant occupations. Between 2010 and 2017, workers who moved from construction into other jobs saw their wages drop an average of 32 percent. While those who moved into management positions or architecture and engineering careers may have experienced increases in earnings, the vast majority of displaced blue-collar construction workers suffered a pay cut.
A drop in human labor means a drop in construction labor income, which translates into a drop in consumer demand. Similar to the effect of automation on the manufacturing industry across the Rust Belt, an increasingly automated construction industry would have consequences for Midwest states. The drop in consumer demand could result in 18,000 non-construction jobs lost and $2.1 billion lost in economic output (in current dollars) in Illinois. Indiana would lose 13,000 jobs and $1.2 billion in economic activity. Iowa would lose 7,000 jobs and $0.6 billion in economic activity. Minnesota would lose 9,000 jobs and $1.0 billion in economic activity. Lastly, Wisconsin would lose 11,000 jobs and $1.0 billion in economic activity.
It is imperative that lawmakers, public officials, and industry stakeholders start preparing for this potential economic change. What are proactive steps that can be taken to ensure that the benefits of a highly-automated construction industry are shared broadly across the economy?
- Apprenticeship programs in the building trades should be utilized and adapted to train new workers and re-skill current employees as specific trades become more automated. Since joint labor-management programs currently graduate 79 percent of all apprentices in the United States, lawmakers should be discouraged from restricting collective bargaining or repealing state prevailing wage laws.
- States and local communities should collaborate with educational institutions to invest in vocational training and worker re-training to prepare individuals for the jobs of the future.
- As construction becomes more automated, lawmakers should consider taxing capital owned by contractors and distributing the proceeds to young and displaced workers.
The world is changing fast. A highly automated construction industry could cause both economic prosperity and economic hardship. However, proactive steps can be taken to ensure that the benefits of automation are shared broadly across the Midwest economy.
Midwest Economic Policy Institute 