Foxconn’s ripple effects: Labor shortage, housing costs and tax opportunities (VIDEO)

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With work on Foxconn’s factory underway, a shortage of labor will remain a pressing concern and high housing costs may complicate plans to build apartments and houses nearby.

Those were two of the main points made by the panel of industry experts who convened in Racine on Thursday to discuss some of the opportunities and possible pitfalls likely connected to the $10 billion factory Foxconn is building in the village of Mount Pleasant. Drawing on their expertise in finance, insurance, residential construction and economic development, the speakers talked about various obstacles to the completion of the project, including the state’s protracted labor shortage, high housing costs and the need for risk management.

But not everything mentioned constituted a warning. The panelists also discussed opportunities presented by the recently passed federal tax bill.

Wisconsin’s labor shortage may only intensify

With the state’s unemployment rate hovering under 3 percent for months, it’s little surprise that construction firms are struggling to find skilled workers. Few in the industry expect the worker shortage to abate anytime soon, said Kelly Armstrong, director of sector strategy development at the Wisconsin Economic Development Corp.

“Workforce and labor is the number one economic development issue right now,” she said.

WEDC and other groups have embarked on a spate of initiatives to get millennials, veterans and others interested in the trades. But contractors may be feeling the pinch of an insufficient workforce for some time.

Wages could increase with shortage of labor

For the homebuilders who lost half their workforce statewide during the Great Recession, the recent boom in construction projects is having effects that feel like whiplash, said David Belman, president of Waukesha’s Belman Homes.

“It’s going to be very challenging,” Belman said. “We went from the recession and went from a drip to a pour.” 

The labor shortage could ultimately drive wages upward, said Elliot LePoidevin, vice president of sales at Marsh & McLennan, which means contractors must be aware of other costs, too. One necessity for competing on the Foxconn project is an emphasis on safety, meaning companies must have risk-management plans in place to keep costs low even as wages rise.

“Contractors that aren’t paying attention to this piece of their business are going to run into challenges,” LePoidevin said.

Jim Brandenburg, a partner at Sikich, said changes to the federal GOP tax bill might actually help employers compete for labor. A provision in the bill allows employers to claim certain costs arising from providing family-sick leave. That, in turn, could encourage them to put such programs in place as a way to attract talent.

Housing hampered by high costs

Belman said the current fast-rising home prices and lack of inventory in Wisconsin are the results of the high costs of land, labor, lumber and legislation.

He said regulations, specifically, drive up the cost of building a new home by more than $80,000.

High costs means its tough for contractors and developers to build homes worth less than $400,000, Belman said. These forces could strongly influence demand for housing near Foxconn’s factory, which is expected to employ some 13,000.

Although Belman expects apartments to follow the factory’s development, it could be two years before work gets underway on such a project.

In Mount Pleasant, residential property assessments increased 10 percent between 2017 and 2018. Land prices are rising fast, too.

Some developers, also, are concerned about building in Mount Pleasant because Foxconn hasn’t released a detailed wage scale. The company’s stated average wage of about $53,000 yearly doesn’t tell developers how much the average worker there will actually make. Follow @natebeck9