Capitalizing on the home market rebound, Zach Weinkauf is busy building decks, remodeling kitchens and framing garages. He’s just not on anybody’s payroll.
In July, the 29-year-old left a job with a remodeling firm in Minneapolis to work as an independent contractor, and he does most of his work with other independent contractors.
“If a construction company now came to me and said, ‘Hey, I can offer you $30 an hour,’ I would just turn it down, because there’s more to be made,” Weinkauf said.
The home market is rebounding as construction in the Twin Cities through July is up 24 percent in 2013 compared with a year earlier. But the number of jobs at construction companies has remained sluggish, at best. Minnesota builders have added an anemic average of 200 workers per month this year, and the total number of construction jobs remains 35,800 short of the peak in 2006.
Fresh off the recession, firms are cautious about hiring, and former construction workers have migrated to oil fields in North Dakota or agricultural jobs. Companies say they can’t find the skilled workers they need, and qualified employees are retiring. Meanwhile, other workers say they prefer working for themselves.
“We have a lot more independent contractors and a lot fewer people who are actually employees of a larger firm,” said Tom Stinson, an economist at the University of Minnesota. “The trend was already starting before the recession, but I think in the construction industry, that transition was accelerated by the big, big cutback in housing.”
Alex Shikhlinski, who owns Delta Construction in St. Paul, said using independent contractors has become a necessity for some firms.
“We have only two employees in the whole company, and we are a multimillion-dollar company, and we have a lot of independent contractors who work with us,” Shikhlinski said. “Half of our subcontractors are the same thing.”
Subcontractors cost more in the near term, he said, but they guarantee lower overhead when work slows. The collapse of housing caught dozens of contractors with too many employees in 2006 and 2007.
The downturn erased 44,000 jobs between February 2006 and February 2010. Big construction firms with long payrolls suffered the most, Shikhlinski said, while firms that use independent contractors could adjust.
Weinkauf ran his own one-man business from 2005 to 2011, and he says he was a far more aggressive spender before the crisis. In 2005 he bought a new truck and trailer, brand-new tools, and took out a $3,200 advertisement in a magazine. Other contractors starting their own businesses before the crash added employees as construction peaked in 2003 and kept adding them.
By early 2006, 132,000 Minnesotans were employed in construction, the all-time high. When the housing bubble burst, the layoffs began, and contractors say they learned the value of staying lean.
Weinkauf was able to keep working as an independent, though he did take a job in 2011 with Platinum Remodeling, a firm for whom he was already doing a lot of subcontracting. He and his wife had a newborn baby, and he needed to help at home instead of spending his evenings responding to e-mails and writing estimates.
But this summer, as home construction in the Twin Cities hit a five-year high, Weinkauf and his friend Dan Wheeler, 28, each struck off on his own. The two men are humble and enthusiastic about seizing their own destiny, but they’re growing operations slowly and have no plans to hire anybody in the near future.
The Department of Labor and Industry estimates there are about 11,000 independent construction contractors registered in Minnesota, but it does not have accurate historic data because the Legislature has twice in the past five years created new licensing or registration programs.
Tom Wiener, owner of Cardinal Homebuilders, said contractors and their employees are working longer hours instead of adding workers. They work nights and weekends to get jobs done. Another example that it’s just not a matter of being independent.
“A lot of them got burned by keeping a lot of guys on longer than they should have,” Wiener said.
The slow construction hiring reported by Minnesota’s labor market information office surprises Marv McDaris, division president for Pulte Homes. He said several of his firm’s subcontractors are adding employees. But firms are also having trouble finding people, for instance, to frame new homes, he said.
Construction workers bailed out or retired when the industry was at a standstill, and many haven’t returned. There are other options. Unemployment in the Twin Cities is just above 5 percent and jobs are available in the oil fields of North Dakota and the strong ag economy of the Upper Midwest.
“It’s almost like we lost a generation,” McDaris said.
And he doesn’t expect the industry to return to prerecession peak employment anytime soon.
“I’m hoping for some slow steady growth — I think that’s what’s best for the industry,” he said.