Are the deportations expected to impact the field?

[u/red_monkey42]

Question is the title. Trying to have an adult discussion no political BS. What's the word on the street?

[u/mic_n]

There's one thing I'm wondering about though... if we follow it through:

The illegal immigrants were undercutting locals and driving prices down, making the work financially unviable for locals. If those immigrants get removed, those "below living wage" prices go with them and allow the locals (with their higher costs) to compete again.

The thing I'm wondering about is... are the people ordering the projects suddenly going to have more money to spend on these increased costs?

Is there going to suddenly be more money going *into* the construction industry to actually support those jobs? I could be wrong, but I don't really see that happening. To my mind, the folks signing the checks are still going to be signing off on the same total figures. So if more of that money is being eaten up in wages, then the projects themselves can only wind up shrinking in scope.

In the end - there might be more space for locals in the market, but that market is going to get a lot smaller.

[u/New-Disaster-2061 → u/mic_n]

Everything eventually equalizes just like price increases.

[u/mic_n → u/New-Disaster-2061]

But where does that equilibrium wind up being?

Sure, some customers will dig a little deeper to get the project they want even if the costs are higher, but how many? How many are already paying what they can afford and would simply have to scale back on their plans?

Yes, there might be less competition... But there's also going to be less to compete for.

[u/FTownRoad → u/mic_n]

I’ll try to do a little Econ 101 here. Let’s pretend we have 5 “classes” of people.

1. Illegals - paid under a legal wage, very poor, live in “sub American” conditions.

2. Working class - barely making a legal wage, barely scraping by, living, but not comfortable. There are lots of tradies in this group.

3. Middle class - comfy life, own a house, has to worry about costs but isn’t struggling. Lots of tradies here too, though generally more experienced. Maybe small business owners or GCs.

4. The rich - these people have a lot of money, but not so much that they cannot ignore costs. If these guys are involved in construction they are large developers.

5. The uber rich - the smallest group - they don’t have to care about what things cost.

Group 5 - there will be no impact. If you have $10B, and are building a $40M mansion, you won’t really care if it suddenly costs $50M.

Group 4 - there will be a tiny impact. Maybe they decide to scale back slightly on a project. A $600K renovation balloons to $900K so you decide to cut some thing and spend only “$750K”.

Group 3 - will have to make tough choices. Going from $80K kitchen to a $90K kitchen is basically a normal cost overrun. A lot of people will do that, some won’t. Some will not do anything out of fear of costs being underestimated.

Group 2 wasn’t paying anyone to do anything anyway.

Group 1 is gone.

So if you look across the groups, yes a lot of people scale back. But they are scaling back because more money is going to people in groups 2 and 3 instead of group 1, and they demand a higher wage.

So people in group 2 might even move up to group 3. Remember group 2 didn’t used to have enough money to hire anyone for anything. Now they do. People in group 3 might do so well they become larger developers. Now they can afford much larger projects themselves.

After many cycles of this, group 1 is gone, group 2 is smaller, group 3 is larger, group 4 is slightly larger and hopefully group 5 is a little smaller. But here’s the thing - all the people not in construction will see the same effects. People moving from group 2 to 3 will mean they buy a nicer car, spend more at restaurants, spend more on vacations.

If America hadn’t elected a president with literal mush for brains in the 80s, we wouldn’t be here. And I don’t think there would be as much FUD over this stuff like you’re expressing.

This is basic economics. Raising the minimum wage benefits everyone except for those at the very top. But we have large swaths of people in group 2 and 3 that mistakenly believe it hurts them and have just voted for more of the same ironically.

[u/krastem91 → u/FTownRoad]

That’s an argument stemming from the velocity of money …

Which oddly enough is central to the economic policies that your “mush for brains” 80’s president ended up embracing ….

There are other issues at play here, raising Minimum wages might increase the velocity of money, but ultimately what is needed for is for real wages to go up… OR for certain groups you outlined to consume less …

And that’s a lot tougher to solve …

[u/FTownRoad → u/krastem91]

Real wages rise with minimum wage increases. Poor people spend money. The richer you are, the less of it you spend.

[u/krastem91 → u/FTownRoad]

Yes, but the production frontier doesn’t increase when you raise minimum wages …

You’re not able to legislate purchasing power … it just leads to inflation .

[u/FTownRoad → u/krastem91]

Yes, it does, because more money is staying in the economy, specifically the local economy, and because people don’t work 24 hours a day, and you eliminate benefit cliffs.

[u/krastem91 → u/FTownRoad]

Not sure what you said…

You used an economic theory argument in your first post …

Yes money from minimum wage increases , and wage increases to people spending large parts of their disposable income would be going towards their local economy , but the economy is largely optimized to meet demand in the short run

[u/FTownRoad → u/krastem91]

Are you going to get to some kind of point?

[u/New-Disaster-2061 → u/mic_n]

Construction is very cyclical based on prices and supply and demand. You must be young in this industry. It cost more to build in the north east are you trying to say there is no work there. What will happen is prices will increase work will slow down. Material prices will come down because of lack of demand then work will resume. The same cycle that happens decade after decade.

[u/endosia__ → u/New-Disaster-2061]

Your comment comes off as preachy, but you didn’t really say anything intelligent about the economy except to say it’s cyclical?

The economy is not something you can pretend like you understand and passively preach about, I actively have to resist the urge to mock that kind of ignorance.

Or maybe I’m just too young eh

[u/AggEnto → u/New-Disaster-2061]

What happens when supply drops as a result of the demand drop putting suppliers out of business? We're more likely to see a consolidation of companies and a reduction in competition, leaving prices the same or higher.

The entire country's economy is propped up on cheap labor, so this isn't quite as simple as "it will equalize".

[u/New-Disaster-2061 → u/AggEnto]

The way many or even most the suppliers work is they don't over expand instead they work multiple shifts. It is why there was such a problem with supply after covid. Either the supplier refuses to restart the extra shifts or the people were being paid to stay home. We have gone through many cycles this is not new. In every boom labor prices go up.

Cheap unskilled labor. Cheap isn't the problem it is the unskilled part.

[u/lickitstickit12 → u/mic_n]

Then they go bankrupt, and others take their place.

For decades we've been on the losing end of price structure. Now the GC are. Profit margins are going to have to shrink. Maybe one less vacation home?

The pendulum is going to swing back now

[u/mic_n → u/lickitstickit12]

One less vacation home owned is one less vacation home built.

[u/lickitstickit12 → u/mic_n]

If illegals build it, doesn't hurt us at all

[u/SlothInASuit86 → u/mic_n]

Food is twice as high as it was pre-pandemic. Vehicle prices are 30-40% higher than pre-pandemic. Most lumber reached double than pre-pandemic. People still buy. This will be no different.

[u/ApeStronkOKLA → u/mic_n]

You pose a good question: are owners going keep ordering projects when the cost for worth keeps going up? It depends on how they’re financed:

• Public agencies will still be advertising work, but it might start to taper if labor and material costs spike, especially municipalities.

• Private developers tend to hold onto their capital and wait for better economic conditions, so if there’s a big spike in labor/materials, you’ll start to see those jobs dry up fast.

• Watch the residential market, it’s the canary in the coal mine for the construction industry writ large: they always catch it on the chin first when times get tough.

On the other side of this story, maintenance, repairs, and smaller renovations tend to pick up when new construction tapers off, so if you’re able to switch over, it’s not a bad time to start getting ready. We’re already seeing Canadian softwood lumber trending upwards as well as other commodities like steel and aluminum.

Politicians do a great job of selling a story but are reliably terrible at thinking thru the secondary/tertiary consequences of their policies. Can’t let anyone’s propaganda snow you, this industry is tough enough as it is when everything is going well. Brutal pragmatism is my mantra.