State or federal immigration reform could impact construction industry

construction workersNo one was particularly shocked by a new study that found half of Texas construction workers are undocumented immigrants. Some people were actually surprised that the number wasn’t higher. Nationally, unauthorized workers make up about 20 percent of the construction industry workforce. Illegal workers, payroll fraud, and labor shortages are big problems within the construction industry, and many states continue to grapple with immigration reform as building activity heats back up.

As many as 400,000 undocumented workers hang dry wall, roof houses, lay tile, and perform other tasks on construction sites every day across Texas, according to the study by Workers Defense Project and University of Texas researchers. For them to actually be on the job, about 40% of Texas construction workers are purposely misclassified as subcontractors in order for their employers to avoid paying payroll taxes and workers’ compensation. This form of payroll fraud also allows employers to avoid knowing a worker’s legal status.

Most undocumented workers receive lower pay, fewer benefits, and less training compared to citizens. Some also argue that construction contractors that hire undocumented workers have an unfair advantage over companies that do not because they can pay workers less and submit lower bids for jobs. The problem also means millions in lost wages and state sales taxes.

The construction industry also is struggling to find enough qualified workers to handle an increase in work. Take a look around places such as Austin and Houston and it’s pretty easy to see that construction work has picked up in recent months. Cranes dot the skylines and more new homes are being built. However, to keep pace, many construction firms face few options to hiring undocumented workers to fill positions on work sites.

Texas lawmakers have filed state bills designed to crack down on worker misclassification. Twenty-six states have similar wage theft or worker classifications laws. Two of the biggest players in the construction industry, Texas and California, do not have such laws in place.

On the national level, comprehensive immigration reform is a priority for some lawmakers. Federal reform would create a pathway to citizenship for workers, help protect their rights, and ensure they have equal pay and protections. However, if federal immigration reform is pushed to the back burner, states like Texas could provide some changes on the work site if they pass additional laws that deal with worker misclassification.

Laura Huchzermeyer

Laura Huchzermeyer is an industry specialist for D&B's First Research at Hoover's. She keeps a watchful eye on the financial services, construction, and real estate industries. Follow her on Twitter.

Read more articles by Laura Huchzermeyer.

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