Expected Shortfall of Some Skilled Craft Labor Hangs Over Planned Industrial Projects in Los Angeles
Planned construction projects for the Power, Petroleum Refining, Chemical Processing and Transportation industries in southern California may be delayed, or their price could increase, due to a shortage of some skilled craft labor, according to Industrial Info's Labor Duration Geolocator. Industrial Info has identified some 283 projects with construction start dates from 2017 through 2022 with a value of about $23 billion.
Of those, there are some very large transportation and manufacturing projects, all of which are competing for the same labor supply. These projects include the L.A. International Airport $2.2 billion People Mover project, scheduled to kick off construction in June 2019, and the L.A. Southern California $1.6 Billion Regional Interconnection project.
A brisk level of project activity in the Power, Petroleum Refining and Chemical Processing industries is one significant reason why the supply of some skilled craft labor in the greater Los Angeles area is less than the demand for it.
The Labor Duration Geolocator identified a significant shortage of boilermakers in the Greater Los Angeles area over 2017-2022. A less sizable shortfall of millwrights and ironworkers also are expected for that area over the 2017-2022 period. There appears to be an adequate amount of other skilled craft labor, including welders, scaffold builders, pipefitters and electricians to meet demand in the Greater Los Angeles area for 2017-2022.
Three industries--Power, Petroleum Refining and Chemical Processing--have scheduled 116 construction projects to begin between 2017 and 2019 in metropolitan Los Angeles, according to Industrial Info's North American Project Platform. Those projects are valued at about $9.1 billion. The Power Industry has the overwhelming majority of project activity there: 65 projects valued at $8.7 billion. Petroleum Refiners plan to begin work on 20 projects in that area over that time, valued at about $360 million. Chemical Processers plan to begin 31 projects in metropolitan Los Angeles over the next three years, valued at about $64 million.
Some of the largest Power projects are Southern California Edison's (Rosemead, California) $1.4 billion dismantlement and demolition of units 2 and 3 of the San Onofre Nuclear Generating Station (SONGS), starting in December 2018 and running through 2031, and AES Corporation's (NYSE:AES) (Arlington, Virginia) $960 million repowering of its Alamitos Power Station, scheduled to run from June 2017 through January 2020. There are many others.
A shortfall of skilled craft labor in one metropolitan area could be partly addressed by journeymen willing to travel from other regions, but the areas surrounding Los Angeles face similar skilled craft shortfalls for the next few years, according to Industrial Info's Labor Duration Geolocator. California's Barstow-Bakersfield area faces its own shortage of boilermakers, millwrights and ironworkers for the next few years, as well as too few scaffold builders, operators and insulators.
"Expected labor shortfalls in the metro Los Angeles area could be alleviated by workers willing to travel from other nearby metropolitan areas," said Tony Salemme, Industrial Info's vice president of Craft Labor Risk Assessment. "But asking a skilled laborer to drive from suburban areas adjacent to Los Angeles adds per-diem costs."
Companies with industrial projects kicking off in the Greater Los Angeles area over the next few years need to factor this expected shortfall of skilled craft labor into their project timelines and cost estimates, Salemme recommended. "People with supply-chain, procurement and project-management responsibilities may need to take a fresh look at their work plans and timelines. They may need to provide housing and per-diems of boilermakers, millwrights and iron workers, which would significantly affect labor costs."
These same contractors will be competing with other firms for skilled workers willing to travel. Those workers can be expected to seek the highest wage rate and per diems, Salemme noted.
He emphasized that the supply and demand for skilled craft labor is dynamic. "Craft labor estimating and costing is not something you can 'set and forget.' Companies and labor organizations need to stay on top of this fast-changing picture."
Industrial concerns and labor organizations can obtain dynamic, updated multi-year forecasts of supply and demand trends for 14 skilled craft labor categories across North America by subscribing to Industrial Info's Labor Duration Geolocator. Please reach out to Tony Salemme at email@example.com.
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