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Build-That-Wall Pledge Has Companies Bracing for Labor Shortages

28 Nov

By Lauren Etter, Leslie Patton and Shannon Pettypiece

For corporate America, there’s a lot to like about President-elect Donald Trump’s platform: fewer regulations, lower taxes and a singular devotion to deal-making.

Yet there’s one signature campaign pledge — to round up and deport millions of undocumented immigrants — that has many executives across the country on edge. The proposal, if implemented even remotely as vigorously as Trump at times promised, would squeeze a labor pool that companies like Dunkin’ Brands Group Inc. and Bojangles Inc. say has already been tightening for months. That in turn stands to further drive up labor costs at a time when many businesses are facing jumps in state-set minimum wages.

All of that may be precisely the desire of many Trump supporters: Prop up stagnant wages for working-class Americans. But for companies in industries such as construction, restaurants, hotels and technology, it could make filling jobs more difficult.

“We supply ready-mixed concrete to the housing industry, and if there’s not enough workers to build houses, guess what? We don’t get to supply the concrete,” said Tom Hill, chief executive officer of Summit Materials Inc.

Hill said he’s in favor of gaining control of the border to stem the flow of drugs and people without documents. But lawmakers would have to devise a guest-worker program to provide laborers and should find a way to make legal the workers who are already in the U.S., he said.

“They tend to be really good hard-working people,” he said. “I would love to see them have a path to citizenship.”

Business Sense

Some business leaders, including Douglas Yearley, CEO of luxury-home builder Toll Brothers Inc., said they hoped Trump’s long experience as a businessman would inform his decisions.

“Our business is an immigrant-based business. Then again, so are his hotels and so are his casinos,” Yearley said at a conference on Nov. 9. “You go on a construction site of any homebuilder and it is the United Nations. I’ve been in this business 26 years and I don’t think I’ve ever met a Caucasian trowel hanger. It’s just the nature of the business.”

Trump has vowed to build a multibillion-dollar wall along the U.S.-Mexico border, deport the 11 million undocumented immigrants in the U.S. and hold legal immigration steady even as companies practically beg the government to raise the number of visas currently handed out. Trump’s measures could have employers from meat packers to restaurants and software companies facing higher wages, renewed threats of work-site raids, the loss of seasonal workers and a continuation of decades-long backlogs for visas.

“We look forward to partnering with the Trump administration and Congress as they transition in the coming months and years,” Karen McLoughlin, chief financial officer of Cognizant Technology Solutions Corp., said at a conference Wednesday. “Obviously, immigration is a very important issue for Cognizant.”

Tight Market

U.S. firms face a tight labor market. The unemployment rate sits at 4.9%, down from 10% in 2009, and wages have started to pick up steam. Most economists agree that the nation is on the verge of full employment, which could drive up wages further. The U.S. Federal Reserve noted in its June report on regional economies that there are labor shortages across the U.S., from Boston to Atlanta to St. Louis, where both high—and low-skilled industries reported having a hard time finding workers and filling job vacancies.

“It’s gotten to be a progressively tighter market over the last two years,” said Firehouse Subs CEO Don Fox. Annual turnover at the chain’s company-owned restaurants has risen to about 95% from about 48% three years ago, he said.

“My hope is that they will open the door for legalization,” he said. “I just don’t see a situation where people will be deported by the millions.”

With as many as 20% of construction workers composed of undocumented immigrants, Trump’s plan to deport them could cause wages to double within a few years, said Mark Boud, chief economist at Washington-based research company Hanley Wood. Unemployment in the construction sector is already about 2% and even lower for some skilled tradesmen.

“If you are going to remove 20% of the labor, that has a huge impact to the point where doubling labor costs from current wages is not unrealistic,” said Boud. “It will take some time, people aren’t going to be thrown out overnight, but a lot of those workers are going to go into hiding.”

Flip Side

By the same token, U.S.-born workers could benefit from Trump’s policies.

“In the short run, it does create employment opportunities for native-born Americans and possibly higher wages,” said Gary Burtless, a senior fellow at the Brookings Institution.

Trump built his campaign on immigration, making one of his first campaign stops near a dusty port of entry along the U.S.-Mexico border. He then won the endorsement of the Border Patrol union, which has seen the nearly 2,000-mile long border with Mexico become inundated with migrants from Central America, Haiti and other countries seeking asylum in the U.S.

Trump has promised that on “Day One” he would repeal Obama’s executive actions, including an order that shielded up to 4 million undocumented immigrants from immediate deportation and allowed them to receive employment cards. If Trump undoes the action,  that could strand the 750,000 people –- many of them college graduates — who have so far been approved for employment authorization under the program.

“Businesses do rely on and currently have workers with employment authorization based on having deferred action,” said Robert Loughran, an immigration attorney and partner at Houston-based Foster Global, noting that those people are scattered across industries, from accounting to software engineers.