Author: Brian Flackey

Minnesota is pushing for more housing, and energy efficiency across the state. To make this happen, it first needs to address the residential construction workforce shortage.

Since the beginning of the pandemic, housing has been a marquee issue in federal, state, and municipal politics across the country. Debate continues to loom large on issues of zoning reform, affordability, and housing accessibility. However, there is a consensus that Minnesota, like most states, is facing a monumental housing shortage that threatens to tear at our social fabric and compromise the stability of our state’s economy.

Bold policies regarding zoning reform, reform of approval processes, and industry financing have all been considered with varying degrees of success. What has been missing to date from the public discourse is a dialogue on how our skilled workforce shortage is contributing to the rising costs of housing and constraining housing production.

Few if any other industries have a direct impact on both the health of our economy and the wellbeing of our residents than the residential construction industry. The construction of new homes and the remodeling of our aging housing stock uplifts and brings stability to Minnesota residents while pumping hundreds of millions of dollars in new and recurring revenue to state and local coffers in the form of property tax, income tax, sales taxes, and permitting fees.

Despite this fact, policymakers have yet to acknowledge nor coalesce around the need for a moon-shot effort to rebuild the residential construction workforce to increase production to the level needed to meet Minnesota’s housing needs. Contrast this with recent successes of powerful special interest groups in the fields of manufacturing, bio-medical, health care, and education industries whose influence has yielded significant state workforce development programs and resources in their respective industries.

Minnesota has one of the oldest skilled labor workforces in the country.

During the great recession, there were many individuals in our industry who left Minnesota to go south or west to states that recovered more swiftly, some shifted to commercial construction, and still others abandoned their careers in construction altogether. Our ranks have never truly recovered.

While the need for residential construction has, arguably, never been more acutely felt, Minnesota continues to lag most of the country in new housing production. And yet policymakers continue to ask more of our shrinking industry.

Where do we begin?

Change the narrative. Albeit vital to our state, rebuilding the residential construction workforce will not be easy. There are significant challenges to overcome. Stigmas and stereotypes must change.

This is not your father’s housing industry. The housing industry of today is dynamic and innovative where young practitioners of a trade are exposed to evolving technologies and building practices to construct ever more efficient, resilient, and healthy homes of the future. Parents, teachers, guidance counselors, and students should demand the dedication of educational resources to foster and nurture students who show a proclivity to work in the field of construction.

Not only can a career in the trades be mentally stimulating, but it can also be financially rewarding. The licensed trades boast a high percentage of small business owners and self-made millionaires. Don’t take my word for it. Read the Daniel de Vise article in USA Today titled, “Meet the millionaires next door. These Americans made millions out of nothing.”  There is a reason The Wall Street Journal has dubbed Generation Z as the “Toolbelt Generation.” As pay and opportunity in the trades continue to grow, the proposition of being college-debt-free and closer to economic independence is extremely attractive. But more needs to be done to introduce students to the possibility of careers in the trades.

Fund pre-apprenticeship programs in our public high schools. The death of the shop class and the hyper-focus on the college track as the only means for success for students have left an indelible mark on our industry. It’s a mark that can only be erased through a seismic shift in thought.

It begins by reintroducing the trades back into our public schools via innovative pre-apprenticeship programs. But these programs are not inexpensive. They require repurposing space in schools, training CTE professionals, and purchasing materials, tools, and software licenses.  Startup and ongoing costs associated with these programs can be cost-prohibitive for many schools. The bottom line is the state needs to step up and support these pre-apprenticeship programs in schools and make this crucial investment in our future residential construction workforce. It can’t just be lip service.

For instance, in 2022 Connecticut recognized this hole in our education system and passed legislation directing the State Department of Education to create a Pre-Apprenticeship School Grant Program that would have granted schools $1,000 for each student who earned a certificate through an approved pre-apprenticeship program. It was modeled on a wildly successful Colorado program that has seen over 44,000 students obtain in-demand credentials since its inception in 2016.

If Minnesota wants to invest in a similar program, it would be imperative for the legislature to provide financial support for these programs if Minnesota is to have a fighting chance at rebuilding its residential construction workforce.

Make it easier for kids to pursue careers in the licensed trades via our public schools.

Minnesota’s high schools are the envy of the entire country. However, the number of job-ready students produced by our vo-tech high school programs is just a minute fraction of what is needed to right-size the housing industry.

If we, as a state, truly agree that growing the trades is a priority, then we must expand opportunities more broadly in our public schools and expose more kids to the trades sooner.

The status quo is no longer working and is a disservice to our youth who are yearning for alternative pathways to success. We must expand programs. The governor and legislative leaders would be wise to work with industry leaders and educators to create and fund a pilot that modifies the school’s traditional curriculum and its pre-apprentice program to satisfy a licensed trade’s apprenticeship educational hours.

Creating pilot programs like this would add value to the high school experience for so many of our disaffected youths. According to a recent study by the Dalio Foundation, 119,000 kids and young adults are disconnected or at risk of being disconnected from school or employment. There is no doubt that greater access to the trades through innovative solutions such as a pilot to expand trades education in our public schools would help to bring this vulnerable population new and exciting opportunities.

Make it easier for companies in the licensed trades to hire new apprentices.

 Finally, there are additional challenges beyond education that must be addressed if meaningful change is to occur. Chief among them are the Minnesota laws governing journeyman-to-apprenticeship ratio requirements. State law requires one journeyman to be on an active worksite for every apprentice present. This law is appropriate and justifiable to ensure safety and work quality.

However, there is an additional problematic piece for apprentices.  This law requires that Minnesota’s Apprenticeship Ratio Policy provides for one journeyworker for the first apprentice regularly employed plus, thereafter, one apprentice for each additional three journeyworkers employed. In stark contrast, Rhode Island only requires one journeyman to one apprentice hiring ratio. In Minnesota, this ratio is set for state and federal projects. This law arbitrarily restricts small to mid-sized companies — a majority of our industry — from expanding, thereby limiting access to would-be-apprentices. This law must be repealed if we are sincere about expanding opportunities for disaffected kids and growing the residential construction workforce.

Absent this change, Minnesota’s current ratio requirements will continue to stifle efforts to reinvigorate the state’s moribund housing industry and to achieve real, meaningful reductions in greenhouse gases through the deployment of energy efficiency measures.

Our industry remains ever hopeful and committed to working with the state to grow the residential workforce because we believe, beyond a shadow of a doubt, that it is the surest path to helping the state find its way out of the current housing crisis.

Below is the proposed new test for independent contract workers. If passed, you could hit with hefty fines when found to be misclassifying an employee.

Subd 4) An individual is an independent contractor and not an employee of the person for whom the individual is providing or performing services in the course of the person’s trade, business, profession, or occupation only if the individual is operating as a business entity that meets all of the following requirements at the time the services were provided or performed:

(1) was established and maintained separately from and independently of the person for whom the services were provided or performed;

(2) owns, rents, or leases equipment, tools, vehicles, materials, supplies, office space, or other facilities that are used by the business entity to provide or perform building construction or improvement services;

(3) provides or performs, or offers to provide or perform, the same or similar building construction or improvement services for multiple persons or the general public;

(4) is in compliance with all of the following:

(i) holds a federal employer identification number if required by federal law;

(ii) holds a Minnesota tax identification number if required by Minnesota law;

(iii) has received and retained 1099 forms for income received for building construction or improvement services provided or performed, if required by Minnesota or federal law;

(iv) has filed business or self-employment income tax returns, including estimated tax filings, with the federal Internal Revenue Service and the Department of Revenue, as the business entity or as a self-employed individual reporting income earned, for providing or performing building construction or improvement services, if any, in the previous 12 months; and

(v) has completed and provided a W-9 federal income tax form to the person for whom he services were provided or performed if required by federal law;

(5) is in good standing as defined by section 5.26 and, if applicable, has a current certificate of good standing issued by the secretary of state pursuant to section 5.12;

(6) has a Minnesota unemployment insurance account if required by chapter 268;

(7) has obtained required workers’ compensation insurance coverage if required by chapter 176;

(8) holds current business licenses, registrations, and certifications if required by chapter 326B and sections 327.31 to 327.36;

(9) is operating under a written contract to provide or perform the specific services for

the person that:

(i) is signed and dated by both an authorized representative of the business entity and of the person for whom the services are being provided or performed;

(ii) is fully executed no later than 30 days after the date work commences;

(iii) identifies the specific services to be provided or performed under the contract;

(iv) provides for compensation from the person for the services provided or performed under the contract on a commission or per-job or competitive bid basis and not on any other basis; and

(v) the requirements of item (ii) shall not apply to change orders;

(10) submits invoices and receives payments for completion of the specific services provided or performed under the written proposal, contract, or change order in the name of the business entity. Payments made in cash do not meet this requirement;

(11) the terms of the written proposal, contract, or change order provide the business entity control over the means of providing or performing the specific services, and the business entity in fact controls the provision or performance of the specific services;

(12) incurs the main expenses and costs related to providing or performing the specific services under the written proposal, contract, or change order;

(13) is responsible for the completion of the specific services to be provided or performed under the written proposal, contract, or change order and is responsible, as provided under the written proposal, contract, or change order, for failure to complete the specific services; and

(14) may realize additional profit or suffer a loss, if costs and expenses to provide or perform the specific services under the written proposal, contract, or change order are less than or greater than the compensation provided under the written proposal, contract, or change order.

(b)(1) Any individual providing or performing the services as or for a business entity is an employee of the person who engaged the business entity and is not an employee of the business entity, unless the business entity meets all of the requirements under subdivision 4, paragraph (a).

(2) Any individual who is determined to be the person’s employee is acting as an agent of and in the interest of the person when engaging any other individual or business entity to provide or perform any portion of the services that the business entity was engaged by the person to provide or perform.

(3) Any individual engaged by an employee of the person, at any tier under the person, is also the person’s employee, unless the individual is providing or performing the services as or for a business entity that meets the requirements of subdivision 4, paragraph (a).