The Outlook for the American AEC Industries
From Surviving to Thriving: The Outlook for the American AEC Industries’ can be found on page 4 of the 2021 edition of Perspective, a compilation of insights from members of the RLB team around the world.
Much attention has been paid to the slogan “Build Back Better,” used by the Biden/ Harris campaign. In three words, it not only acknowledged the need for repair, but it staked out the objective that the end result needs to be better than the original. Now, with new leadership in Washington, it’s time to move beyond the alliterative appeal of the phrase and get serious about putting it into practice.
It’s not going to be easy. In recent years, institutions and industries of all scales and sectors suffered setbacks of two types: systematic legislative dismantling, and widespread natural destruction, ranging from record-breaking wildfires to storms that wiped out billions of dollars of agricultural assets. Overlay the coronavirus pandemic on those conditions, and recovery is daunting, but the path is clear. We must work together and be informed by both hindsight and foresight. To that end, Biden has assembled a cabinet that prioritizes experience, above ideology. The situation is urgent; we can’t afford to kick the can down the road again.
The Build Back Better campaign has resonance for the AEC industries in several areas:
Economics and trade
Tariff wars may have been good for grabbing headlines, but carefully recalculating them will be good for the AEC industries because it eases relations with friendly—and important—trade partners in Asia and Europe, who are integral parts of the construction materials supply chain. Biden has proposed an offshoring tax penalty on goods and services that are produced overseas to be sold in the US, as well as a “Made in America” tax credit for investments in manufacturing across the country, including reopening closed factories and expanding production.
The nominee for Secretary of Commerce, Gina Raimondo, will oversee trade policy and America’s relationship with both China and institutions like the World Trade Organization. The department will seek to rebuild relationships battered by trade sanctions, rethink the use of tariffs, and work to build a united front to tackle China. Key to this last task is reestablishing a role for the United States in the Comprehensive and Progressive Agreement for Trans-Pacific Partnership [formerly known as the Trans-Pacific Partnership, before the US withdrawal from the pact in 2017], which would leverage collective strengths and concerns of the region. The influence is formidable, and growing; the McKinsey Global Institute says that twenty years ago, Asia accounted for less than a third of global output, and twenty years from now it will account for more than half of the world’s total economy. Of particular negotiating interest to the CPTPP is digital trade and e-commerce, practices that were greatly accelerated by the pandemic crisis.
Environment and climate change
According to a January 2021 report from Munich Re, hurricanes, wildfires, flooding, and other natural disasters across the United States caused $95 billion in losses in 2020. The damage costs are almost double those of 2019 and the third-highest tally since 2010. When viewed from other perspectives, the cause for concern escalates: America’s share of the losses is 45% of the total global damage assessment, and of the ten costliest natural disasters in 2020, six of them occurred in the US.
It’s long been clear that we must do a better job of making buildings and communities more resilient to natural disasters, as well as mitigating the economic fallout from such occurrences by developing new tools to manage and reduce risk and the cost of transferring risk. As an incentive, the Biden administration will work with the insurance industry to identify ways to lower property insurance premiums for homeowners and communities who invest in resilience, expanding programs like the Community Rating System that FEMA currently administers across the country.
To improve the energy efficiency of buildings, Biden is targeting a 50% reduction in the carbon footprint of the U.S. building stock by 2035, creating incentives for deep retrofits that combine appliance electrification, efficiency, and on-site clean power generation. This is bolstered by a proposed $1.7 trillion federal investment in green technology research, to be spent over the next ten years. The investment dovetails with the economic plan to create jobs in manufacturing renewable energy products and will help the US reach net zero emissions by 2050, a commitment that has been made by more than 60 other countries.
Labor and infrastructure
Marty Walsh, the Biden nominee for Secretary of Labor, is the first former union leader to hold the post, having been president of Laborers Local 222 in Boston, where he also led the region’s Building and Construction Trades Council before being elected mayor of the city. Working in conjunction with the Secretary of Transportation nominee, Pete Buttigieg, the AEC industries can anticipate a serious focus on infrastructure improvement projects, which include a proposed federal investment of $1.6 billion in water infrastructure, high-speed rail, clean energy, and municipal transit projects.
Proposed actions in labor and social policies also have the potential to affect the AEC industries, as well, both directly and indirectly. One of the issues the incoming team will confront is that of worker classification. A rule passed by the Trump administration and slated to go into effect on March 8 makes it easier for employers to classify workers as independent contractors, rather than employees. The ramifications of this will determine who is eligible for—and who will pay for—benefits such as sick leave and unemployment insurance.
The continuation of the Deferred Action for Childhood Arrivals program [DACA] will ease tensions in the construction industry by providing greater stability for workers and their employers, in a field that has been grappling with labor shortages. The Associated General Contractors of America estimates there are 80,000 DACA recipients currently employed in the sector.
Raising federal minimum wage to $15/hour [from the current $7.25/hour, the rate set in 2009] will benefit many workers in lower-paid service industries, but may not have any significant impact on construction industry.
The integrated approach outlined by the Biden administration is a realistic plan for progress, one whose chances for success are boosted by the albeit slim Democratic majority in both houses of Congress. Aptly for the AEC industries, it is analogous to a building whose structures and systems are designed, engineered, and constructed in a holistic way. By establishing benchmarks and goals and carefully tying together programs and policies from different sectors to support them, we all can build back better. As an industry, we need to not only give the new administration a chance, we also need to provide advice and support to ensure that the goals of ‘Build Back Better’ are achieved.