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Trump's infrastructure splurge would collide with U.S. skilled labor crunch

[December 19, 2016] By Richard Cowan

WASHINGTON (Reuters) - President-elect Donald Trump's drive to rebuild U.S. roads, bridges, ports and other public works projects with a $1 trillion infrastructure investment plan would come as the country faces a shortage of skilled laborers.

Before any dirt can be moved, Trump would have to get approval from Congress. But with Democratic support and a push from business groups, there is some optimism that Trump could win over skeptical Republicans who control Congress, if the plan does not add significantly to federal debt.

More than two-thirds of U.S. roads are in less than good condition and nearly 143,000 bridges need repair or improvement, the Transportation Department estimates.

At the same time, construction contractors have reported tight labor conditions in the South, Midwest and Southwest, causing project delays, the Federal Reserve noted last month.

Earlier this year, the National Association of Home Builders estimated there were around 200,000 unfilled construction jobs in the United States, an 81 percent increase in the last two years.

Infrastructure projects need highly trained workers, such as heavy equipment operators and iron specialists. But as a result of the 2007-2008 recession, which caused an estimated 25 percent of construction jobs to vanish, their ranks have thinned. (Graphic: http://tmsnrt.rs/2h9paJX)

Many of these workers went back to school, joined the military or got lower-paying jobs in retail, services and other sectors. Some just got too old for the rigors of construction.

"They wandered off into other careers," said Leonard Toenjes, president of Associated General Contractors of Missouri, which represents contractors in the state.

Undocumented immigrants, who otherwise might help replenish those ranks, are unlikely candidates however, since companies do not want to invest in training people with an uncertain status, especially given Trump's anti-immigrant bent.

The labor shortage is driving up construction costs, according to government and industry experts, which could cut into the scope of any new Washington investment scheme.

In response to the construction "skills gap," the U.S. Department of Labor and Federal Highway Administration are aiming to expand help to localities training workers for road and bridge building, according to a FHWA spokesman.

Even if the scope of work is not as grandiose as Trump originally envisioned, it would benefit a range of businesses, from steel maker Nucor Corp and concrete firm US Concrete Inc to construction machinery companies such as Caterpillar Inc.

More infrastructure spending would boost trade unions, too, which appeals to Democrats.

MCCONNELL WARY

"We will build new roads, tunnels, bridges, railroads, airports, schools and hospitals," Trump boasted in a Dec. 1 speech in Cincinnati.

A Trump transition representative, who asked not to be named because the topic was still under discussion, said that enactment of "infrastructure funding legislation" is one of the top priorities for the first 100 days of the new administration. A Trump website refers to taking steps that would fill a $1 trillion gap in infrastructure investments over 10 years.

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Republican U.S. presidential nominee Donald Trump looks out at Lake Michigan during a visit to the Milwaukee County War Memorial Center in Milwaukee, Wisconsin August 16, 2016. REUTERS/Eric Thayer/File Photo

Like many Trump campaign proposals, his infrastructure plan is thin on details.

Senate Republican leader Mitch McConnell told reporters earlier this month: "What I hope we will clearly avoid, and I'm confident we will, is a trillion-dollar stimulus."

In a departure from past fiscal policies, Trump has proposed slashing taxes and expanding infrastructure investment at a time of economic stability. Historically, such steps have been used by the government to provide economic stimulus in recessions.

Trump has discussed investor tax credits for infrastructure projects. Democrats have attacked this as a boon to Wall Street that would spark too few projects and create too few jobs.

House of Representatives Democratic leader Nancy Pelosi told reporters last week infrastructure is something her party could collaborate on with Republicans.

But she said Democrats would reject anything "disguised as infrastructure. It has to be a real infrastructure bill that grows the paychecks of American workers."

If Congress balks at writing a big check, there is talk of a mix of alternatives. One could involve new corporate income tax revenue from bringing foreign profits into the country. Others could be an infrastructure revolving fund, raising the gasoline tax or a new surface freight fee, experts said.

These could help marquee projects move forward: a Hudson River rail tunnel between New York and New Jersey; a deeper port in Charleston, South Carolina; expanded rail service in southern California; fixing the crumbling I-70 freeway in Missouri; replacing a key bridge linking Ohio and Kentucky.

Harry Holzer, professor of public policy at Georgetown University, said fixing roads and bridges would boost U.S. productivity and, depending on how it is structured, generate good-paying jobs for those without college educations.

Given shortages of high-skilled construction labor, he said government ought to ramp up the projects carefully to allow time to train a new generation of skilled workers. "I'm not sure anyone has thought that through," he said.

(Click here for graphics on 'U.S. construction employment, spending' http://fingfx.thomsonreuters.com/gfx/rngs/USA-TRUMP/0100312C2CC/DataStream-Chart.htm)

(Additional reporting by Lindsay Dunsmuir; Editing by Kevin Drawbaugh and Lisa Shumaker)

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