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PHC Contractors By The Numbers

Census of Construction data sheds light on some interesting issues.

Every five years the Census of Construction Industries (CCI) publishes data about the nation's construction trades and businesses. Although out of date - results for the 1997 survey year didn't appear until July 1999 - anyone who seeks truth in numbers can glean plenty of useful information about our industry.

The CCI defines construction work to include new construction, additions, alterations and repairs, so the count includes service firms as well as construction companies. It includes much more detail than I will go into here. Instead I will deal only with nationwide data for the plumbing, heating and air-conditioning contractors category.

New, But Improved?

The latest CCI entails a new North American Industry Classification System (NAICS), in which PHC contractors are assigned Code 235110. It supercedes the old Standard Industrial Classification (SIC) 171100. Although some categories were retooled in the NAICS, data for PHC contractors in most cases matches that under the old SIC system, so we can directly compare 1997 data with 1992 SIC numbers.

A notable exception is that the Census Bureau has stopped trying to capture information on the number of small shops doing PHC work. In previous SIC censuses they reported as many as 92,000 firms doing business under the heading of "Partnerships & Sole Proprietorships." However, a Census Bureau employee explained to me that keeping track of the nonpayroll firms was difficult, and the data was unreliable, so they stopped doing it.

Officially, the CCI counted 84,876 firms in the PHC business as of 1997. This is based on reports from individual locations, not parent companies. So consolidation should not have any impact on these numbers.

Unofficially, I would guess there to be upwards of 100,000 additional small contractors, many of them operating out of homes and garages. It stands to reason that most of these companies would be concentrated in the residential sector.

Some notes about the data in the accompanying charts:

If you add up the number of firms in Table 1, they come up to 84,524 instead of the 84,876 reported in the top line. Since these are not rounded numbers, I can't explain the discrepancy. It could be an error in Census Bureau arithmetic, or else the 352 missing firms are accounted for in some manner that I couldn't detect.
The breakdowns in Table 1 contain overlapping categories. For instance, I'm pretty sure there are more than 4,145 mechanical contracting firms in the country. (I've heard estimates ranging between 12,000-15,000.) It's just that the definition of a mechanical contractor is fuzzy and some may have identified themselves as HVAC, plumbing or other types of specialty contractors.
In Table 2, the large percentage increases in overall work volume (53.5 percent), value added (58.3 percent) and payroll figures give ample testimony to the nation's construction boom during the last decade. At the time of the 1992 CCI, construction was just starting to emerge from a slump at the beginning of the 1990s.
"Value Added" in the CCI is defined as "value of business done, less costs for construction work subcontracted out to others and costs for materials, components, supplies and fuels." It corresponds to gross profit.
Of particular interest to me was the data in Table 2 pertaining to employee pay. It tends to support the point made in last month's column when I railed against inadequate pay scales in the construction trades.

Blue-Collar Bias

Although the total payroll of construction workers rose 55.2 percent in the five-year period between CCI surveys, that is largely a function of greater employment, which rose 31.8 percent in the same period. The average pay of construction workers rose only 17.7 percent during the same period, a rate of about 3.5 percent a year.

It's interesting that the average jumps to more than 4 percent a year (20.2 percent cumulative) when white-collar staff is added to the mix. Why are contractors more generous in rewarding management and office staff than the field workers who are even more in short supply? I'd be interested in hearing any theories you folks might have. For now, it suggests an inherent bias against blue-collar workers.

As noted, the CCI has much more detail than I can present in the limited space available. For breakdowns by state and other parameters, go to the CCI Web site at www.census.gov:80/const/www/cci/frames.html.