California investments in construction should promote self-sufficiency and healthy communities, not worker poverty.

Many California construction workers need a raise, recent analyses show. Although official statistics indicate that construction workers earn more per hour on average than other workers, the industry is split into two tiers, one with higher quality jobs and one with lower quality jobs. Nonresidential construction jobs, which are more likely to be unionized, pay higher-than-average wages, but residential contractors, with low unionization rates, typically offer low wages and few fringe benefits. Because of the proliferation of these conditions in the residential sector, construction workers overall are more likely than the broader California workforce to live in poverty or deep poverty and to rely on public assistance programs. 

Using reports by the UC Berkeley Labor Center and data from the Public Policy Institute of California, this post examines how low-wage construction work imposes steep costs—not only on workers and their families, but also on California’s public programs and taxpayers. We will also explore some of the structural factors and industry practices driving construction worker poverty. 

Numerous studies over the past four years show that most construction workers and their families face greater economic hardship than the average California worker. Data from the American Community Survey (ACS), the Current Population Survey (CPS), California’s social programs, and other sources reveal disproportionate rates of low-income status, poverty and deep poverty, social safety net program utilization, and lacking health insurance among private sector construction workers. 



A 2021 report published by the UC Berkeley Labor Center found that between 2015 and 2019, 48 percent of California construction workers’ families utilized Medicaid, SNAP, TANF, EITC, or a combination of these programs. The utilization rates among all working California families were much lower (36 percent). 

Construction worker families also accounted for a disproportionate share of California’s spending on Medicaid and other social safety net programs. Despite only making up a yearly average of about 4.3 percent of California’s working families, construction worker families accounted for larger shares of the statewide spending on all five programs examined in this analysis (see Table 1).  Table 1: Social Safety Net Program Spending on Construction Worker Families vs All Working Families in California, 2015-2019



Additionally, construction workers in California were uninsured at significantly higher rates than the overall workforce. While just 10 percent of all California workers lacked health insurance, 26 percent of construction workers were uninsured—more than two and a half times the statewide average (see Figures 2). This is especially notable because construction workers are at an increased risk of on-the-job injuries. From 2021 to 2022, the construction industry had a higher nonfatal workplace injury rate than the rest of private industry and accounted for 20 percent of all workplace accident fatalities nationally. Because they are less likely to have health insurance and more likely to be seriously injured at work, construction workers are at risk of running up high healthcare-related expenses that could contribute to impoverishment. 

A more recent analysis of American Community Survey (ACS) data found even sharper disparities between construction workers and all other California workers. Using the California Poverty Measure from early 2023, this analysis revealed that construction workers are significantly more likely to be low income (0-200% of the CPM poverty threshold) than the overall California workforce (see Figure 3 below). The share of construction workers earning a low income (56.5 percent) was over 35 percent larger than the share of all workers earning a low income (36.3 percent). The poverty and deep poverty rates among construction workers were also higher than among workers at large. 

The declining influence of labor unions in the California construction industry is undoubtedly related to worsening economic circumstances for workers. Union membership has long been associated with higher pay and better benefits for construction workers. In 2015, unionized construction workers earned wages that were a national average of 42 percent higher than those of non-union construction workers. With other employment benefits like health insurance factored in, union member compensation was a shocking 78 percent higher. As unionization rates fall, construction employers are under less and less pressure to pay lucrative wages and must instead adopt “race to the bottom” compensation practices to remain competitive. The unionized shops that remain in this bleak landscape also lose leverage when non-union construction jobs become the norm and have an increasingly difficult time negotiating contracts that meet their members’ needs. 

The decline of unions in the construction industry also means that workers lack protections against exploitative industrial practices, such as misclassification. Misclassification– the wrongful classification of workers as independent contractors– is rampant among California’s construction employers. A 2023 study found that 13.9 percent of all California construction workers were misclassified. Misclassification contributes to worker poverty in multiple ways, including the facilitation of wage theft and the denial of paid leave benefits. 

When workers are wrongfully classified as independent contractors instead of employees, they have no legal right to a minimum wage or overtime pay. This makes it easier for unscrupulous employers to pay them less than they are owed. Independent contractors also cannot access workers’ compensation benefits, paid family leave, or paid sick leave. Misclassified workers are therefore more likely to find themselves in situations where they must take unpaid time off work in order to care for their families or themselves. As was previously discussed, construction workers also face a higher risk of missing work due to the industry's elevated injury rate; without access to workers’ compensation because of their classification, they are more likely to lose weeks or months of income while recovering from disabling workplace accidents. For more information on how misclassification harms California’s construction workers, see our earlier post on the subject. 

While remedying California’s housing crisis is a pressing task for its state government, development-friendly solutions should not come at the expense of construction workers and their families. Evidence suggests that California is experiencing a construction worker shortage alongside its housing crisis, and its construction labor pool is unlikely to grow if the industry remains associated with worker poverty and poor benefits. To meet its urgent housing demands, California must ensure construction jobs are attractive, sustainable, and fair to workers. A crucial first step will be addressing the factors undermining the financial stability of construction worker families in collaboration with their advocates in organized labor.