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At Tesla’s gigafactory, a larger battle over worker pay

Are there not enough construction workers? Or are jobs just not paying enough to attract them?

Picketers protest the hiring of  lower-paid, out-of-state workers at the Tesla Gigafactory site Feb. 29, near Reno, Nev. (Anjeanette Damon/The Reno Gazette-Journal via AP)

On Monday, hundreds of workers walked off their jobs at the giant battery factory that Tesla Motors is building in the desert outside Reno, Nev. It wasn't your typical picket: They weren't protesting bad working conditions, or making a show of force around contract negotiations. Rather, they were protesting other workers — specifically, the fact that they were from somewhere else.

"Tesla got $1.4 billion in tax incentives to promote Nevada's construction sector, not New Mexico's," says Todd Koch, president of the Building and Construction Trades Council of Northern Nevada.

That's half true. Tesla and Panasonic, its partner in building the $11 billion "gigafactory," only have to satisfy a 50 percent local hiring requirement in order to win billions in tax breaks. According to the most recent audit, 68 percent of workers are from Nevada — even though contractor Brycon Construction is indeed based in New Mexico. Because of the lower cost of living in places like Arizona and New Mexico, many out-of-state workers will accept substantially less than the $35 an hour a member of Koch's union can make.

Tesla's Gigafactory outside Sparks, Nev. is scheduled to be fully operational in 2020. When it's completed it will be the second largest building in the world. (Video: Daron Taylor/The Washington Post)

Koch thinks the gigafactory should be hiring more people from the community, whether there are incentives or not. But would the Nevadans compromise a bit on wages in order to at least have a job?

"At that kind of a wage, you can’t buy a house in our area, you can’t prosper, you can’t have insurance, you could never build a retirement," Koch says. "So the answer is probably no, nobody’s going to work for that kind of money." Instead, he says, some union workers have moved on to other jobs, or gone on unemployment.

That dispute explains an important debate underway right now in all sorts of skilled trades: Builders say there's a labor supply problem, which needs to be fixed by bringing more people into the field from across the country and across the border. Worker groups say there isn't a supply problem — it's just that builders aren't paying enough to make the jobs worth someone's while.

In Nevada, unions tried to protect the state's workers by requiring Tesla to pay a "prevailing wage" on the project. They weren't successful, exposing those jobs to price competition. That happened through the 1980s and 1990s in the construction industry, as states repealed laws dating back to the New Deal that set higher wage rates for public projects, decreasing the amount of money a person can earn by pouring concrete or pounding nails. And liberal economists have pointed out that if there were a real labor shortage, real wages would be rising faster, which appears to have finally happened in 2015.

At the moment, the gigafactory project has been able to find all the workers it needs — in part because hiring has been below what Tesla projected, and in part through attracting workers from other states. That's fine with the local economic development people, who don't mind bringing people in from outside.

"There are many projects in the area that are under construction and the growth we are experiencing is putting a real strain on the available workforce in the area," says Mike Kazmierski, president of the Economic Development Agency of Western Nevada. "There are more jobs than available construction workers and there is no way we can meet our construction needs without outside help."

"The union is taking advantage of the international spotlight on this project to push an agenda," adds Aaron West, chief executive of the Nevada Builders Alliance. "We have several contractors from out of the area working in Northern Nevada driven purely by demand.  Our hope is to show these out of town workers how much the region has to offer and convince them to stay."

Increasingly, however, builders are saying they can't find enough skilled workers for their jobs at all. That side of the argument was represented in a survey of construction business owners last week from HomeAdvisor, which found that 93 percent believe the scarcity of labor was impacting their growth. In a panel discussing the report, real estate industry representatives fretted that the labor supply issue was raising the cost of housing, already considered unaffordable in much of the country; some favor beefed-up guest worker programs to alleviate pressure until the industry widens the pipeline of trained people coming in.

Marianne Cusato, a professor at the University of Notre Dame who wrote the report, says people aren't flowing into the industry at the rate they're exiting — creating a possible systemic shortage in the future, even accounting for the risk of another construction downturn. "There’s a long-term issue that’s hiding behind the regular cycle," Cusato says. "The really big issue is that there’a a massive perception problem that 'everyone must get a 4-year degree, or you’re not American enough, and only other people swing a hammer.'"

That's certainly part of the issue in construction, just like it is with manufacturing; some say the pendulum in American education has swung too far away from vocational programs that fill an actual labor market need. And Nevada's workforce education system has geared up to meet the surge in demand. But there's still a substantial wage premium for going to a traditional college, and the construction trades will likely have to maintain healthy salaries themselves in order to keep drawing people in.

Of course, that's a hard case to make for Nevada unions that want their members to be chosen over people from outside the state. Koch says that despite Tesla meeting its local hiring requirements, it should still employ as many people as possible from the surrounding community. "I don’t know if there’s any hope to change it legally," Koch says. "So I think we’ve got to do it in the hearts and minds of the citizens of Northern Nevada."