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President Biden has spent much of his energy in recent months trying to clear a path for his trillion-dollar infrastructure bill.
The bill, officially the Infrastructure Investment and Jobs Act, was passed by the Senate in August. However, support from Democrats in the House of Representatives hinges on an even bigger tranche of funding – via the social welfare bill – being approved first.
If and when the infrastructure bill does pass through Congress, it will unlock around $550 billion of new spending, in addition to previously announced funding.
What will the infrastructure bill mean for the building products industry?
It is expected to incentivize and finance substantial growth in the industry. Funds could be disbursed very soon after the bill is passed in both chambers.
The largest bundles of funding are earmarked for transport infrastructure, with $110 billion for roads and bridges, $66 billion for passenger and freight rail, and $39 billion to improve and expand public transit systems. A further $12.5 billion is lined up for electric vehicle infrastructure. Other funding bundles include internet access and utilities.
The economic impact could be significant. GDP is predicted to grow by 2.1%, and the building products sector as a whole looks set for a period of sustained growth. However, whether individual companies reap the benefits or not depends on their preparedness.
The biggest challenge is likely to be access to skilled labor. Conservative estimates suggest the infrastructure bill could create 100,000 permanent jobs, along with hundreds of thousands of temporary roles.
However, companies in the building products industry are already locked in a fierce battle for talent, which is driving up hourly wages. As demand for infrastructure development increases, competition for skilled labor will only amplify.
In order to take advantage of the infrastructure bill, companies will need to do four things:
1. Follow the bill’s passage through Congress closely and be primed to act; Have detailed plans for immediate legislation approval, 6 month delays, and delays that might last longer than a year
2. Develop relationships with sources of new skilled labor (such as apprenticeship programs, community colleges and technical schools)
3. Incentivize skilled workers to stay for the long-term (e.g. through bonus structures and delayed pay-out streams)
4. Work with local, state, and federal governments to be ready to file for grants or win RFPs as early as possible once the bill passes both chambers
Labour supply isn’t the only issue. The bill could also lead to increased inflation and long approval processes for projects. Will companies have sufficient oversight to determine whether specific projects represent a good investment?
A huge opportunity undoubtedly lies ahead for the industry as a whole, but for those who aren’t prepared for what’s coming, that opportunity could easily slip through their fingers.