The Wall Street Journal (subscription required) ran a story on Wednesday of how a black couple built a roaring business in dry wall work in Hilton Head Island, using Hispanic labor, only to see it wither in the face the competition from former employees. This is a good case study of how immigrant labor has been cutting the cost of residential construction and creating havoc among sub-contractors.
Per the WSJ:
In 1997 the stucco business made $971,000, according to the Hairstons’ tax return. To handle his blossoming business, Mr. Hairston rented a large office with four rooms, two restrooms and warehouse space behind it. He bought a condominium and a plot of land as investments. Flush with success, the Hairstons broke ground on a 7,600-square-foot, three-story house with an ornate gold-and-black gate, a cherub fountain in the front and a large swimming pool in the back.
As Hilton Head prospered, more and more Mexican immigrants flocked there. From 1% of the population in 1995, Latinos accounted for 11% of Hilton Head’s 34,000 residents in 2000, according to census figures. Officials peg the current Latino population at about 15%.
One immigrant who prospered was Fidel Serrano.
After eking out a living as a baker at a doughnut shop in Houston for five years, Mr. Serrano moved to Hilton Head Island in 1994, joining two brothers who had recently settled there. “There was plenty of work and life was calmer here for the kids,” recalls Mr. Serrano, a native of Mexico. Mr. Serrano, his wife, two sons and two brothers rented a rundown two-room trailer, for which they collectively paid $600 a month.
Mr. Serrano began to work in stucco, perfecting his skills as an employee of Mr. Hairston’s Pro Plastering & Stucco. He says he earned $8 to $10 an hour during the two-and-a-half years he worked for Mr. Hairston. In the beginning, Mr. Serrano recalls, Mr. Hairston still employed several black workers. But gradually Mr. Hairston came to rely more on Mr. Serrano and other Mexican immigrants. “We showed up for work every day and we were dedicated,” Mr. Serrano recalls.
Around 2000, Mr. Serrano struck out on his own, working as a subcontractor to Mr. Hairston. He supplied Mr. Hairston with crews for several jobs. “I was able to train the workers,” who were all Spanish speakers, he recalls. Mr. Hairston typically paid him about 25% of the value of the contract for the job, he says. Mr. Serrano says that he pays taxes on all his workers, as well as workman’s compensation.
….further down in the article:
Mr. Serrano received his green card last year and bought a three-bedroom house. Most of his jobs are in luxurious gated communities, some of the same ones where Mr. Hairston thrived a decade ago. “Work is the only thing you can do to better yourself,” Mr. Serrano says. “We aren’t expecting the government or anyone to support us.” He says that Mr. Hairston does good work and declines to comment about his former boss’s financial difficulties.
In addition to facing competition from former workers, Mr. Hairston says he also faced competition from subcontractors hiring illegal immigrants and paying them under the table. Mr. Hairston says that while he hired undocumented workers he paid payroll taxes and workman’s compensation for them which added about 20% to his labor costs.
Other subcontractors agree they are being undercut by competitors who hire illegal immigrants off the books. Danny Miller, who runs a stucco business called Two Brothers, says that “on a weekly” basis, his company loses bids for jobs to contractors who hire illegal immigrants. “That pretty much explains it all,” says Mr. Miller.
At Sea Island Supply, owner Ron Sandlin remembers when mainly blacks and whites came in to buy brick, stucco and masonry materials. Now, his clientele is 85% Hispanic. He and his staff are taking Spanish lessons at a local college.
Though construction in Hilton Head continued to boom, Mr. Hairston closed his business office in 2002. He began to seek jobs in other markets. By 2003, revenue from Mr. Hairston’s stucco business had fallen to $182,000 from $971,000 six years earlier.
Ms. Hairston was elected to the County Council…
In September, Mrs. Hairston presented a draft of an “illegal immigration relief ordinance” to the County Council. Under the ordinance, companies that knowingly hire undocumented laborers could have their business licenses revoked. The ordinance would require that all businesses volunteer to participate in a federal government pilot program that verifies whether a Social Security number matches an individual’s name. It would bar illegal immigrants from getting a business license.
If the ordinance passes, “costs for yard service, green fees and house painting might escalate marginally for a while,” Mrs. Hairston says, but “we will hold the moral and ethical high ground.”
The County Council voted overwhelmingly to move the proposal forward in the first and second readings. But after loud opposition from Hispanic residents and many employers, the council instead approved on Monday a watered-down version called “lawful employment ordinance,” which is less controversial and mainly reinforces existing federal and county employment codes. The council is to take its final vote on Dec. 27.