There’s a growing interest among American workers in blue-collar jobs, notably in fields like construction, plumbing, and steel. Even prominent CEOs, like Jensen Huang from Nvidia, have commented on this shift. He suggested that the next set of lucrative jobs won’t be based in Silicon Valley but will instead stem from the workforce constructing the data centers that support the tech industry.
These positions can offer salaries exceeding $100,000, don’t necessarily need a college degree, and there’s a significant shortage of skilled laborers, such as electricians and supervisors, to fill these vacancies. As it stands, skilled workers are already in high demand, and the competition for labor in data center construction is placing additional stress on the housing sector, which struggles to keep pace with demand.
Joel Varner, a senior economist at Realtor.com, pointed out that the dwindling construction workforce is a critical issue affecting the homebuilding industry. This situation results in higher labor costs and prolonged construction timelines for new houses. Varner noted that if zoning laws entirely block certain projects from beginning, the lack of labor could prevent others from being completed on time or profitably.
This raises an interesting question: can we attract young workers into these roles, and might the housing market see a change if workers transition from data centers to more traditional homes?
The answer seems to vary depending on who you ask.
Data Center Workforce Needs
Huang’s insights are reflected in rising wages in the industry. Construction workers involved in building data centers have experienced pay increases of up to 30% compared to their prior jobs. For instance, a drywall contractor who oversaw 200 workers at a data center site in Ohio is now earning over $100,000 a year, while an electrician managing multiple sites in Northern Virginia is making more than $200,000 annually.
The rise in wages correlates with a shortage of workers. By 2025, the value of data center construction in the U.S. is expected to reach $80 billion, which is about three times what it was the previous year. Estimates suggest there’s a shortfall of around 439,000 workers this year alone, highlighting a significant lack of electricians and HVAC technicians.
This construction surge isn’t confined to a few tech-centric areas; there’s a notable data center boom happening across various states. More home sales in the U.S. are now occurring within a five-mile radius of data centers, especially in underprivileged neighborhoods, according to Realtor.com.
States like Texas and Virginia have advanced data centers, but others such as Georgia, Pennsylvania, and Ohio are catching up. Particularly, Pennsylvania and Ohio could see a boost in merchant activity due to their lower levels of residential construction compared to the southern states.
The high wages for workers involved in data center construction stem from the companies funding these operations. Giants like Meta, Amazon, Google, and Microsoft are pouring billions into these projects, unlike home builders, who tend to operate on tighter profit margins and can’t quite match those wages.
The pressing question is whether workers drawn to data centers for high pay will eventually pivot back to addressing the vital construction needs in other areas.
Will Housing Construction Benefit?
Optimistically, if more skilled craftsmen are trained now, they could contribute to homebuilding in the future. However, the situation is more nuanced. Kathryn Thompson, from Thompson Research Group, pointed out that while housing construction has been sluggish lately, it doesn’t necessarily mean there’s a fierce competition for labor between these sectors at the moment. Should housing demand pick up, that could change, though.
Competition for skilled labor might be more specific than it seems on the surface. Carpenters focused on homes are unlikely to shift to data centers, but there could be competition among electricians—those skilled in the specialties that both data centers and homebuilders need.
Ryan Starr, an architect, noted another complication. Large data centers require specific construction capabilities that many local contractors may lack, often leading to general contractors and their teams coming from outside the area. This cycle creates temporary surges in local labor demand but doesn’t provide long-term solutions.
Will These Workers Help Build America?
The urgency of the housing crisis won’t pause for workforce calculations. The U.S. is facing a shortage of around 4 million homes. Last year, builders added only about 1.3 million homes, falling short of the necessary pace to remedy the situation. This backdrop has spurred the Let America Build campaign, aiming to ease permitting processes and clear zoning hurdles for new construction.
State reports from Realtor.com about housing affordability and construction progress illustrate where the challenges currently exist and how they intersect with the data center boom. Texas continues to grant the most permits, particularly with places like Austin leading the new construction charge. Other regions, such as Nashville, Raleigh, and Charlotte, are also seeing significant data center investments nearby. However, pursuing large-scale projects doesn’t always equate to affordable housing; for instance, Arizona—a major data center location—still received merely moderate grades for affordability despite ongoing construction.
The Let America Build initiative is aimed at increasing the speed of home construction. As the data center boom continues, the demand for skilled tradespeople like electricians and plumbers remains high. The interplay between these two developments could hinge on several important aspects.
Berner mentioned that investing in long-term opportunities could yield benefits if workers attracted to data center jobs remain within the sector, even if profitability fluctuates. This could lead to a substantial pool of talent emerging if those electricians move from data centers back to residential work. However, if they pursue other well-paying opportunities, the advantages to home construction might be minimized.
Timing Issues
Looking ahead, Plunkett foresees potential, even if it is somewhat of a distant prospect.
He believes that in the long term, this construction boom might inspire more individuals to pursue apprenticeships or skilled trades, ultimately benefiting the housing sector. The challenge lies in timing since it will take years for training programs to align with labor needs. However, he suggests that short-term competition for these workers could lead to a larger future workforce for homebuilding as well.
Thompson remains hopeful regarding this pipeline, stating that while there will likely be hurdles along the way, it should ultimately yield positive outcomes for the housing market.
