2013

Business owners often talk about five- and 10-year plans. They use these plans as a business compass during discussions with stockholders, or review them with bankers, for example. Where do they want to be in a decade? What will their company look like? How can they have more control over their business future?

The process starts with a closer look at the forces currently shaping the world around them. For building service contractors, the overall shift of the United States in recent years from an industrial nation to a service-based economy has far-ranging implications.

“The service sector is such a wide concept,” says Joe Coates, Consulting Futurist Inc., Washington. “It runs the gamut, from information management to janitorial.”

Service industries accounted for 83 percent of private non-farm employment in the United States in 2000, according to “50 Trends Shaping the Future,” a publication of the World Future Society, a nonprofit educational society based in Bethesda, Md. A record 95 million jobs in 2000 were in the service industry. By 2010, the service sector is expected to account for virtually the entire net gain in U.S. employment — making up nearly 90 percent of the workforce.

Ten-year plans for BSCs are made that much easier due to the plethora of research and statistics focused on the service industry and its importance to our nation’s — and the world’s — future.

To help BSCs plan, Contracting Profits examined many current trends, and spoke to futurists, consultants and labor experts to find out how current trends will impact our fast-growing industry, 10 years down the road. We found that a lot of needs in 2013 will be more outsourced, both domestically and internationally. Service workers will be even more likely to be recently-arrived immigrants than even today. Workers also will be more likely to be unionized.

Outsourcing as a way of life
As alluded to earlier, one of the most dramatic forces currently shaping the service industry is outsourcing. Specialized service providers offering payroll, secretarial, employee-assistance plans, benefits administration, information technology and building services, among others, will proliferate over the next 10 years.

The biggest factor that will drives corporate outsourcing, both now and 10 years from now, is the desire to cut expenses, says Alex Lam, chief operating officer of the Asia unit of the Outsourcing Institute, an international professional association with U.S. headquarters in Jericho, N.Y. Corporate executives view cleaning and other facility-related services as the cost of doing business — financial drains, not assets, and not health- or safety-preserving organizations.

Labor-intensive service functions, in particular, lend themselves to being outsourced because of the rising cost of medical insurance, says Dr. Marvin Cetron, founder of Forecasting International in Falls Church, Va., and a contributor to the “50 Trends” publication.

One negative consequence of the movement toward outsourcing: a greater number of American workers may be without health insurance, Cetron warns. While in-house janitorial, maintenance and clerical workers most likely qualify for benefits, many service-industry employers do not offer insurance. This could cause a public-health crisis if service employers or the government do not address the health needs of these workers, he cautions.

Some companies are taking outsourcing a step further and shipping their white-collar support jobs, for example, overseas. Labor is significantly cheaper in developing countries such as India, the Philippines and China, where the supply of educated professionals, for the foreseeable future, will outpace demand. Also, communications technology will continue to improve, so phone calls or Internet requests taken in India can be processed with the same speed and accuracy as they are in the United States.

Similar to the manufacturing migrations of the late 20th century, when trade agreements and cheap labor sent many manufacturing jobs overseas, this latest trend is expected to accelerate. In a recent New York Times article, Forrester Research, Cambridge, Mass., predicted that by 2017, 3.3 million back-office jobs will migrate to other countries.

The Times article suggests demand for office space will drop by about 50 million square feet a year as jobs migrate — with half a billion square feet lost by 2013. That means cleaning contractors in some markets may find themselves paying vacancy-rate credits to clients with half-rented buildings, or with fewer buildings to clean overall, within the next decade.

A nation of visitors
While millions of high-tech and clerical jobs are expected to disappear over the next decade, employment in other service industries will grow, according the U.S. Department of Labor’s “Occupational Outlook Handbook.” Building-cleaning employment is expected to grow 10 to 20 percent between 2000 and 2010; the pest-control and groundskeeping workforce should grow 21 to 35 percent. Employment in other service fields, from healthcare aides to correctional officers to manicurists, also is expected to grow faster than employment in other industries.

Some former high-tech workers will be retrained to fill these fast-growing service occupations, but many employers will turn to immigrants to meet demand.

People from other countries came into the U.S. during the 1990s and early 2000s at a rate not recorded since the early 20th century. More than 1 million people were admitted to the U.S. as lawful permanent residents in each of the last two years. In 2002, about 32 percent of the 1,036,732 people who were granted permanent-resident status came from Asia, 16 percent from Europe and 21 percent from Mexico, according to the 2002 Yearbook of Immigrant Statistics.

By 2013, the U.S. Census Bureau expects 34,969,000 immigrants to be living here (based on projections from the 2000 census); this represents 11.4 percent of the total projected U.S. population. That’s up from an estimated 29,141,000 immigrants, or 10.3 percent of total population, in 2003.

While some highly educated immigrants arrive in the country on specialized work visas, many others come with limited education and rudimentary, if any, English skills.

For instance, Cetron has had extensive experience working with Korean immigrants in the dry-cleaning industry who had difficulty acclimating to American business norms.

“In this country, you sign a contract prior to delivery,” Cetron explains. “In some parts of Korea, you negotiate a price when the goods get delivered.”

Language barriers also will continue to be a problem over the next decade. Whereas older immigrants used to learn English quickly, in order to blend in, many new immigrants prefer to use their native languages. Rather than fighting this, Cetron suggests offering training in other languages until translation devices become common and cost-effective.

In spite of the pitfalls, the service economy will need immigrants to fill worker demand down the road, adds Coates. Curbing immigration might just lead to a worker shortage.

There is a movement afoot to legalize immigrant workers. Unions, especially, are paying attention to immigration, as many of new union members are non-American.

“We very strongly support legalizing immigrant workers,” says Stephen Lerner, director of the building-services segment of the Service Employees International Union (SEIU), an organization serving building and health-care workers. “The health of the [service] industry depends on it. There’s been a failed policy for the last 20 years. Raids and round-ups haven’t worked — they’ve just created an entire class of workers who are terrified.”

Solidarity forever?
This immigration boom might well end up as a boon for the unions, whose overall membership has been showing a steady decline for the last several decades.

In the United States, unions enrolled 23 percent of employed wage and salary workers in 1980, but only 16 percent by 1995. By 2005, despite several recent successes in organizing, contract negotiations and strikes, union membership will fall under 12 percent, according to “50 Trends.”

Within the service industry, union membership is relatively high and trending upward. The SEIU and the American Federation of State, County and Municipal Employees (AFSCME), two unions representing building service workers, are among the country’s largest and fastest-growing. AFSCME has more than 1.4 million members; SEIU, which includes hundreds of thousands of contract-cleaning employees in its ranks, has 1.6 million members. Nearly 136,000 joined SEIU in 2002 alone. If SEIU recruitment and organizational efforts keep up at the 2002 pace, over the next 10 years, the union will nearly double in size.

“For building service workers, we will see an increase in unionization,” Lerner says. “The service employees want unions — we put huge resources into support. We will help the contractors work with the building workers to stabilize the industry, so the buildings get cleaned and workers get treated well. Where there’s not a union, there’s high interest in organizing because of the low wages and benefits [service workers] usually receive”

Currently, 90 percent of the cleaning work in downtown areas and 70 percent in suburban areas is unionized, Lerner says, adding that there’s still potential for growth.

Recent SEIU campaigns, as well as those of other unions, have focused on big companies in large markets. But over the next decade, expect to see smaller businesses targeted for unionization.

“Unions eager to retain their membership [numbers] will target any substantial firm with less-skilled employees to organize,” says “50 Trends.” “This could raise labor costs for companies that unions once would have considered too small to organize.”

Lerner confirms that more and more smaller companies are targets of unionization efforts.

“In some areas, there are dozens and dozens of small contractors who are unionized,” he explains. However, he disputes that this will cause labor rates to rise — if anything, unionization of an entire market will allow small companies to compete on a level playing field.

If salaries and benefits are negotiated city-wide by a union, companies of all sizes can bid based on the same labor rate. Since up to 90 percent of a cleaning operation’s costs are labor-related, this levels the field, at least somewhat, when it comes to bidding.

Automatic, almost
Unions may not be happy, however, with another trend that will affect the service industry over the next 10 years — automation.

For example, retail inventory used to be performed entirely by hand, on paper. Now, that task has been made simpler — workers can use hand-held scanners to count products on store shelves. Soon, however, the process will be completely automated, Coates says. Products and shelving will be able to “communicate” with computers that can track and reorder merchandise.

There are signs that automated inventory will replace hand-held scanners well before 2013. Retail giant Wal-Mart recently announced it would require its suppliers to attach computer chips to shipments by 2005. This will allow goods to be tracked throughout the shipping and stocking process, and ensure products can be automatically reordered at the appropriate time.

Coates also sees a trend toward self-diagnosing and self-announcing building systems.

“Information technology can be wired into a structure,” says Coates. “A building may be able to tell you if there’s a water leak, if there are rat noises in the walls. Even now, monitoring the state of buildings is so advanced, companies can manage to do it from miles away.”

For instance, many facilities HVAC systems are fully computerized, and can be monitored over the Internet. Facility managers don’t even need to be in the state, let alone the building. (Facility monitoring is one of the few building-service occupations that lends itself to offshore outsourcing.) Self-diagnosing buildings will allow service providers to be quickly notified and address hidden problems before they escalate.

Building occupants also might be able to take advantage of this technology, Coates speculates. Computers could easily guide someone through the procedures for a spill cleanup, for instance, reducing the need for day porters, as well as reducing the chance that the spill will have time to set.

All of this automation means service workers will be able to target their tasks more precisely to the needs of the building, improving productivity dramatically.

But productivity, Coates warns, comes with a price — jobs. Many manufacturing jobs were eliminated over the last half century due to technology advancements. Displaced workers were re-trained to fill service occupations, but some of these service jobs may be eliminated as well.

“Within 10 or 15 years, we may realize that 70 percent of the workforce can do all of the work available,” Coates predicts.

He says a major shift in the American employment pattern will be required, including paying parents, through tax incentives, to stay home to raise their children; keeping young people out of the workforce by expanding educational opportunities; and reducing the retirement age. This would also require a shift in government strategy, where the first instinct in an economic downturn is to create jobs.

The World Futurist Society’s “50 Trends” report also predicts workers will need to cope with career obsolescence. The report says that while two-income families will continue to be the norm in coming years, it will become more common for one partner — of either gender — to take a sabbatical to raise their children or return to school.

Where do we go from here?
So, we hope today’s BSC is taking a hard, long look into his or her crystal ball. Some issues that cut across all segments of the business world, like productivity, should materialize. An even closer look should reveal the issues that will have a dramatic effect on service providers in particular.

The state of your business, 10 years down the road, will depend, in great measure, on your ability to translate events currently whirling around you into an effective, long-term business game plan.