The construction labor shortage is being widely felt across the industry, especially as business has started to boom. Due to the fallout of the pandemic and other macroeconomic factors, construction companies have been unable to find enough workers to complete projects on time.
This workforce shortage will likely continue affecting organizations in the short-to-medium term, leading to many potential issues, including:
- Safety Concerns: Without a steady supply of trained or senior-level workers, many companies may have to depend on employees with fewer skills and less experience, putting the business and themselves at a higher risk for injury or equipment misuse.
- Lower Efficiency: Workers with less experience may work slower as they learn the ropes. This can also cause project delays and damage the company’s long-term client relationships.
- Higher Labor Costs: With such a low supply of labor and a high demand for laborers, pay rates and benefits packages have been increasing for construction workers. According to the Associated General Contractors of America, 73% of construction firms of all types have increased their pay rates in the last year to deal with shortages.
Why is there a Labor Shortage in the First Place?
The current labor shortage in the construction industry is due to myriad factors that have created a perfect storm, beginning with the 2008 recession, which saw 600,000 skilled construction workers leave their jobs in that year alone. Economic reasons by themselves aren’t the only strain on the construction industry. Among the other pressures that have left this sector understaffed include a change in workforce demographics and the fallout of the pandemic.
With a large portion of the construction workforce being baby boomers, retirement is proving to be a problem for many construction and other related industries. An estimated 29% of the construction workforce will have retired by 2026, leaving a significant gap for others to fill. The surplus of older workers retiring, combined with a decline in foreign contractors willing or able to work in the construction industry, have been major factors in the ongoing worker shortage.
The Post-Pandemic Boom (and Its Fallout)
With the worst of the economic effects of the pandemic in the past, residential homeowners and businesses are finally getting around to long-awaited renovation projects and new builds. The increase in activity has created a major boom of demand that even peak pre-pandemic levels would struggle to meet. Residential homebuilding has been complemented by a large boom in governmental spending for infrastructure, including roadworks. In 2021, the U.S. Government allocated $110 billion for new funds towards roads, bridges, and other major infrastructure contracts. The issues that this boom has caused have also been compounded by the fact that training programs were largely slowed or canceled due to pandemic-related safety issues, exacerbating the construction worker shortage.
How to Reduce the Impact of the Labor Shortage
While the labor shortage is projected to be an ongoing issue, there are a few things business owners can do to keep their workers and increase their bottom line.
1. Take Advantage of Technology
There are technology solutions available that can make workers more efficient and productive, enabling them to get more done with less. Tools such as drones, digital twins, and automated safety systems can help to both reduce the need for extra workers as well as minimize the risk of injuries that could take people off of projects for days or months at a time. Certain technologies also help you to process paperwork more quickly as well as ensure that billing processes are completed automatically.
2. Offer Higher Pay and Better Benefits
While the construction industry’s pay raises don’t match up to other industries who want to hire from the same labor pool, creating incentives can help you get the talent they need. By creating a strong incentive and labor package, you can also retain talent for longer, bypassing future labor issues and retaining young employees who may become skilled, long-term workers in the future.
Labor retention through higher pay can be vital for any construction firm. With the sector facing a turnover rate of as high as 56%, providing reasons for your employees to stick around longer can help to mitigate the impacts that are facing the wider industry. Benefits that you should be considering outside of higher pay include more generous sick and vacation leave policies as well as more flexible schedules when possible.
3. Provide Training to Incentivize New and Existing Employees
If you’re looking to attract younger talent, incentivizing your new employees with clear paths to promotion and certification can boost your retention efforts. Providing younger employees with a feeling of meaning, purpose, and opportunities for career development beyond baseline construction labor can not only gain their interest, it can engender feelings of long-term loyalty to your organization. Providing training can also help to keep your employees committed to your company. Opportunities for training used in conjunction with a strong pay and benefits package can also help boost your employee retention rate for the long-term and attract new candidates through referral or word of mouth.
4. Consider Leveraging Internships
The current labor pool for young construction professionals is low: just 11% of 18-24 year-olds believe that working in the trades can lead to a high-paying job. In order to make up for the low levels of interest from the younger generation, consider being more proactive in your hiring and advertising practices for young workers. Job fairs and internships out of high school are fantastic ways to get young people interested in the work early and start developing their skills. A huge benefit of internships is that you can quickly vet those who would be promising employees and extend them an offer or apprenticeship right out of high school or college.
5. Use Alternative Talent Pools
Instead of looking at the traditional pipeline for talent, there are also other avenues that you can explore to find skilled workers for your company. One way to gain a larger talent pool is through second-chance hiring, or hiring people with felony convictions. Many correctional facilities have classes and shops for enterprising prisoners to build their skill sets, and by giving them a second chance, you may gain a dedicated worker for life. In fact, the Second Chance Business Coalition states that 82% of managers who have hired workers with a criminal record found that they bring equal or higher value to their organizations than workers without records.
Another option that your organization could investigate is hiring veterans for your workforce. Organizations like Helmets to Hardhats help veterans and construction firms find each other for placements. Many military members have skilled training relevant to the industry already and can prove to be a huge asset to your organization.
The Landscape of Construction is Changing
This shift in demographics and labor is just beginning. Companies of all kinds must adapt to ensure that the loss of workforce combined with the rapid increase in demand for services, will not cause you to lose your competitive edge – or overlook the risks and liabilities of your rapidly changing industry. That’s why it’s more important than ever to ensure your business is covered with insurance specialized for the unique needs of your industry.