Special Series: Cracking Construction’s Skilled Labor Shortage: Part One

In this special, in-depth series, Triax explores the causes and consequences of the skilled labor shortage as well as a path forward through innovation and technology. 

Construction activity in the United States has hit pre-recession levels, as the demand for housing, retail and office space keeps developers, contractors and workers busy. Dodge Data & Analytics forecasts a 3% rise in the value of total construction starts for 2018 to $765 billion, which represents a steady rise of 7% since 2016. Construction spending in New York City alone is expected to reach $61.8 billion in 2018, a 25% increase from 2017, with spending for the three-year period from 2018 to 2020 reaching $177 billion. Amidst this flurry of activity, however, looms a sobering reality: the lack of skilled construction workers to meet this growing demand.

An August 2018 survey conducted by the Associated General Contractors of America (AGC) and Autodesk found that 80% of construction firms are having a hard time filling the hourly craft positions that represent the bulk of the construction workforce. In addition, 81% of firms think it will continue to be hard – or get even harder – to find craft workers.

Causes Contributing to the Shortage

So where are all the construction workers?

During the Great Recession, 2.3 million workers – more than 40% of the workforce –left the industry when they could not find jobs. Even when things improved, skilled workers stayed away, either because they were gun-shy about getting back into what can be a volatile industry or because they had by then established a new career in a different field. For whatever reason, according to the Bureau of Labor Statistics, six out of 10 construction workers left the industry and never came back.

Others today are simply reaching the retirement age, as across industries, Baby Boomers leave the workforce at a rate of 10,000 workers per day. If workers are retiring at a representative rate, and construction comprises 10% of the U.S. workforce, roughly 1,000 skilled workers could be leaving the industry – and taking their valuable knowledge and experience with them. In addition, as the workforce ages, the potential for stresses and strains compounds, and employers may be faced with increased worker injuries and illness.

Compounding this problem is the fact that the stream of new workers coming into the industry is barely a trickle. Younger workers, particularly millennials, show a lack of interest in pursuing a career in construction. While mid-20th century Americans saw a life-long, stable career in construction, particularly those who wanted a secure spot in the middle class, that is no longer the case.

Unfortunately, construction’s public image is one factor keeping young people from the trades. A National Association of Home Builders (NAHB) study found that among young adults aged 18 to 25 who knew what career they wanted to pursue, only 3% would choose construction. What’s more, 63% of individuals who were undecided about their future career path said they could not be lured into the construction trades no matter how much they were paid. The reasons? Almost half said construction was too physical and 32% said they thought the work would be too hard.

Meanwhile, vocational institutions and high-school shop classes, an integral path into the trades for many, are fighting for funding within educational and societal systems that push the value of a four-year liberal arts degree over a trade-based training program.

The common wisdom remains that a four-year degree translates into more money over a lifetime, and that is generally true. But college graduates also leave school with considerable debt, and statistics that seem to pan the idea of a two-year or technical degree are derived from lumping those who work in low-paying service jobs with well-paid tradesmen like electricians and plumbers, skewing the figures down. In reality, in 2015, an electrician made an average $5,000 more than the average college graduate. And according to a Harvard study, only 33% of jobs that come available in 2018 will require a four-year degree or higher versus 57% of positions that will require a technical or two-year degree. The lack of transparency around the relative merits of a vocational education for some individuals is undoubtedly a factor in the current skilled labor shortage.

Consequences of the Labor Shortage

As firms across the United States struggle to find enough experienced labor, construction firms have to change the way they operate, recruit and compensate. A chronic labor shortage threatens to significantly impact the U.S. economy in the long-term and is already hitting contractors where it hurts most – at their bottom line.

1. Turning Down Work: As contractors grow increasingly worried about having enough workers to meet demand, fewer firms are able to bid on construction projects. According to the same AGC and Autodesk survey, almost half (44%) of contractors have had to lengthen project completion times due to the labor shortage; 47% of firms have had to list higher prices, and 27% have had to push back completion times in their bids.

2. Increased Safety Risks – and Costs: In the short term, companies have been combating the labor shortage by hiring less experienced workers to meet demand – a practice that fills a project with warm bodies but raises a different set of issues. Construction is a dangerous business, particularly when it comes to falls, and safety is a big concern when inexperienced workers land on a job site. 80% of contractors surveyed for the Q3 2018 USG + U.S. Chamber of Commerce Commercial Construction Index report responded that they were either highly concerned (26%) or moderated concerned about the safety risks created by too few skilled workers.

3. Less Quality Control: Less tenured employees also generally lack the skills required to produce a consistent, quality product on time. As key considerations are overlooked, or corners are cut to complete a task, the quality of the work can suffer, leaving contractors on the hook for any additional rework costs. In addition to putting the project over budget, shoddy work harms a contractor’s reputation in an industry that is built on relationships and word-of-mouth referrals.

4. Higher Wages: Contractors are having to increase wages to attract and retain workers with 62% of companies reporting increased base pay rates in the last year and one-quarter having to update employee benefit or bonus structure programs.

Part Two of this special series discusses the best way to overcome the skilled labor shortage, using new and exciting technology to optimize resources in place and streamline project delivery.

Special Series: Cracking Construction’s Skilled Labor Shortage: Part One