Breaking Down the Ongoing Labor Shortage in the Construction Industry

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September 01, 2017

Labor Shortage In Construction Industry

In the years since the Great Recession, construction work has returned -- in force -- in both housing and commercial development. Unfortunately, the pool of skilled laborers has not returned with it.

According to the National Association of Home Builders (NAHB), the pace of work compared to the available workers with the skills to undertake it continues to get even more out of phase. At the beginning of the growth period in 2012, 21 percent of building firms reported a "serious shortage" in laborers. By 2016, that number leaped to a whopping 56 percent!

How the Shortage Plays Out in the Market

This shortage encompasses both permanent workforces as well as the subcontractors who might normally fill in the gaps not covered by the regular laborers.

Skilled laborers find themselves in an incredibly competitive market, where skills are valued higher than they were before the recession. This increase in labor costs has led directly to an increase in overall costs, meaning home and commercial construction prices are currently inflated overall compared to where they would be without this skilled worker bottleneck.

Between 2012 and 2017, the median housing price has jumped up by 30%, outpacing the rate of inflation.

How We Got Here

In the midst of The Great Recession starting in 2008, construction screeched to a halt across the globe. This forced builders to lay off employees in the absence of work, with some so cornered by the shrinkage of the industry that they closed their businesses entirely.

As the slow rebound from 2008 dragged on, many out of work skilled laborers understandably left the construction workforce, pursuing education in fields they perceived as more stable.

Foreign-born workers also left during this period, and in the meantime U.S. immigration policies have tightened considerably. While some of these types of workers are trickling back in, there aren't nearly enough of them to come close to meeting the overall demand.

How Builders Are Confronting This Issue

Without the large pool of skilled laborers to pull from that previous generations of builders enjoyed, today's construction firms are developing innovative action plans to mitigate the financial stress.

Primarily, they are rewarding their veterans as well as focusing on recruiting them whenever possible. Putting out feelers to find any older, experienced workers who didn't seek training and establish themselves in another industry during the recession is a crucial tactic to both re-build a workforce as well as send the signal to younger workers that the industry will have their backs as they age.

Many firms are establishing or improving programs to train in-house staff in new skills. Many existing, lower skilled staff already have the benefit of being close to the industry, and serve as a useful base of workers to develop to deal with this shortage in the somewhat longer term.

More broadly, builders are finding ways to leverage technology to simply do more with less. Building Information Modeling techniques cut out some of the on-site work that previously could only be done by the most experienced and talented workers.

Off-site prefabrication is the most significant way to lessen the need for on-site labor. As these options continue to improve in pace with newer manufacturing technologies, more and more aspects of a build are compatible with some style of prefabrication.

Perceptions Need to Change

Builders must confront the construction labor shortage on two fronts: cutting costs in the short-term, public relations in the long-term. Any cost-cutting measure that maintains overall quality standards should be leveraged. And, crucially, the signal needs to be sent out to young American workers that the construction industry is a growing, lucrative space to work in.

Increased lobbying has U.S. politicians taking notice, with more focus on training young workers in skilled construction-related fields rather than the focus on just Liberal Arts or STEM higher education paths. As perceptions around construction as a stable industry change, the worker shortage should finally start to slow.

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