It's the same story all over: general and subcontractors are swamped with work, but they just can't get around to all of the projects that they have on the backburner. Or they are in the middle of a project and they have to tell the owner that they won't have it done on schedule because they just don't have the resources that they thought they did. And those resources are almost always in the same area: labor.
The enormous labor shortage that the construction industry is currently facing is not news to anyone at this point. However, with a little context, construction professionals can learn what they can do to stay ahead of the game despite the huge shortage in construction workers.
Where The Shortage Came From
Between the years of 2006 and 2011, the construction industry lost 2.3 million jobs as a result of the Great Recession and the concurrent fallout in construction. Those hit the hardest were in the single-family residential space. However, the repercussions of losing so many jobs are still being felt today. For example, there are 1 million fewer residential construction jobs than there were before 2006.
What does that mean? That when the recession hit in 2006 millions of workers went looking for other jobs, found them, and then stayed in them after the market healed. That means that now, over a decade later, we are still feeling the effects of that time on the modern construction workforce.
Meanwhile, 79% of construction firms plan to expand their headcount in 2019. Also, 4 in 10 companies have reported that the expect finding qualified talent to remain a challenge throughout the remaineder of 2019, with 1 in 4 expecting the labor market to get even more difficult than it already is in the future.
The result? The Bureau of Labor Statistics shows that there are nearly 200,000 unfilled jobs in construction. That's where all of those missed jobs and opportunities are coming from: there simply aren't enough qualified workers to fill all of the positions.
What Construction Companies are Doing
To try and fill their share of those 200,000 open positions, more and more construction companies are raising wages and offering comprehensive benefits and compensation packages to their employees. It makes sense: if labor is short, prospective employees have their pick of potential places to work for. And, once you get a job, your employer is going to do their best to keep you there.
Nearly 6 in 10 respondents in a Fox News poll said that they plan to increase base-pay rates, 29% provided incentives such as bonuses and 1/4 rasied contributions to retirement and improved employee benefits.
Bob Ernst, president of FBN Construction, a high-end construction firm in Boston, said the labor shortage has forced him to increase salaries to retain good talent. “We’ve had to increase salaries significantly in the last five years,” Ernst said. “We generally do what we have to do to keep them. Some of our skilled carpenters are making $80,000 to $110,000 a year.”
A recent report from the Associated General Contractors of America shows that 79% of construction companies want to hire more employees this year, but the industry is only estimated to grow its workforce by .5% annually for the next 10 years.
That means, undoubtedly, that construction costs are going to increase as a result: there is more money to be spent, but there are not enough people to work all the jobs and those that are working are expecting higher and higher wages.
Construction costs increased 6.2% last year. “The majority of the increase coming from increased labor costs,” says John Wagner, national construction director at global insurance brokerage firm Gallagher. “With labor shortages, projects take longer and bid contracts also become more expensive.”
While it might seem like there is no hope or end in sight for this situation, in fact the opposite is true. Later this month we'll discuss how shifting trends in education and an emerging, younger construction workforce that could make a huge difference in one of the industry's largest problems.