Labor Squeeze Could Slow Construction Growth

November 13, 2018 Conley Smith

Everywhere you turn, it seems the words “construction jobs” and “labor shortage” jump out at you from the page. As 2018 nears a wrap, these two parallel competing storylines are reaching a fever pitch with much speculation on how it will all play out for contractors in 2019.

 

With the construction industry booming, there is rising demand and serious obstacles to filling positions—from the field to the office. Whether you’re a roofer looking to add a crew of installers or a concrete firm seeking a second cost estimator, rising wages and higher demand are creating critical chokepoints for many contractors.

 

When you consider backlogs are averaging over nine months, odds are the construction labor crunch could get worse before it gets better. In fact, construction spending hit a seasonally adjusted annual rate of $1.329 trillion and grew 5.5 percent for the first nine months of 2018.

 

Low Unemployment Is Bad News?

 

First, let’s look at a few facts that have been blowing up the headlines. According to the Associated General Contractors of America (AGC):

  • Construction employment rose by 30,000 jobs in October 2018
  • Construction jobs rose to 330,000 jobs over the past year, topping 7.3 million for the first time since April 2008
  • Hourly pay jumped 3.9 percent, rising at the fastest rate in nearly a decade
  • The unemployment rate fell to 3.6 percent

The potential downside? With unemployment at historic lows, many in construction are finding it more and more difficult to hire and/or train workers for critical positions. An AGC survey last summer showed that 80% of construction firms are struggling to fill hourly craft positions, which make up the bulk of the construction workforce.

 

A chorus of experts is now worried that these nagging issues pose a significant risk to future economic growth. “Labor shortages in the construction industry remain significant and widespread,” said Ken Simonson, AGC’s chief economist. “The best way to encourage continued economic growth, make it easier to rebuild aging infrastructure, and place more young adults into high-paying careers is to address construction workforce shortages.”

 

Getting Creative to Add New Workers

 

Just how big is the demand for construction workers? The trade group Associated Builders and Contractors (ABC) notes that with an expected $1.3 trillion in construction spending in 2018, there is the potential for another 300,000 to 500,000 jobs. If an infrastructure package of $100 billion over 10 years passes, this number could go as high as 700,000 jobs. This is a big part of the reason they’ve set up more than 800 apprenticeships, craft training, and safety programs across the U.S.

 

One way many in the industry are trying to fill jobs is by spreading the word that construction pays well, does not require a four-year degree, and offers apprenticeship programs. In addition, many construction programs are getting creative by targeting younger students, veterans, and people who were formerly incarcerated and face difficulty finding work.

 

With pay ranging from $50,000 to $70,000 on average industry-wide, more and more unskilled workers who don’t necessarily fit the profile are becoming open to the idea of swinging a hammer. Some of the selling points include that these good-paying jobs won’t cost young people the $100,000 price tag of a college degree, will help keep them physically fit, and is much more mentally engaging than many imagine.

While their peers are still paying off student loans well into their 30s, construction workers may have already moved from the field to a well-paying management position. In fact, construction grabbed up nine total spots on Indeed’s 2018 Top 25 Best Jobs list with commercial project manager (average base salary $80k+) snagging the No. 1 position.

 

The Future is Female

 

While many say the aging workforce is exacerbating the issue, there is also a gender gap that is troubling the construction industry. The National Association of Women in Construction says there has been a steady rise in the number of women employed over the last 10 years. However, women reportedly only make up only 9.1% of the workforce.

 

Like other industries, construction is starting to realize the win-win of adding more women to the workforce. A recent McKinsey study noted that companies ranking in the top quartile of executive-board diversity were 35% more likely to outperform others financially.

 

One of the ways construction is providing a path forward for women is in regards to pay equality as the gender pay gap is much lower than in other industries. The Bureau of Labor Statistics reports that women in construction earn an average of 95.7% of what men make—an 18% pay bump compared to other industries.

 

Wanted: Tech Savvy Workers

 

Sure, putting work boots in the field may always require very specific skills and talents. But it’s important for contractors not to overlook the growing need for a tech-savvy workforce. More and more tablets, drones, and whiz-bang tech are showing up in both the field and the office. This is, of course, one of the biggest draws for younger workers looking for a tech environment.

 

 

 

Not only are construction skills in high demand, but contractors are under pressure to ensure they are growing their businesses the right way. When it comes to hiring, On Center can help. Don’t miss our How to Hire a Great Estimator Guide or our interactive infographic Anatomy of a Great Estimator. When it comes to adding the right skill set for your business, these go-to resources can help contractors find, recruit, and retain top talent.

 

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