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How Severe is the Construction Industry’s Labor Shortage?

A lack of skilled workers is nothing new to the construction industry. Trade organizations, hiring managers, and small businesses have been complaining that the trades just aren’t attracting young adults anymore, and the current workforce is aging out.

But that labor shortage became even more apparent during the pandemic. With fewer people willing to risk going to work combined with a boom in residential construction, the labor shortage continued to grow. How severe is the issue, and how can it get better? These are the questions the industry should be asking.

How Severe is the Construction Industry’s Labor Shortage?

While the construction industry faced labor shortages in the past (think back to the housing boom of the 2000s), the one it’s facing now is a serious challenge. Estimates show that to keep up with current demand, the US construction industry would have to add 650,000 skilled workers to its ranks. If projections are correct, the current trajectory will require 2.2 million new workers within the next three years just to meet current housing needs.

The Canadian outlook is actually worse. Numbers in Canada require hiring an additional 80,000 workers. Considering population numbers, this is a higher percentage than the issue seen in the US.

What’s causing it?

Retirements

Plain and simple: folks are retiring. The average age of retirement for construction workers in the US is 61 years old. In Canada, the age of retirement across all industries is slightly higher at 64 years old. With over 20 percent of the industry’s workforce being over 55, they’re leaving in droves. 

The pandemic didn’t help. The Great Recession helped many employees find the door, spurring moves to other industries as well as trips to social security offices around the country. 

Lack of Young People

On the opposite end of the spectrum, the interest of young people in entering the construction trade is far too low. According to the US Bureau of Labor Statistics, the 20 to 24-year-old segment made up just 7 percent of the survey respondents working in the construction industry. 

The root cause of this issue is the younger generation’s upbringing that focuses on college and degrees rather than skills or licenses. Instead of construction, this age group is seeking employment in the medical, business/management, and tech or IT fields. 

Market Competition

Even if there wasn’t a housing boom at hand, the industry would be in trouble. Unemployment rates are low, while vacant job numbers are very high, indicating that every industry is facing the same shortage. In this environment, job seekers have options.

Construction employees are leaving job sites for better working conditions in the service or warehouse industries. Those that are staying in construction, they’re able to bounce from employer to employer in search of better pay and better healthcare.

Increased Demand

The pandemic might’ve shut some individual job sites down, but it didn’t slow the construction industry much. Project volumes ballooned with a shift from typical commercial construction to a focus on residential home building. Folks were leaving cities in droves, building new houses, or renovating older ones in the country in order to escape the monotony of struggling cities.

Commercial construction’s direction changed as well. With so many folks staying home and ordering their goods online, fulfillment centers became a precious commodity. Warehouse construction is experiencing a boom in volume without a boom in skilled labor.

What Does This Mean for the Industry?

Ultimately, the labor shortage will have a profound effect on the construction industry. Business owners will need to offset increased costs, and keeping projects on track will seem an impossible task. 

Increased Prices

Construction companies big and small have had to increase the amount they pay their employees over the course of the pandemic. They’ve also had to improve employee benefits to sweeten the deal. The issue is that with already slim profit margins, these companies have had to offload these increased costs of doing business onto customers and project owners.

More Delays

One of the issues of hiring during a labor shortage is that it’s not always possible to find quality employees or vet their experience before hiring. Many projects have gone off the rails in recent history due to poor quality and low productivity. Couple those issues with up to 25 percent of project owners reporting delayed or incomplete deliveries, and delays abound.

Lack of Experienced Leadership

With so much of the experienced workforce hanging up their hardhats, there’s going to be a marked reduction in seasoned leadership. Employers will be forced to promote less experienced employees to foreman or project management positions than they had in the past. While there’s always a learning curve, this lack of experience may cause a ripple effect through the workforce, possibly causing lower productivity, more waste, and more inefficiencies until this group of managers matures.

What Can the Construction Industry Do About the Shortage?

Construction as a whole has been trying to solve the labor shortage issue for a very long time. However, there are a few moves that companies can make to lessen the impact a labor shortage has on the company’s growth.

Consider Improving Wages and Benefits

The modern job seeker has options, and it’s important that companies make their outfit the most attractive. Higher pay than the competition is certainly helpful, but so are better healthcare programs, fringe benefits like childcare reimbursement, tuition assistance, or more days off for time with family. 

These changes may increase younger job seekers’ attention, giving the construction industry a leg up on manufacturing or e-commerce. They can also help one company stand out against the rest. While this will ultimately cost the company more money, it may be one of the only ways to keep a staff full during a continental labor shortage.

Focus on Training

Rather than finding new skilled labor, construction companies can attempt to mold current employees into skilled ones. Investing in tuition or training programs will help employees learn the types of skills that a company can build on. Sending them to specialized schools or setting up programs where senior staff mentors them on their way towards licensure may also be options.

While there is always a risk in training someone only to lose them to another company, consider that it’s possible to invest in a person’s future and create a loyal employee. It also gives employees the feeling that the employer cares—something today’s generation of job seekers is looking for. This can help retain staff rather than let them slip away to competitors offering slightly more money.

Reduce Inefficiencies

Getting more boots on the ground is a challenge that will take long-term planning, so the construction industry needs to focus on finding solutions in the interim. One move that most construction companies could benefit from is reducing inefficiencies through technology.

For example, companies that switch from basic accounting software to construction-specific management software can lower some of their dependence on specific manpower. These software programs are customizable, allowing users to tailor workflows, create custom forms, provide wireless access to current drawings, and track progress through accurate, up-to-date job costing reports.

While technology might not replace skilled labor, it can help make management personnel more efficient. With access to cloud-based drawing storage, site leadership can ensure the crews are working from the most current drawings to prevent mistakes. These folks will also be able to send and receive RFIs and change orders and their approvals from the site, potentially reducing the need to leave for administrative tasks.

Promote Awareness

The construction industry still has a stigma, and it’s preventing younger job seekers from considering it as a potential career path. The idea of it being a low-paying, gruff boys’ club is keeping folks with degrees from joining the ranks of new electricians, carpenters, plumbers, and other trades.

The industry must consider promoting awareness that a career in construction can be a fulfilling and inclusive one. With the potential for promotions, a great living, and competitive benefits, getting the word out that construction could be a viable option for young folks shouldn’t be hard.

Part of promoting awareness may mean shifting the focus from marketing the business to marketing the careers. Senior management may need to partner with local youth organizations and social groups to encourage open dialogue about the industry. Adopting modern media streams like social media, YouTube, and podcasts can help reach younger audiences as well.

None of these tactics will have an immediate impact on the labor shortage, but they can help change the stigma that construction is a dead-end career choice. Young folks who are on the fence about what to do after high school or college may not be considering the industry, and some pointed effort can help. 

The Labor Shortage Isn’t Going Away—Companies Have to Act Now

Ultimately, every industry is feeling the pain of the labor shortage. Construction, however, is particularly affected since it needs skilled workers. It’s important that the industry—and the companies that comprise it—make the moves necessary to attract new employees, retain current ones, and make sure they’re operating as efficiently as possible over the next decade.

Get your business back in financial control amidst the labor shortages. Find out how Premier can empower your business for success.

Schedule a demo today.

Author Biography:

Tom Scalisi has over 15 years of experience working in the trades. Since moving to full-time freelance writing, he has developed a passion for helping construction companies grow. He enjoys teaching contractors how technology can streamline their businesses and educating them about their rights during payment disputes. 

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Industry Insight Tips & Advice Ultimate Guide

Why Embrace the Future of Automation in Construction

For construction companies, time is money. Both in the field and the office, time wasted is money lost. Using out-of-date processes and multiple software programs can quickly eat into slim profit margins. Construction companies must rely on technology to make their processes faster and avoid errors. If they don’t, they will continue to spend money and time fixing problems and repeating work.

Construction’s future?

Although no one has a crystal ball to tell exactly what the future holds, here’s where we think construction is headed:

Automation

Smart contracts will make the payment process faster. Technology will assess how much of the work has been completed, and payments will automatically be distributed to those contractors who have completed the work.

The software will analyze compliance documents, and automatically notify all pertinent parties when insurance or licenses have expired. Contractors will be able to submit compliance documents directly through a portal, where the software will analyze them and gather the required information.

All the documents that pertain to a specific project will be organized and searchable in one location. All team members will have access to these documents, and paper files will be a thing of the past.

Accounts payable invoices will be scanned by software, and the information will be automatically entered into the accounting system. The software will provide analysis and let operators know when contracts are overbilled or change orders are not updated.

Payments to subcontractors and suppliers will be processed automatically by the system, without the need for checks or other paper documents. Payments will be tied directly to the completion of the work.

Artificial intelligence (AI)

Project software will be infused with artificial intelligence that allows the software to provide predictive analysis based on past project data. As contractors process projects through the software, they will learn what activities cause the most delay or create the most risk and remind users when these possibilities occur.

Using the Internet of Things (IoT) and wearable technology, the software will be able to analyze the completion of work in the field. It will then compare that information to the project schedule to determine if there are any delays. Parties will be notified when the schedule slips, allowing the team to proactively respond.

Machine learning

Machine learning, a subset of AI, will assist estimators in project bid analysis, allowing them to select projects they will be the most successful on. AI will also identify the most common bidding errors and correct them before they bid goes out.

Photos will be taken of each worker as they arrive on-site and will be analyzed to determine if the proper personal protective equipment (PPE) is being worn. If there are missing items, the system will notify the worker and their supervisor, allowing them to correct the problem.

Problems with the status quo

Currently, construction teams work with a hybrid of software and paper documents. While some contractors strive to go paperless, many still rely on paper documents for certain activities, like material takeoff. This dual approach leaves contractors open to the following problems:

Lost time

The process of entering and analyzing information by hand takes more time than an automated system. Systems are available that capture data automatically directly from documents and provide analysis, saving contractors time.

Lost information

Paper documents are often lost or misplaced when they are filed incorrectly, or not filed at all. Even teams that rely on software often use multiple systems for different purposes (estimating, project management, accounting). This confuses users who don’t know where to look for the information they need. This takes extra time to determine the correct system and find the data they need. If documents are lost or misplaced, more time is lost in searching for them or re-creating the documents.

Errors are more likely

An experiment in 2009 showed that data entry workers made up to 10.23 errors when entering data from thirty spreadsheets. Data entry errors can cost companies millions of dollars. Workers can spend more time searching for errors and correcting them than in the initial data entry.

Hidden costs of mistakes

Besides lost time finding and correcting mistakes, it has been shown that incorrect data can cost companies up to 30% or more of their revenue. A 2018 Goldman Sachs report stated that the direct and indirect costs of manual paper invoice processing are $2.7 trillion for businesses around the world. The hidden costs of manual data entry can be enough to make or break your business.

Benefits of new technology

Embracing automation and other technological improvements can save companies real money.

  • Work is performed faster.
  • When there is only one integrated source of information, less time is wasted searching.
  • Accuracy is improved with automatic data capture.
  • Time and costs are saved by limiting time wasted on rework, searching through data, and fixing errors.

In a nutshell?

If your construction company is wasting time on manual processes and paper documents, it’s time to embrace automation. Premier Construction Software can help you reduce errors, speed up data entry, and waste less time looking for information. We bring the power of automation, artificial intelligence, and machine learning to construction accounting and project management. For more information on how our software can save you time and money, contact us today.