Firms are Ready to Hire.
In October 2014, the Associated General Contractors of America conducted a survey of nearly 900 construction firms across 48 states and the District of Columbia to discuss construction industry hiring in 2015. (To view the survey results and report, “Ready to Hire Again: The Construction Hiring and Business Outlook.” The survey reported that hiring plans are on the rise. Nearly 80% of the firms surveyed expect to hire more employees, which is an 25% increase from 2014. (See Jeanie J. Clapp, Ready to Hire Again AGC Members Forecast a Bright 2015, Constructor Magazine, (March/April 2015). In fact, as of March 2015, construction employment totaled 6,344,000 and the unemployment rate fell to 9.5%. But companies will face challenges finding enough qualified people to hire.
Labor Shortages Loom.
While hiring is on the rise, 87% of the AGC firms who are hiring, report difficulties filling positions, with the greatest hiring challenges for roofers, carpenters and operators. This figure is up more than 10% from 2014. Simply put, there are not enough skilled workers to go around. A study by the Construction Users Roundtable (CURT) estimates that there is currently a shortage of two million skilled construction workers. Based on the circumstances that created the market shortage, closing the gap will not happen quickly.
Labor Market Gap Widens.
- The construction industry lost 2.3 million jobs during 2007-2009 and has only recouped less than half a million. By 2016 it is predicted that the construction will require 6.7 million workers, 50% more workers than are currently available today.
- With the number of retirees on the rise and fewer qualified professionals to fill the positions, firms are scrambling to fill skilled positions.
- Moreover, new graduates from craft programs are perceived to be unqualified, with more than half of the firms AGC surveyed characterizing training programs for craft workers to be “below average or poor,” and only 20% of the firms surveyed rate professional training as “above average or better.”
- Fewer workers are entering the craft trades, with federal funding for career and technical education declining from $1.3 billion in 2013 to $1.12 billion in 2014. (See Kelly Davidson, Industry Seeks Answers to Increasing Labor Shortages, (April 30, 2014).
- Retention of existing workers is also waning. Forty percent of the firms surveyed report loosing employees to non-construction sectors and 28% report losing craft workers to other local construction firms. (See Sheryl S. Jackson, Wage Wars Industry Workforce Shortage Impacts Construction Paychecks, Constructor Magazine, (March/April 2015).
- While there is some shift of employees from the energy sector to construction, the crossover is not seamless, and construction firms are not “actively recruiting” from that sector. Therefore, for all of these reasons, despite the vibrant market growth, the labor pool continues to shrink.
Expect Pay Raises.
- In an effort to retain quality workers and attract new talent, firms are increasing wages. More than half of the firms surveyed are increasing base pay for professional workers, and 46% of the firms are raising pay for skilled craft workers. Base pay is rising at an average rate of about 3% per year.
- In addition between 20% and 25% of the firms are improving their benefits packages for professionals and/or skilled craft workers.
- Finally, firms are developing and implementing bonuses tied to achievement of performance goals, satisfaction of training standards or new customer acquisitions.
Begin Development of Workforce Training Programs.
In the Southeast and Gulf states, areas predicted to be hardest hit by the labor shortage, workforce training and educational programs for skilled trades are taking hold. For example, the Construction Careers Academy in San Antonio, Texas offers high school students a curriculum to prepare for careers in architecture, construction management, engineering and the trades. The school uses voter-approved capital bonds, grants, donations and community partnerships to fund programming. Similarly, in St. Louis, the Associated General Contractors of America developed the first publically funded high school for construction in the United States. In addition, organizations are working to improve the industry image. Alabama, Georgia, Indiana and other states are launching campaigns to help teach parents, students and educators the value of learning a trade.
Consider Offsite Prefabrication.
Some companies are addressing the labor shortage by using more off-site prefabrication to accommodate a smaller workforce. EMCOR reports that the use of design and communication technology, off-site prefabrication has allowed for a revenue growth of 35% while workforce is up only 10%.
Consider the Impacts and Options.
A labor shortage in the construction industry is upon us and is expected to get worse. The domino effect of the shortage is not hard to predict, in fact the first few tiles are already falling. Without enough labor to staff new construction, some businesses are turning away business and declining bidding opportunities. Other firms are responding with paying higher wages and bonuses to retain and attract talent. Both of these factors create project risk. With fewer laborers available to choose from and fewer firms bidding the work, project cost, quality and timeliness become real concerns for the project owner.
Some short-term solutions such as pay raises and trade industry campaigns may help to create a stop gap, however, these approaches are unlikely to solve the long-term problem. Rather, firms should begin to engage in difficult discussions regarding how fundamental changes in the means and methods for construction projects can be implemented in order to compensate for the advancing workforce shortage.