State of the Construction Labor Market: What Firms Need to Know

By: Pritam Tamang on March 9, 2020

Spending on construction projects has recently surpassed a trillion dollars. And, over the next four years, the construction software market is expected to grow by $724.88 million.

But that growth doesn’t mean that all is well in the industry.

There is a major shortage of construction labor right now, and the reality is that skilled workers are hard to come by.

This is a challenge, but it’s also an opportunity for your business to examine its hiring practices and get creative. Importantly, it’s also time to look at tech investments as long-term insurance to hedge against the labor shortage.

Fail to act, and you risk losing projects to larger competitors that have the resources to poach good workers. Or, you risk going over deadline or budget—or worse, both.

Read on to learn the factors affecting the construction market this year and how you should respond to come out ahead.

3 things construction firms should know about labor in 2020

1. There are more hammers than hands

The construction industry is booming. There is work, and this should have workers clamoring to get into this industry.

But, 80% of construction firms in one Associated General Contractors of America survey say they are struggling to fill positions. Seventy-three percent of respondents believe the situation is only getting tougher, and 45% of them point to challenges related to finding skilled workers.

Why is this happening? In a way, the construction industry is a victim of its own success. It has grown so quickly in recent years that labor hasn’t been able to keep up—and the construction labor shortage statistics show it.

In recessions, many skilled construction workers struggling to find jobs eventually give up and change industries—which is exactly what happened around a decade ago. Also, younger workers stopped considering construction as a future profession and opted for other paths.

So, while an industry can take off overnight when demand is high, labor takes a bit longer to develop. The talented labor pool will most certainly fill up again over time if demand stays hot, but for now construction firms will have to figure out creative ways to attract top talent.

How does this affect your firm? Ask just about anyone in the construction industry about labor and they’ll tell you the same thing: It’s harder than ever to find skilled workers.

This is an especially big problem for small and midsize businesses (SMBs), which struggle to compete with the deeper pockets of larger firms for attracting top talent. In addition to money, larger firms can offer more career advancement opportunities.

But SMBs have their own advantages:

  • Employees can advance more quickly.

  • Smaller firms offer a tight-knit and supportive working environment.

  • Smaller firms can give more personalized, hands-on training to their employees that can prove valuable to their career.

  • Employment perks can be more tailored to the individual employee’s wants and needs.

What should you do? Instead of searching for top talent, develop it yourself. Find unskilled workers and pitch them with free training and apprenticeships to help them grow in your firm. Our step-by-step guide for doing this will help you get started, but here’s a basic rundown:

  • Look for unskilled workers with potential: During your job search, identify candidates who are unskilled (and therefore less expensive to hire), enthusiastic (so they’re trainable), loyal (so they’ll stick around), and have shown initiative in the past.

  • Train those unskilled workers: Do an audit of your organization’s functional and technical expertise gaps to better understand the need for skilled labor, then set up on-the-job training programs (or spring for formal training from a third party). Leverage mobile training technology to keep workers’ skills fine-tuned during their career with you.

2. Skyrocketing costs

Construction costs have been rising at a rate of 23.6% since 2004. A Turner report reveals that nonresidential construction costs in the fourth quarter of 2019 were the highest in the last 13 years.

Why is this happening? The natural result of a shrinking labor market is rising construction costs. Regulations and high land prices are certainly major drivers of costs, but the main contributor to the sudden spike in costs is labor.

Since labor wages constitute a sizable portion of every construction budget, any dramatic increase is going to have a major impact on the total cost.

That’s just the reality of a labor market where skilled workers are scarce, and the problem is not going to be solved until more workers enter the industry.

This problem isn’t likely to disappear anytime soon, and it will take a three-pronged approach to deal with it:

  1. Firms bringing in unskilled workers and training them.

  2. Widespread adoption of new technology to supplement a limited workforce.

  3. A continued boom in the industry to encourage the best and brightest workers to choose careers in the construction field.

How does this affect your firm? Predictably, rising construction prices negatively impact SMBs that face continually shrinking profit margins in an industry where there isn’t a whole lot of room to begin with. Construction firm managers and owners must figure out a way to limit labor costs, or they risk operating at a loss on their next project.

What should you do? This problem does not have a quick and easy solution, but there are a few things you can do in the short term to alleviate the pain:

  • Carve out more space in the budget for workers, which may mean you need to do a deep dive and broad budget analysis to figure out where you can cut to make room.

  • Ensure your workers aren’t spending time on tasks that you could automate, so you get the most out of the workers you have and limit the need to bring in more.

  • Assign an existing unskilled employee as an apprentice to one of your skilled workers in an area where you need the most help.

3. Tech as the new labor

Investment in new technologies to automate manual tasks and reduce headcount requirements at construction firms is growing.

The industrial automation market is expected to reach $269.5 billion by 2024, according to MarketsandMarkets, and drone usage in the construction industry has surged 239% year-over-year, according to a DroneDeploy report.

Why is this happening? Automation certainly has a long track record in construction, but the ways in which automation can assist workers have changed.

  • Drones can conduct land surveys and secure job sites with minimal input from the field, freeing up workers for other tasks.

  • Demolition robots can rip through concrete without placing workers in dangerous situations.

  • Augmented reality can improve worker effectiveness. They can wear heads-up displays that relay critical information about what they’re looking at, such as temperatures or potentially unsafe conditions.

  • Artificial intelligence can help you analyze all the data your firm collects and pull out actionable insights, such as how best to utilize your workers to maximize savings.

How does this affect your firm? Automated construction equipment and augmented reality—niche products only a few years ago—are now seeing wider use in construction.

SMBs had been reluctant to get involved in these innovations in the past due to high prices, but as the technology has matured, prices have fallen to the point where it’s become more affordable to smaller firms.

What should you do? Create a pilot program using relevant technology to lower costs in the long term.

  • If the need to conduct large-scale measurements and inspections is a challenge, invest in a drone that can conduct surveys and inspections.

  • If improving the effectiveness of workers is your challenge, try wearable tech or augmented reality devices. Read more here to learn about how to create such a pilot program.

  • If you’re leveraging temporary workers to address the labor shortage, use construction project scheduling software to effectively manage your workforce.

Key takeaways for addressing 2020’s challenges head on

The construction labor market is at an interesting point in its history. After recession hammered construction for years, we’re at a period of booming growth with a workforce that is still catching up.

This dynamic situation creates opportunities for agile businesses that are smart enough to know what actions to take. Here are a few steps you should take right now as a construction owner or manager:

  • Conduct an audit of your firm and identify what positions are most in need of expertise.

  • Create a training program to pilot with a few unskilled employees. An apprenticeship program would be ideal here and could be offered as a benefit to attract the best and brightest workers.

  • Determine what type of emerging technology best fits your business needs—demolition robots, drones, augmented reality, etc.—and figure out where you should invest now to see long-term benefits.

If you are looking to compare and find tools to reap immediate business benefits, check out our construction software category page. For personalized assistance in your software search, schedule a no-obligation, free call with our construction software experts.