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

by:
on January 18, 2019

The construction industry is in a weird place right now:

Spending on construction projects has surpassed a trillion dollars in recent years, and the construction software market is expected to reach $1.8 billion in 2022.

Yet, despite these statistics showing promising growth, the construction labor market is in bad shape. Construction labor is undergoing a major shortage right now, as these statistics show:

construction labor market numbers infographic

(Source: Bureau of Labor Statistics)

The reality is that skilled construction workers are hard to come by, but you have an opportunity to overcome these construction labor shortage statistics by investing in affordable technology and developing creative hiring and training practices.

If you don’t take these actions, you either risk missing out on projects because your bigger competitors can use their extensive resources to grab the best workers, or you will fail to stay on time and on budget because of your labor situation—or worse, both.

1. Unfilled Job Openings Are Exploding

The Statistics: The Bureau of Labor Statistics shows the number of unfilled construction jobs is steadily growing, with firms trying to fill 73,000 more openings in 2018 compared to the previous year.

In fact, a recent National Association of Home Builders survey found that 82 percent of its members ranked the cost and availability of labor as their top problem.

How This Affects Firms: 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), who struggle to compete with the deeper pockets of larger firms in attracting top talent. In addition to money, larger firms can also offer more career advancement opportunities than a smaller or midsize firm.

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

Why This Is Happening: The construction industry is booming. Shouldn’t workers be clamoring to get in this industry?

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.

When a recession happens, many skilled construction workers who struggle 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 fields.

So while an industry can take off overnight when demand is good, 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 managers will have to figure out creative ways to attract top talent.

What To Do About It: Instead of finding top talent, create 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), enthusiastic (so they’re trainable), loyal (so they’ll stick around) and have shown initiative in the past.
  • Train those unskilled workers: Conduct an audit of where you are most in need of skilled labor, then set up an on-the-job training program (or pony up for formal training from a third party) and use mobile training technology to keep their skills fine-tuned during their career with you.
Case Study: In the Bay Area, firms building the $1 billion Chase Center—the future home of the Golden State Warriors—have created programs to train local residents on how to build the arena.

The New York Times describes the case of 33-year-old Jeromy Gaviola, who joined the program after struggling to find work in the area. After six weeks of training, he helped install insulation and acoustical ceiling tiles above the practice court.

2. Numbers of Tools to Help Laborers Are Increasing

The Statistics: Investment in new technologies is growing to automate manual tasks and potentially reduce headcount needs at construction firms.

The industrial automation market is expected to reach $149 billion by 2022, according to Market Research Future, and drone usage in the construction industry has surged 239 percent year over year, according to a recent report.

How It Affects Firms: Automated construction equipment and augmented reality—niche products only a few years ago—are are enjoying widespread use in construction.

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

Why This Is Happening: Automation certainly has a longer track record in construction, but the ways in which automation can assist your workers have changed.

  • Drones can conduct land surveys and secure job sites with minimal input from the field, freeing up your workers for other tasks.
  • Demolition robots can rip through concrete without putting your employees in dangerous situations.
  • Augmented reality is another important tool that can improve the effectiveness of your workers. They can wear heads-up displays that can relay critical information about what they’re looking at, such as temperatures or potentially unsafe conditions.
  • There’s also artificial intelligence, which doesn’t directly assist your workers but allows you to crunch all the data your firm collects and lead to actionable insights, such as how best to utilize your workers to maximize savings.

What To Do About It: Create a pilot program using some of this technology on your next project to see if it can help you.

  • If conducting large-scale measurements and inspections is your challenge, invest in a drone that is able to conduct surveys and inspections, and see if it ends up saving you money on labor.
  • If improving the effectiveness of your workers is your challenge, try wearable tech or augmented reality devices, and read here to find out more about how to create such a pilot program.
  • If using temps is your challenge, use construction project scheduling software to effectively manage them and slash labor costs.
Case Study: MarketWatch noted the case of one commercial real estate builder who bought drones to do land surveys because they couldn’t find engineers.

There are a host of companies that offer drones coupled with software that are capable of automatically scanning a large site and sending those measurements to the construction manager via software, without any need to pilot the craft or manually enter the measurements.

3. Labor Is Causing Construction Costs to Skyrocket

The Statistics: Construction costs have been rising at a rate of 23.6 percent since 2004. A recent report noted that construction costs have risen for 23 straight months as of September 2018, and would continue to do so for at least the next six months.

How It Affects Firms: Predictably, rising construction prices are having a negative impact on SMBs who face continually shrinking profit margins in an industry where there isn’t a whole lot of room to begin with. Construction managers and owners must figure out a way to limit labor costs or they risk operating at a loss on their next project.

Why This Is Happening: The natural result of a shrinking labor market is skyrocketing construction costs. Regulations and high land prices certainly are still a big driver of costs today, but the reason for the bulk of the sudden spike in costs is labor.

Since labor wages take up around a quarter of the cost of a new home, for example, 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 and provide a little relief to construction firms. By bringing in unskilled workers and training them, you’ll be doing your own small part to fix this problem.

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

    1. Firms bringing in unskilled workers and training them
    1. The widespread adoption of new technology to supplement a limited workforce
  1. A continued booming industry that will attract the best and brightest workers to choose careers in the construction field

What To Do About It: 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 your budget for workers, which may mean you need to do a deep dive and broad budget analysis to figure out what you can cut to make room.
  • Ensure your workers aren’t doing tasks that you could automate, so that you get the most out of the workers you have and limit the need to bring in more.
  • Find an unskilled employee you currently have and make him or her an apprentice to one of your skilled workers in an area where you need help. This could give you insights or a longer-term training program.
Case Study: Sometimes, the solution is to get creative rather than hire more skilled workers.

An architect described in a recent issue of Building Dialogue how he was able to solve a tough construction issue by researching local alternatives, figuring out ways to build it out and working with the general contractor and suppliers to come up with a holistic solution that didn’t go over budget and result in schedule delays.

When you come across a problem that you think skilled workers are needed to solve, huddle with your team instead to brainstorm a more cost-effective solution. You’ll be surprised at how often this is sufficient.

Overcome the Labor Market’s Challenges with These Takeaways

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

This dynamic situation creates opportunities for agile businesses 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 that could be used on a couple of new, unskilled employees as an experiment. An apprenticeship program would be ideal here and could be offered as a benefit to attract the best and brightest workers.
  • Determine which type of technology best fits in with your business—demolition robots, drones, augmented reality etc.—and figure out where you could start a pilot program to see how it could improve your business, and if it could be expanded.

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