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Construction Industry Faces a Labor Shortage

As construction labor market tightens, will project deadlines slip?

Q2 2018
Construction contractors are accustomed to dealing with complications that can delay projects. Bad weather, material shortages, and union strikes, for example. Add to that list a relatively recent situation: a shortage of skilled workers that seems to be affecting most of the U.S. According to the USG + U.S. Chamber of Commerce Commercial Construction Index, about 65 percent of small contractors report they have trouble finding skilled workers.

The employment opportunity ratio for construction jobs has risen in recent months, according to online employment marketplace ZipRecruiter, indicating that there are more construction job openings and not enough qualified workers. In February, the nationwide employment opportunity index for construction jobs was 0.16, meaning there were six applicants for one job opening. A year ago, one job listing would see twice as many applicants.

Small metropolitan areas have seen a more serious shortage in workers than densely populated areas, according to ZipRecruiter. For example, in Hot Springs, Ariz., there were four job openings for every qualified applicant, according to ZipRecruiter data. In 12 other cities, more than half in the Midwest and the Southwest, there was more than one job opening for every applicant.

A Nationwide Situation
Ken Simonson, chief economist for the Associated General Contractors of America (AGC), agrees that the labor crunch seems to be a nationwide situation, based on AGC’s annual industry surveys. According to Department of Labor data, construction employment has been on the rise in about two-thirds of the states, and 35 states and the District of Columbia added construction jobs within the past year.

The industry has no problem finding people, but many of those people don’t have construction experience.So, companies have had to spend much more on training to bring people up to speed. Ken Simonson, chief economist, Associated General Contractors of America (AGC) “The industry has no problem finding people, but many of those people don’t have construction experience,” Simonson tells Area Development. “So, companies have had to spend much more on training to bring people up to speed.”

On a more promising note, the high cost of a college education has led more young people to consider careers in the skilled trades, Simonson notes. “As more kids come out of college facing large debt and wind up working as baristas, they are finding college is not the right choice for everyone, and that the starting wage in construction is a lot higher.”

Rich Jacobson, executive vice president at Kraus Anderson Construction in Minneapolis — one of the largest contractors in the Midwest — has seen “definitely a strained market when it comes to hiring.” But Kraus Anderson has ways to deal with the tight market. “We’re very strategic; we plan ahead and try not to ‘over-promise’ clients by taking on more work than we can handle.”

The company has a full-time recruiter, a director of talent acquisition, who works to make sure that Kraus Anderson has “a pool of qualified candidates ready at all times,” Jacobson says. The firm doesn’t use many unskilled laborers, mainly focusing on recruiting carpenters, project managers, and site supervisors, he says. “We’re selective and make sure we are hiring people for the long term, which is a better fit for us and for them.”

Developing Talent
Kraus Anderson’s recruiter works with the AGC’s local industry advocate to access the local labor pool, and to reach out to potential candidates through trade shows, job fairs, and visits to high schools and technical colleges in the area. The company also works with Dunwoody Institute, a local trade school, to support scholarship programs and help with curriculum development in construction-related areas.

As more kids come out of college facing large debt and wind up working as baristas, they are finding college is not the right choice for everyone, and that the starting wage in construction is a lot higher. Ken Simonson, chief economist, Associated General Contractors of America (AGC) Developing talent is essential, since the industry is “more technology-based than ever, using computers, tablets, drones, and other things in our everyday operations,” Jacobson says. To improve productivity, the company also relies heavily on robots in demolition work, he notes.

Construction companies have responded to the labor shortage by stepping up their recruiting and training efforts, and “engaging more with school districts, community colleges, and labor force development agencies to modernize their career and technical education programs,” Simonson further explains. Companies are also investing more in a variety of high-tech machinery, materials, and methods to improve productivity.

For example, laser and GPS-guided road graders reduce the number of workers needed on road projects. Drones are being widely used for remotely inspecting and documenting project conditions, and computer modeling has improved coordination between architects and project supervisors, and aid in material ordering accuracy.

Using prefabricated and modular building materials is another way to boost productivity. “But it’s still hard to get enough volume of business in a given location to keep a (component) factory,” Simonson says. “Contractors have a lot of site conditions, local building codes, and union rules to contend with.”

So far, most contractors report they are still able to deliver projects on time, Simonson says “but they are increasingly concerned that deadlines will start to slip” due to labor shortages. The industry also anticipates project costs will start rising more rapidly, as contractors face higher costs for wages and benefits, and also recruiting and training.

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