A storm is brewing for the construction industry in the form of an acute labor shortage. A shortage of approximately 660,000 workers in 2022 is predicted by the Associated Builders and Contractors (ABC) network. Industry forecasts reveal that close to 1.2 million construction workers will leave their jobs in 2022. To top it off, the skilled labor shortage is also reaching crisis levels. A recent study from the U.S. Chamber of Commerce Commercial Construction Index states that 92% of contractors have reported difficulties in finding skilled construction labor.
Major Factors Causing a Construction Labor Shortage
The labor shortage in the construction industry dates back to the 1970s. With the expansion of the construction industry, the labor shortage started getting worse and eventually became a crisis. Mentioned below are some of the major contributors.
- Distorted Supply and Demand in the Industry
Major events like the recession and covid resulted in layoffs and downsizing. Projects were placed on hold, postponed, and canceled, resulting in layoffs. This created a low labor supply in the market. The majority of this labor pool started their careers in other industries.
After these events, the industry started to recover rapidly, and multiple new projects were launched. This created a high demand for construction labor in a short period. The workers who were laid off earlier were now employed in other industries, and most of them chose not to return. This created a huge gap in the market, giving rise to an acute labor shortage problem.
- Low Job Security
The layoffs and downsizing resulted in the construction industry being labeled as risky and uncertain. Masses started to refrain from joining the construction industry. This was primarily due to this fear of low job security.
- Experienced Workers Retiring
A recent survey by the NAHB revealed that the average age of workers in the construction industry is 41. It further highlighted that more than 1 in every 5 construction workers is over the age of 55. This means a wave of retiring workers is coming soon which will further worsen the impact of the skilled labor shortage.
- Low Retention Rate
The employee retention rate in the construction industry is among the lowest of any industry. A recent study from the ABC association found that the rate of entry-level construction labor increased by 72.8%, but the total number of construction laborers only increased by 25%. This means that the retention rate for construction labor was less than 50%.
Impacts of the Labor Shortage
The impact of this severe construction labor shortage can be seen from field labor operations to managerial tasks. There are numerous issues created by the labor shortage. Some of the major problems are mentioned below.
One big problem created by this labor shortage is delayed project completion time. Lack of manpower and labor results in longer durations to complete tasks, which often results in delays and extensions. These delays also result in missed commitments which, in turn, damage the credibility of builders.
The labor shortage can also result in quality control issues. A lack of skilled labor and experienced workers compromises the quality of projects. The chance of errors also significantly increases with an inexperienced workforce.
Additionally, the shortage of skilled labor drastically increases the cost of projects. Contractors often have to outsource skilled labor to meet deadlines. This added labor comes at a higher cost which along with the purchase of heavy equipment for sale increases the overall cost of projects, and profit margins are sacrificed.
A long-term effect of a labor shortage is the decreased viability of the overall construction industry. The current labor market for the construction sector is highly volatile and uncertain. Even with this uncertain labor market, contractors are still taking up new projects and making commitments about delivery dates. This is leading to missed commitments becoming a common industry practice which, in turn, is damaging the viability of the overall industry.