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The Bipartisan Infrastructure Law (BIL) is expected to create nearly 300,000+ construction jobs by 2027 and 2028. And that’s just the tip of the iceberg. As infrastructure planning is increasing, so is the need for construction workers. But who will fill these positions?
According to McKinsey, the US currently has the highest level of construction industry jobs, with 440,000 openings. Meanwhile, the manufacturing industry has over a million job openings.
While the number of job openings keeps increasing, there aren’t enough laborers to fill those roles. The labor shortage is one of the many pressing construction challenges that project managers and owners have to face.
How does labor shortage impact construction? And what can we expect in the future? Let’s discuss more.
Reasons for the construction labor shortage
According to the Associated Builders and Contractors, the construction industry needs 342,000 new workers in 2024 to meet the workforce demand. That’s still a lower-than-actual figure presuming the growth in construction spending will decrease in the future.
Why don’t we have enough construction workers to fill these places? Here are some reasons.
The ABC reports that almost 25% of construction workers are aged 55 or above. They will retire soon, leaving a shortage of millions of construction workers in the space.
Not only did these older workers make up the majority of the workforce, but they also had the highest productivity. With them gone and not enough people to replace them, the gap in the workforce will be pretty prominent.
Insufficient skilled workers
4 out of 10 of the new workers that enter the construction industry have entry-level occupation skills. To make matters worse, this trend has been going on since 2012.
Although the growth of entry-level workers is relatively better, there aren’t enough skilled workers on construction sites. In some cases, the growth of skilled workers has been much slower. In others, it has declined, such as carpentry.
Most millennials and Gen Z are not interested in joining the construction industry. Rather, they are more educated than baby boomers. So, they prefer working in industries offering higher salaries and more job security.
Most youngsters also prefer working online or remotely. Thus, their interests are not feasible with the demands of the construction sector.
In the past few years, immigration policies have become much more stringent. That’s why there’s a shortage of overseas workers entering the construction industry to compensate for the shortage of local workers.
The impact of construction labor shortage
The construction labor shortage affects many stakeholders. Here are some of them.
With the number of construction workers declining every day, contractors and construction companies are finding it harder to find skilled workers with high productivity and engagement.
As a result, their projects may get delayed. Some projects may also go over budget since the managers and owners have to spend extra money on workforce training.
Project owners are experiencing delays in projects, which eventually results in budget overruns. They also have to spend extra on labor costs since qualified workers are hard to find.
The existing construction workers are also affected by this shortage. They may have to work harder and longer to compensate for the lack of workforce.
However, construction workers will also be impacted positively by this shortage. McKinsey reports that line installers will be in demand in the future since not many are entering the market.
Likewise, electricians, equipment operators, and construction managers will also be in demand. On the technical side of things, civil engineering is a sought-after occupation.
Individuals in these fields can expect higher salaries due to a shortage of skills. The growth of construction industry wages is already the fastest it has been since the run-up to the financial crisis of 2008.
Local economies, especially tourist-oriented ones, may suffer due to labor shortages. Since these economies depend on construction for economic growth and job creation, a labor shortage comes as a major blow for them.
They will also have to spend more money on infrastructure development since most construction companies will compete for the same talent. With digital transformation entering the mix, these economies must also increase their construction budgets to accommodate hiring software developers and engineers.
How to address the construction industry labor shortage?
There are a few ways to address the potential labor shortage in the construction industry. But government entities, stakeholders in the construction industry, and lawmakers will have to come together to accomplish them.
Increase construction worker supply
The most obvious way to tackle this shortage is to increase the number of construction workers. ABC is doing fantastic work in this regard.
The organization has a national network that contains management education programs, safety training, craft training, and over 800 apprenticeships. Members of ABC have spent $1.6 billion to educate 1.3 million course attendees in 2021.
Upskill existing workers
McKinsey’s 2022 American Opportunity Survey found that construction workers have the appetite for upskilling if they get access to the right resources. 58% of the workers in the construction value chain want to pursue credential opportunities and future training. That’s 17 points higher than the US national average for all industries.
Construction workers can enroll in a few current programs, such as the UpSkill Houston program. But more of these programs are required to fill the skills gap sufficiently.
Shifting to skills-based hiring
Most hiring in advanced construction positions is based on college education and credentials. But that’s often why many skilled workers get left behind simply because they do not have a college education.
The Rework American Alliance aims to change this by advocating for skills-based hiring. The approach looks at a candidate’s experience, certifications, and on-the-job performance rather than their education.
The labor shortage in the construction industry has wide-ranging effects. Besides affecting government entities and construction stakeholders, it also impacts workers and property owners. With the proper recruitment approaches and training opportunities, the skills gap in the industry can be minimized if not filled.