The Construction Labor Shortage and its Impact: Addressing Skilled Labor Shortages

In 2020 and 2021, a global pandemic was an unknown risk that the construction industry had never anticipated and like all business and industry segments, construction was significantly impacted by two years of pandemic disruptions and continues to grapple with its lingering effects. According to the U.S. Bureau of Labor Statistics, the unemployment rate in the construction industry was 3.5% in July 2022. The last time it was lower than this was in September 2019 – about six months before the initial lockdowns from the COVID-19 pandemic started in the U.S. The construction labor shortage spiked in 2020 at the height of the COVID-19 pandemic. The unemployment rate spiked to 16.6% in April 2020. While it’s improved significantly, finding workers in the industry remains an issue. According to David DeSilva, Head of Construction, The Hartford, “Pre-pandemic labor was already a growing concern. There were more workers leaving the field than entering it. Some firms were addressing it before COVID-19, but I don’t know if they fully solved the issue,” DeSilva explained. “The pandemic really accelerated this shift of workers retiring or changing careers.”

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The fallout from the pandemic drove the wave of finding and forging new technology to change the construction site, improve the ability to win projects, and increase profit margins.  As companies approached 2022, a new era of dealing with the pandemic, construction projects around the country have resumed. Construction found this post-pandemic period to be an opportunity for growth. However, a trend is preventing the construction industry from forging forward and riding the success wave. One of the most pressing impediments to industry progress is labor shortages. while the demand for construction services has surged after the pandemic, the number of laborers has not.

According to the Associated Builders and Contractors (ABC), the construction industry in the United States would need to hire 650,000 more employees just to fulfill the current demand by 2022. Hiring and retaining the right talent is still a common concern in construction, and it is growing more difficult now due to the impact of the recession, employees close to retirement age, and laborers becoming more concerned with their health and safety.

That number provided above by the ABC is expected to grow over the following 2 years, extending the labor deficit far into 2023 and beyond. In other words, labor shortages and supply chain disruption will continue to be a problem for the construction sector in 2023.  Executives should therefore seek solutions to this problem while also viewing this trend as a unique opportunity to enhance and rebuild their construction firms and refurbish their industry, allowing it to emerge stronger than before.

How Does the Construction Labor Shortage Impact Construction Companies?

In this post-pandemic era, the industry is experiencing progress in residential housing, commercial properties, and public work projects. The workforce necessary to take on these projects isn’t readily available and this shortage in labor has affected the industry in many ways. Below are the effects of labor shortage on construction companies:

  • Decreases in productivity to increases in workers’ compensation claims
  • Contribute to delays in project completion, issues with quality control, increased builder risk costs, and more.
  • Having fewer workers means companies must be more selective in the projects that they can bid on
  • Unable to work on many projects concurrently
  • Meeting contractual obligations and finishing duties on the schedule are likewise becoming more difficult.
  • Negative workmanship, such as rushing to finish a project on time and poor-quality services
  • Job delays, reengineering of construction sequences, a shift in the business model
  • Employers are forced to hire lesser-skilled workers in order to meet the ballooning demand, a risky endeavor since adhering to safety regulations is of utmost importance in the construction industry.

Taking the Opportunity to Address and Meet Construction Labor Challenges

There is no quick and easy way to solve the construction labor shortage. But with the problem becoming more and more prevalent, executives are investing in different ways and solutions to meet this problem. As David DeSilva noted, the construction industry has been trying to address the labor shortage and its impacts since before the COVID-19 pandemic. He said he’s seen an increase in smart technology use within the industry as a way to improve productivity and worker safety.

“There’s more implementation of onsite imagery, water sensors, wearables on the workers or telematics in fleet vehicles,” he said. “These technological devices are going to drive down loss costs and benefit the companies and workers.” The investments seem to have a positive impact. The incident rate of nonfatal occupational injuries and illnesses in the construction industry was 2.5 per 100 full-time employee.4 This is lower than the rate in 2019, 2018 and 2017, which were 2.8, 3.0 and 3.1, respectively.  

Another solution is investing in the consistent improvement of worker safety, it must be a business imperative. Companies need a safety and training program to make sure employees can do their jobs correctly. Again, DeSilva offers his take on this idea, “It comes down to accountability,” DeSilva explained. “A lot of the things construction companies are doing when it comes to safety may have been an afterthought six to eight years ago.”

A third solution is for construction businesses invest in measures to help them run an efficient and safe workplace, like partnering with an experienced insurer. DeSilva highlighted The Hartford’s Risk Engineering team as a valuable service to the construction industry. Consultants can work with businesses to identify risks and provide recommendations to address them.

Other effective strategies leaders in the construction industry can initiate to meet the shortage in labor include communicating more effectively about the benefits of construction industry employment, developing fruitful partnerships with universities and trade schools, enticing young people with generous and practical benefits, providing training and advancement opportunities onsite, embracing new technologies, and attracting new skilled laborers.

While confronting the challenge of labor shortages it is an opportune time for executives to see it as a chance or opportunity to strengthen and rebuild their industry. Construction companies can leverage these obstacles to rethink what they provide employees and create a culture that attracts long-term talent. The construction industry is filled with hard-working individuals who are passionate about their families and care about their craft. These times of challenge are the perfect opportunity to strengthen the industry by finding new ways to support the laborers who uphold it.

HWAA can help you!

HWA Alliance has served the construction and real estate development industries since its inception. We have provided a variety of services to community development corporations, real estate developers, contractors, and syndicators. The workforce of a construction company is the foundation of the building industry, without them, it would be impossible to complete a project. HR managers and contractors deal with unique challenges such as coping with changing labor laws. If you want to learn more about our services in the construction industry, call us today!