The What and Why of Construction’s Massive Labor Shortage—and How to Reverse It

Across the board, the construction industry is on the rise. In fact, the U.S. private construction industry alone is currently valued at $992 billion, up from $571 billion just seven years ago in 2012. Despite this growth, a major problem stands in the way of taking the construction industry to its highest peak: the labor shortage.

If you’ve been involved in the construction or field service industry long enough, you’ve almost certainly felt the impact of the labor shortage—and you’re definitely not alone. Over the past few years, firms across the nation and beyond have had trouble meeting project deadlines and filling open positions at their companies—even turning down contracts outright due to a lack of bandwidth and resources to successfully complete the work required.

Construction’s massive labor shortage didn’t happen overnight. It has many layers and complexities that have contributed to it over the years. As a result, it there is no single easy fix. Here is the what and the why of this situation, and the proactive steps you can take to safeguard your organization from its negative effects.

The good and bad of high demand

The labor shortage in construction is a double-edged sword. On one hand, it’s a signal of the construction industry seeing the biggest financial success it’s had in years. In fact, the U.S. private construction industry alone is currently valued at $922 billion, up from $571 billion in 2012, all while employing 10 million workers in the process. On top of that, construction-related spending currently makes up a whopping 13-percent of the world’s total GDP.

On the other hand, all of these construction projects require a large volume of skilled workers to meet the demand, which has been difficult to fulfill for business owners and operators. As it stands, 81 percent of construction firms are now asking skilled workers to do more work than they have in the past, 70 percent of firms are struggling to meet project deadlines and 63 percent are being forced to increase costs for new work.

All of this has led to companies paying skilled workers higher wages just to keep them around. Ahu Yildirmaz, co-head of ADP Research Institute, stated in plainly: “The tight labor market is pushing companies to pay more. As labor shortages are apparent in most of the sectors, the businesses are holding on to their skilled workers by increasing their wages.”

The good and bad of high demand

There are a number of events and variables that have contributed to the labor shortage in construction and field services, many of which are difficult to pinpoint. According to many experts, though, a primary driver was the Great Recession. After the global economy tanked, many millennials who saw their parents and loved ones losing jobs and foreclosing on their homes rushed to get their college degree to protect themselves from the same fate. This made millennials much less likely to go into the trades and instead go with “tried and true” career paths. This way, they’d always have a degree to fall back on.

Some 600,000 workers left the industry during the Great Recession and have not returned.

When asked by GlobeSt.com, John Wagner, a national construction director at successful insurance firm Gallagher, had this to say: “For one, construction is not an attractive industry to millennials. In addition, 600,000 workers left the industry during the Great Recession and have not returned. One reason for this is that the healthcare and social work industries are attracting more workers than the construction industry. Finally, the United States is experiencing a slower population growth and an aging workforce.”

Piggybacking on this thought, another key reason for the shortage is the stigma associated with the trades. Growing up in recent decades, teachers and parents alike steered kids toward attending college in hopes of becoming doctors and doctors.

Issi Romem, fellow at UC Berkeley and Chief Economist at BuildZoom, also points to the decline of vocational institutions across the United States since the recession and the lack of family ties to construction both as possible contributors to the shortage. “Another possibility is that young workers often enter construction following the footsteps of slightly older relatives and friends. The decline in construction labor during the housing bust, especially among the younger ranks, left fewer young construction workers to reel in the next generation.”

Family ties to construction both as possible contributors to the shortage. “Another possibility is that young workers often enter construction following the footsteps of slightly older relatives and friends. The decline in construction labor during the housing bust, especially among the younger ranks, left fewer young construction workers to reel in the next generation.”

Lastly, the effects of the shortage have been amplified due to urbanization, which has dramatically increased construction in major cities without a parallel increase in laborers in those spots. Today, there’s a movement away from the suburbs and into metropolitan areas, particularly by young professionals. This is partly due to millennials staying single and delaying having children longer than previous generations, making city life more attractive. In fact, 82 percent of North Americans now live in urban areas. Zooming in, 41 urban areas across the United States house at least 1 million residents, up from just 12 areas in 1950.

As people continue to migrate to the cities in masses, more condos will continue to be built, new high-rises will continue to be constructed to create business districts and existing infrastructure will continue to be touched up. But housing in urban areas remains expensive, making them unattractive locations for construction laborers to live in or move to, notwithstanding the lure of more work.

How to counter construction’s labor shortage

#1. Create mentorship programs.

Mentorship programs can help you overcome many of the troubles brought on by the labor shortage by nurturing and training new or existing employees to handle bigger projects and take on more responsibilities for your business. Doing so can provide your workers with hands-on, effective instruction on the day-to-day tasks to keep your business running long-term—which in turn makes them feel more motivated and invested.

Mentorships come in all shapes and sizes. There isn’t a cookie-cutter model when it comes to setting up your mentorship program, but you can start by having regular sit-downs with your most promising employees who see a future with your company. During these meetings, start showing them the ropes of your business from an administrative and operational point of view. Tell them how you got into the trade, why you started your business, the key lessons you’ve learned along the way, the biggest mistakes you’ve made and more.

You can also have mentees shadow you during your administrative tasks like payroll processing, conducting sales calls or drafting contracts—all of which will give the individual a high-level view of how your business runs and operates.

#2. Invest in an applicant tracking system.

While there’s no doubt that a shortage in skilled workers exists, there’s also a good chance you’re not reaching all of the qualified candidates in your area. The reason? Posting to job board after job board and reading through resume after resume takes a lot of time away from your business (and others around you have already automated these tasks).

By investing in software solutions like an applicant tracking system (ATS)—which can post to multiple job boards with the click of a button, filter out unqualified candidates and streamline email communication—you can reach more people than you ever could manually. Doing so could make all the difference in landing your next great hire.

#3. Enhance your training and hire from within.

Promoting your current employees to higher positions rather than always having a revolving door in your hiring process can help lessen the harsh effects of the labor shortage. By doing so, you’ll save yourself time and money that would otherwise be spent searching for, hiring, onboarding and training a new employee. Seasoned employees know the nuances that make your business unique—they already know the ebbs and flows and the people in your organization. On top of that, hiring from within your organization could provide a boost to team morale to see you rewarding high-performing workers.

Again, mentorships can help groom people for greater responsibility. There are also resources available to help further your or your employees’ training. For instance, you can use platforms like Coursera or UCLA Extension program online to prepare your workers for higher positions as project managers. You can also check out AGC for construction project management classes as well to better equip your workers for senior positions.

#4. Change your company culture.

Regardless of the industry you’re involved in, no two businesses are the same. There are an endless amount of nuances and unique aspects of a business when it comes to any industry, and construction is no different. One thing that separates the successful companies from the unsuccessful is company culture.

By creating a company culture that’s inviting and warm, you can increase employee retention and overall satisfaction. By fostering a company culture that rewards hard work and promotes based on merit, you can combat the labor shortage by having a workforce motivated to climb their way up the ladder.

To do this, work with your team to create a company mission statement (if you don’t have one already). This mission statement should be something bigger than the work you’re involved in. For instance, if you own a roofing company, your statement could focus on the protection and peace of mind you provide to your clients versus the roofing itself. This will give your employees a vision to rally around.

Next, list out the values you hold in high regard at your company—and use them as a guide to who you hire. By building a team of like-minded individuals who share similar values, you’ll increase the likelihood an employee stays with your company long-term by creating a welcoming work environment.

#5. Partner with local schools to recruit young talent.

Many schools around the United States have vocational programs for carpentry, electrical work and other similar field services, but few have programs dedicated solely to construction. That being said, by partnering and creating good relationships with local high schools and community colleges, you might tap into a pool of motivated, high-quality workers. You can begin by attending their job fairs and other career-focused events. The process will be a long one, but the work will pay off if you can successfully lay the foundation as being a viable alternative for students not be interested in more “traditional” education paths.