Dealing With Construction Labor Shortages

Contractors have been dealing with the difficulties of labor shortages for decades. But with the Great Recession in 2008 followed by the COVID pandemic of 2020, there has been a significant reduction in available workers.

In fact, according to the National Center for Construction Education and Research, the industry is in a reduction cycle where more workers are leaving the commercial sector than entering it.

And it doesn’t look like the shortages will be ending any time soon. Associated Builders and Contractors (ABC) recently released a study determining that in 2025, the construction industry will need to hire an additional 501,000 workers on top of those hired at the traditional yearly pace.

However, this shouldn’t necessarily incite a panic. First off, labor shortages are not a new phenomenon, especially in commercial construction. It’s more common for construction companies to be down workers than to experience a surplus.

Furthermore, and more importantly, commercial construction is still one of the most profitable sectors for the US economy. The overall construction market has been on an upward trend since 2007, and it’s forecasted that by 2027, construction will be valued at over $2.2 trillion.

Now, even with those big projections, contractors still have to navigate a competitive commercial landscape without as much help as required. So how do they do that?

They diversify, they retain, and they keep an eye on scope. Success isn’t impossible, but it will involve vigilance and strategy. Let’s get into it.

Key Takeaways Dealing With Labor Shortages In Construction:

• The construction sector faces an unprecedented demand for labor, with projections showing a need for 501,000 additional workers by 2025 beyond the normal hiring pace.
• Construction firms can navigate labor shortages by diversifying their project portfolios, focusing on worker retention, and maintaining realistic project scopes.
• Despite current workforce challenges, the construction industry remains highly profitable, with market valuations expected to reach $2.2 trillion by 2027.
• Career opportunities in construction continue to expand, but changing public perception about careers in construction remains crucial for addressing long-term industry demand.

Labor Shortages in Construction 

Labor shortages in the construction workforce occur when demand for construction services exceeds the available labor pool.

There are a few reasons why construction employees are currently hard to come by:

1. Miseducation: To put it truthfully, there is a stigma against pursuing a career in construction and other trades despite the growing industry demand. Parents are encouraging their children to go to a four-year institution instead, so there is a smaller newbie pool to pull from.
2. Education: For those that go to a university and obtain some type of bachelors or above degree, they’ll be hired into a higher standing position because of their background.
3. Promotions: As with any field of training, construction employees want to rise in the ranks and receive higher incomes as quickly as the company allows. Unless absolutely needed, the foreman won’t go back to laying asphalt.
4. Post-Pandemic Concerns: After the difficulties created by COVID, many employees, especially those dealing with any health concern, are looking for positions that offer remote opportunities.

Construction isn’t the only sector of the economy dealing with labor shortages. It’s a pretty ubiquitous circumstance across all realms of business. Commercial construction is just impacted to a greater extent.

When there are fewer employees, a higher chance of project delays, schedules are overrun, costs pile up, and potential project owners are more hesitant to start a new job.

Yet, even with these mounting concerns, there are easy ways to safely traverse the current hiring landscape.

Handling Construction Labor Shortages 

The truth of the matter is there is no way to prevent or stop labor shortages. At least not at a micro level. However, there are ways to be successful regardless of the reduced number of employees.

Consider a headache, for example. You can’t always stop the headache from happening, but you can reduce its effects. You hydrate to reduce the length; you take medicine to diminish the intensity of pain, and you nap to pass the time while everything hurts.

Labor shortages are dealt with in a similar way. You don’t have all the workers you need, so you adjust your business strategies to work around this limitation.

Diversify the Portfolio 

This may seem counterintuitive: you have fewer workers, so why grow the portfolio? To give your company more options for profit.

Just because you only have a certain number of employees doesn’t mean you can’t do a variety of jobs. Good workers and lots of knowledge can take you far.

Consider expanding in the following ways:

1. Trades: Whether it’s through strategic hiring of even one person specialized in different skilled trades or sending your team to training, learn new skills, and branch out into other fields.
   1. By adding to your construction company’s resume, you can bid for other jobs previously unavailable to you or you can snag more work on a job you’re already helping with.
   2. Keep in mind that this also counts in terms of your current trade. Don’t just do ceramics if you install floors, look into carpets, linoleum, tile, etc.
2. Government: Federal and state governments are always funding commercial projects. These opportunities offer high margins for profit, excellent experience, and recession-proof employment.
   1. You’ll need to find ways to manage prevailing wage and certified payroll reporting, but you’ll also receive payments on time without much hassle.
3. Unions: Becoming a union-friendly company has its advantages. It’s a new pool of applicants, and if workers need jobs, unions play a crucial role as liaisons to connect these employees with construction businesses.
4. Subcontracting: if you’re struggling to accomplish jobs on time, it may help to tag another construction company in. They won’t take all your work, of course, just the specific sectors you need help with.
   1. It’s a good way to ‘add to your workforce’ for a brief time without hiring people fully.
5. Seasonal: During peak seasons when demand is especially high, advertise for temps. There are plenty of people looking for a way to earn money in a short span of time: teachers on summer break or landscapers during the winter, for example.
   1. Seasoners aren’t in the general hiring pool for commercial construction because they don’t need long-term full-time work. But they’re useful in a pinch.
6. Green: In today’s world, more and more project owners are trying to include sustainability in their structures.
   1. By being knowledgeable about eco-building, not only can you go for the environmental jobs, but you can also be added to existing projects as they pivot to more ‘green’ methods.

All these options are especially helpful because they don’t mean bigger jobs with unmanageable scopes.

You don’t have to take on more work; you just now have new ways to keep yourself in business even without lots of employees.

It is fair to say that some of these strategies can be implemented quickly, while others may require some preparation. However, as you adjust now, it creates a blueprint for your company during future shortages.

Retain Your Workers

One of the most important strategies to focus on while navigating a labor shortage is to retain your workers, as high turnover can increase labor costs. This means finding ways to keep the ones you have and protect your bottom line.

To keep your workers safe, you need to keep them safe, paid, and provided for. Here’s what that looks like:

1. Enforce Safety: Construction employees want to know that their health and well-being is relevant to their employers. If they feel unsafe, they will go elsewhere. In addition, if a company has a bad reputation for incidents, they won’t even apply.
   1. Implement a safety program to demonstrate the importance of safety at the jobsite. Taking actionable items to encourage safety is a powerful move.
2. Prevent Burnout: When there’s a shortage of employees, jobs become even more of an “all-hands-on-deck” situation. Workers will get tired, and burnout can lead to reduced output and resignations.
   1. Enforce breaks, encourage time off, and mandate lunches. Make sure laborers are getting away from the tasks and having time to breathe.
3. Offer Opportunities: Construction employees will stick with companies that give them room to grow, whether that’s using a ladder system with upward mobility or supporting journeymen programs.
   1. Your people need to know that they can gain higher pay and new responsibilities if they stay.
4. Pay Consistently: This isn’t always easy for small construction businesses. Especially during times of economic fluctuations or while dealing with subcontracting situations. But being able to pay employees on time, as expected, and in the full amount is critical to staying in good standing.

No construction business will be able to retain 100% of their employees 100% of the time. It’s the nature of commercialism. But, by implementing some of these operations, your construction company is an attractive place to remain.

Hire Skilled Labor 

When new employees aren’t readily available, you have to lean on your current team. Which is why you need to create a crew that is as capable and efficient as possible. Hiring skilled labor is one way to ensure your team is filled with knowledge and ability.

Skilled labor involves a certain level of training, education, or experience. They tend to perform the more complex tasks and are given additional responsibilities on a jobsite. Some professional examples include plumbers, carpenters, and electricians.

There are a few reasons why skilled labor is so valuable:

1. Save Time: When you add a plumber to your team, for example, from the onset, they’ll have a base of skills and insight to pull from compared to the newbie who needs to be trained on how to lay piping.
2. Enhance Accuracy: A carpenter will not just be able to cut and shape wood. They’ll know measurements, be comfortable with conversions, understand the tools, and recognize the quality. The same can’t be said about an unskilled worker hired to install planks for a day.
3. Accelerate Tasks: Electricians know their specific work. They move quickly, install materials confidently, and are already familiar with the solutions to varying problems.
4. Expedite Innovation: Statistics show that skilled construction workers, because of their background and training, take to new construction technology and techniques quicker than unskilled workers.

None of this is to say that unskilled workers can’t have a major positive impact on a construction company. And if employers are willing to invest the time and money to send teams to training, unskilled workers can become skilled workers quite quickly.

However, if the resources aren’t there, skilled workers can immediately affect a contractor’s productivity levels from day one.

Create an Attractive Environment 

Sometimes, there is no avoiding the inevitable: you just have to hire people, and you need to hire them as soon as possible. In this competitive environment, where many construction businesses are wanting for more hands, you need to find ways to stand above the others.

This is done by being appealing. While the demand exceeds the supply, the employees have the upper hand. Gone are the days of just needing a job; now, laborers have choices for the ‘right construction job.’

You become the right job by showing a strong record of keeping the employee first:

1. Ensure Safety: Just like your current workers, potential employees want to see a strong record of safety. They need to know that they will be protected on your jobsites.
2. Offer Benefits: This is easier said than done for many construction companies. But if you’re in a position where you can offer health insurance or life insurance or some type of coverage, it really becomes a separating point.
3. Build the Resume: Again, workers aren’t in construction anymore for just the paycheck. They want to participate in big jobs, fulfilling jobs, and consistent jobs. Show them your experience. Build a name aligned with quality, efficiency, and success.
4. Increase the Backlog: Of course, payday is important. Workers will flock to the companies that maintain a steady stream of jobs throughout the year. If you show signs of slowing, laborers get nervous.
5. Flexibility: This one is a little unique because construction normally has to work within strict day times based on light. And it’s always in person. But if you have multiple jobsites, rotate where the workers are assigned so they can diversify their skills.
   1. Or if you’re having a slow period, let your workers be “loaned” out to companies with jobs and then welcome them back without issue when you can give them hours again.

Whether you’re retaining your labor force or trying to add to it, the considerations will be the same. Keep your people safe, working, and paid. And don’t be afraid to let it be known that you do all of those things.

Stay on Scope 

Ambitiousness is an admirable thing. But not if you don’t have the workforce to complete your jobs.

When you’re bidding, go for the projects that match what you can handle. Investing in something way out of your capacity can be both costly and detrimental to your reputation.

Of course, there is always flexibility.

• If you rather have a big backlog, take on lots of smaller jobs to carry you through the year.
• If you want to try a bigger job, then cut down on the amount of work you’d be managing during the same time period.
• Rotate during the seasons: maybe spring is for many small jobs, summer is for one big project, and the fall/winter involves a handful of medium construction opportunities.

Once your company is comfortable operating at a certain pace, you can always try a project just a few percentages bigger than what you’re used to. But if you go too massive, you have to be prepared to eat expenses.

Change Minds 

This isn’t really a strategy to manage worker shortages immediately, but it is something to think about. As mentioned at the beginning of this article, one of the greatest factors against construction is the influence of public minds.

There is a much greater push for higher education than there is for trade work solely because a stigma exists against the commercial construction industry.

Taking the time to educate the communities about the fruitful opportunities in construction can be key to getting younger generations invested in the industry sooner.

Showing off the solid pay rates, the expansive opportunities, the union agreements, and the federal work are all great angles to change the opinions of those outside of commercial construction.

Construction Labor and the Future 

2023 saw some of the lowest rates of unemployment in the history of the US economy. At the same time, America experienced a historically high number of job openings. Hence the massive labor shortage.

The Census Bureau Job-to-Job Flows data expects more than 1.9 million workers to make an exodus away from construction by the end of 2024, which seems alarming.

Except, the experts also say the tides are changing. They predict that 2.1 million workers will enter into construction in 2025, which is exciting and hopeful and could offer some much-needed ease for contractors.

But labor shortages happen all the time. They’ve existed as long as construction and could impact the entire commercial sector or just a specific trade.

Regardless, being prepared to be understaffed is a crucial element for a successful construction business.

As the construction workforce continues to evolve, successful construction firms will need software solutions to manage their growing teams and projects.

Don’t be afraid to expand your portfolio and try new types of construction projects. Create attractive incentives to retain your employees and appeal to new construction laborers.

Hire skilled workers when possible and stay within your scope as often as you can.

By putting these methods into practice, construction professionals can stay profitable and in business even while the rest of the sector strains.

To talk more about your company’s needs and how to handle a construction labor shortage, talk to a FOUNDATION® specialist today.