Unstable Markets

Skilled Labor Shortage

News Flash – Consumer prices rocketed higher than expected last month, jumping 6.2% annually for their biggest increase in 31 years, the Labor Department reported.

We have redefined unstable markets to mean not only variations in revenues but also market conditions that bode against stable operations and profitability. As we have said, markets are rendered unstable not only by revenue fluctuations, but also by after-contract signing cost inflation, contentious labor relations, competitive tensions, inconsistent government regulations, contract negotiations and owners’ commodity view of contracting services. All these factors add up to perpetually unstable market environments that challenge profitability and gradually erode contractors’ capital footings. (Remember, the lack of adequate capital is the number one cause of contractor failure.)

Shortage of Skilled Labor 

As of July 2021, the Bureau of Labor Statistics reports that there are 300,000 unfilled construction jobs nationwide. Contractors say that the unemployment benefits provided by the federal government incentivize not returning to work, and that the shortage of skilled labor is only temporary. After all, they say, the unemployment stats are easing already. When the benefits run out people will have to return to work. 

Research, however, contradicts this simplified view of the construction labor market. A recent study by the Federal Reserve of San Francisco reveals that the pandemic stimulus unemployment benefit is only one small factor impacting the job-finding rate in construction. Construction is struggling with long-standing employment issues that have been shrinking the labor pool for many years.

Unattractive Construction Career Opportunities

In post war America (1946 -1966), building trades were consider highly desirable well-paid “professions” that were difficult to gain access to. By 2021, that image has been tarnished. Young people now entering the labor market no longer see skilled construction trades as desirable careers:

  1. Young potential employees now see building trades as hard, dirty, dangerous, unglamorous work that most of them believe they would rather avoid and opt rather for the “college” education that they feel will gain them entrance to white collar management jobs.
  2. A second misperception the study revealed is that young people think construction workers earn low wages. This is why recent high school graduates prefer a “temporary” job at McDonald’s rather than entering a construction trade apprentice program. This in spite of the high hourly wage in construction–the perception seems to be low annual earning. (See next item.)
  3. A third misperception is that construction employment is not perceived as a steady job—Constantly affected by the weather and in large areas of the country cyclical–where workers are busy in the summer and often idle in the winter. While not always the case, this seasonal image persists.
  4. Study respondents also cited the lack of comparable employer healthcare and other benefits. (These of course vary, particularly between union and open shop employment)
  5. There is also a significant gender disparity in construction employment – according to the Bureau of Labor Statistics. This disparity leaves construction in a deficit position, considering the growing number of women in the US workforce.
  6. People ready to return to work after the pandemic are being more selective. Some individuals, especially those with accounting or project management experience, are being hired by other industries.
  7. And finally, the construction labor pool is aging. Beginning in 2022, the US Department of Education estimates that 4 out of 10 construction workers in the United States will retire by 2031. (Early retirements during the pandemic may also be a factor.)

A Unified Approach for Changing the Perception of Construction Careers

Ultimately, addressing the labor shortage in construction, particularly with skilled trade workers, will take a coordinated effort to educate, recruit, and retain workers, requiring close interaction between companies, industry leaders, workforce development programs, schools, and government.

An industry approach to this critical shortage of skilled labor should emphasize:

  1. The redevelopment of apprenticeship programs – The pandemic disrupted the operations and funding of many construction training programs, and it will be an important part of recovery efforts to revisit and reaffirm government support for those programs where possible. Government should be encouraged to work closely with the community college system, for example, as some may have capacity and desire to expand their building trades programs to meet increased demand but may not have the physical space or capital to fund that expansion. Increased investments by government could also include more scholarships for certification and training, especially for underrepresented or nontraditional construction workers. While it is important to focus on youth engagement, the potential career trajectories of incumbent workers also must be considered.
  2. Renewed commitment to diversity – Our male dominated industry must take a fresh look at itself if it is to compete for workers in the modern age. Although there are nearly one million women in the industry, many of them are in leadership roles in family-owned companies. Construction companies must be more proactive in recruiting women to fill the skilled trade roles so sorely needed. History has proven that when women were needed to fill traditional male roles in industry during wartime or economic depression, they willingly and seamlessly slipped into the roles successfully. The construction industry will not be able to flourish without them in the future.
  3. An Executive Role – Every construction concern, large and small, must gain access to an executive position for personnel management. This is an investment that the construction company of the future cannot afford to forego.

Contractors must stop competing in an ever-shrinking labor pool and join together to execute an overall construction industry solution to this critical shortage of skilled labor. 

More on stability of the construction market next week.

For more information recruiting and training of employees, read more at: https://simplarfoundation.org/?s=employees

For a broader view on the organizational change, read more here: https://simplarfoundation.org/?s=organizational+change

To receive the free weekly Construction Messages, ask questions, or make comments contact me at research@simplarfoundation.org.  

Please circulate this widely. It will benefit your constituents. This research is continuous and includes new information weekly as it becomes available. Thank you.