With the construction industry in most of the country now several years into a recovery, many firms have gone from worrying about not having enough work to not having enough workers. Nationwide, 73 percent of firms report they are having a hard time finding enough qualified workers to hire according to our 2017 Construction Hiring & Business Outlook we released with Sage earlier this year.
It also appears that labor shortages are not going away anytime soon. Seventy-five percent of firms report it will continue to be hard, or get even harder, to find hourly craft personnel over the coming 12 months. One reason for this pessimism is that demand for construction continues to grow in many parts of the country. Indeed, construction employment is at its highest level since 2008 while construction spending levels continue to grow.
Contractors also worry about the poor quality of the pipeline for recruiting and preparing new craft workers. Three-quarters of our member firms rate the new craft worker pipeline as poor or fair while only 14 percent said it was good or excellent, according to a workforce survey we released last summer.
Tight labor market conditions are prompting many firms to change the way they compensate employees. Nearly half of construction firms report they have increased base pay rates for craft workers because of the difficulty in filling positions. Twenty-two percent have improved employees benefits for craft workers and 20 percent report they are providing incentives and bonuses to attract workers.
Many firms report they are doing more training and changing the way they operate to cope with workforce shortages. Forty-eight percent report they are doing more in-house training while 47 percent report they are increasing overtime hours and 39 percent are increasing their use of subcontractors.
It is important to note, however, that there is not a single labor market for the entire country. In certain parts of the country, West Virginia and Kansas are recent examples, demand for construction is shrinking. And—due to chronic underfunding of our infrastructure—highway and other civil works firms have not experienced as much growth in demand for construction as have other segments. As a result, these firms may be less likely to having difficulty filling positions to meet potential growth in demand for their services.
Yet the bottom line is that many construction firms across the country are facing significant workforce shortages, especially within the largest segment of the workforce, hourly craft workers. These shortages are forcing firms to increase pay and benefits and adopt labor-saving tools and methods.
Yet these strategies can only go so far for an industry that remains heavily labor intensive. As a result, workforce shortages have the potential to undermine broader economic growth by forcing contractors to slow scheduled work and/or choose not to bid on projects, thereby inflating the cost of new construction.
Construction workforce shortages will not go away without broader changes to the nation’s approach to education and workforce preparation. As we have detailed in our Workforce Development Plan, there are a range of steps federal, state and local officials should take to make it easier for school systems, local associations and construction firms to set up recruiting and training programs.
These measures include reforming and increasing funding for the Perkins Career and Technical Education Act, enacting comprehensive immigration reform, and making it easier to set up charter schools and career academies that teach basic construction skills.
The broader challenge behind growing workforce shortages is that many potential workers, and their families, are likely to view construction as a profession of last resort. Establishing more career and technical education programs within our school systems will go a long way in changing these cultural perceptions.
After all, it’s time to stop signaling to children that the only path to success lies through college education.