Why is There a Labour Shortage in the Construction Industry? (and How to Fix It) 

The skilled labour shortage in the Australian construction industry is one of the most pressing challenges faced by contractors today.  

The key factors that have led to the skilled labour gap in the construction industry include: 

• An ageing workforce 

• A lack of interest in construction from younger generations 

• Economic and market forces 

• Impacts from the COVID-19 pandemic 

Reason 1: The ageing Workforce 

One of the most significant contributors to the labour shortage is an ageing construction workforce. Many seasoned professionals, particularly the generation referred to as ‘Baby Boomers’ (those born between 1946 and 1964) are nearing or have already reached retirement age.  

According to Master Builders Australia, over 25% of Australia’s construction workforce is over the age of 55. The Australian Bureau of Statistics reports that the median age of Australian workers is on the rise, now sitting at 38.9 years old. 

This demographic shift has left a substantial gap in both skilled and managerial roles that the younger workforce is not filling at the same rate. 

Without adequate succession planning and recruitment of younger workers, the inevitable loss of this experienced workforce directly results in a reduction in productivity and knowledge transfer, further widening the skills gap. 

Reason 2: Lack of Interest from Younger Generations 

Another major factor in the construction labour shortage is the dwindling interest in construction careers among younger generations.  

Attracting younger workers to the construction sector is becoming increasingly challenging. One industry report shows that Australia’s young construction workforce (aged 30 and under) grew by less than 1% between 1997 and 2017, compared to over 6% growth in the older workforce (aged 50 and above) during the same period. 

This shift is compounded by misconceptions about the construction industry, where roles are perceived as too physically demanding, offering limited career advancement and low pay. 

As a result, fewer young people are pursuing careers in construction, leading to a shortage of new workers to replace those retiring. 

Reason 3: Economic and Market Forces 

Economic influences, including increasing inflation, rising cost of materials, and supply chain disruptions, have added to the challenges in hiring and retaining construction workers.  

Labour costs have surged alongside other operational expenses, making it harder for firms to compete for the shrinking pool of skilled workers.  

These ongoing pressures mean it’s extremely difficult for developers and construction companies to make a profit, often resulting in project delays, or in worst cases, businesses folding, and projects abandoned.  

This alarming increase highlights the depth of the crisis, posing risks not only to individual firms but to the entire supply chain, from large contractors to small suppliers. 

At the same time, many firms are hesitant to expand their workforce due to economic uncertainty, fearing fluctuations in demand and increasing project risks. This cautious approach has led to a slower recovery in the construction labour market post-pandemic. 

Reason 4: The Great Resignation and Pandemic Impact 

It is impossible to talk about the current skilled labour shortage without referencing the still palpable effects of the pandemic.  

COVID-19 increased the construction labour shortage, with many workers leaving the industry due to health risks, job insecurity, or to pursue new opportunities with a better work-life balance.  

Additionally, the pandemic disrupted supply chains, further stalling projects and reducing the workforce available for immediate deployment. 

This all led to the event now referred to as the "Great Resignation," wherein workers across industries reassessed their job satisfaction, seeking roles with higher pay, better benefits, and fewer physically demanding tasks.  

This shift has made it more challenging for construction companies to attract and retain young talent, a known weakness of the construction sector.  

Addressing the labour shortage in the construction industry requires strategic and forward-thinking solutions.  

Although the construction sector is renowned for being slow to change with the times, construction firms must adopt new approaches to attract, train, and retain young workers, with a focus on both short-term fixes and long-term workforce development. 

Below are some actionable steps companies can take to close the labour gap and ensure a steady supply of skilled workers for the future. 

Fix 1: Recruiting the Next Generation 

One of the most effective ways to address the labour shortage is by targeting the next generation of workers early.  

Construction firms should invest in outreach programs that engage high school and tertiary education students, offering apprenticeships, internships, and summer job opportunities.  

By collaborating with local trade schools and technical institutions, companies can showcase the potential for career growth and stability within the industry. 

Attending career fairs, offering hands-on experiences, and dispelling misconceptions about the industry’s opportunities are crucial. Educating younger workers about the financial benefits, job security, and advancements in construction technology can help reverse the stigma and encourage more people to pursue careers in this field. 

Fix 2: Improving Pay, Benefits, and Work-Life Balance 

To remain competitive in a tight labour market, construction firms must offer attractive compensation packages. Competitive wages, healthcare benefits, family leave, and flexible work schedules are essential in appealing to the emerging workforce.  

Whether or not businesses choose to incorporate flexibility into their workplace, the demand for it is undeniable. Flexibility isn’t just a priority for mature workers or those with young families, it's increasingly being sought by the majority of Gen-Z entering the workforce. 

Moreover, offering non-traditional benefits like mental health resources, wellness programs, and financial literacy training can help enhance job satisfaction and retention. 

While most construction firms can’t afford to increase pay packages amid the current crisis, there are ways to make jobs more appealing without focusing on financials. 

With younger generations becoming more conscientious, the workforce today values work-life balance, and construction companies that prioritise this by providing paid vacation leave time, family-oriented benefits, and flexible working conditions, you are far more likely to attract and retain workers of all ages. 

Fix 3: Investing in Training and Career Development 

There is a growing stigma around construction careers being a ‘dead-end’, or not offering paths for growth and improvement.  

Offering continuous learning and career development opportunities is another critical strategy for addressing the labour shortage. Implementing structured training programs for both new hires and existing employees can help them gain the skills needed for today’s construction projects, including operating modern tools and adopting new technologies. 

Firms should also develop clear career advancement pathways, providing mentorship and leadership training to ensure workers feel valued and have opportunities for growth.  

With a fundamental part of constructions’ workforce en-route for retirement within the next decade, it is more important than ever to establish pathways for the younger generation to learn from their senior peers. 

Not only that, but cross-training employees to take on various roles within the company can improve job satisfaction while also increasing overall workforce efficiency. 

Fix 4: Embracing Technology and Innovation 

Technology is transforming the construction industry, making jobs more efficient and less labour-intensive.  

Embracing new technologies like automation, prefabrication, and augmented reality can help reduce reliance on manual labour and attract a tech-savvy workforce.  

With many young students now looking into career opportunities that cater to their tech-minded skillsets, this is a clear way to bring in fresh talent whilst helping to keep your construction business at the cutting edge. 

Companies that incorporate modern tools and digital transformation will not only gain a competitive edge but will also appeal to younger generations seeking innovative, forward-thinking careers. 

Moreover, using technology to enhance job site safety, such as construction software (like construction ERP), drones, and wearable devices, can all make construction jobs more appealing by reducing risk and improving overall working conditions.