Why is There a Labor Shortage in the Construction Industry? (and How to Fix It)
The American construction industry. is grappling with a severe labor shortage due to factors like an aging workforce, declining interest in vocational careers, and a shift in economic priorities.
This shortage has had far-reaching consequences for the industry as a whole, including slowed project timelines, increased costs and, in some cases, has led to safety concerns on job sites.
With job openings rising to over 459,000 by late 2023, construction firms must find solutions quickly to stay competitive.
But why is this happening, and what can be done to bridge the gap? This article explores the root causes of the skilled labor shortage and discusses effective strategies the construction industry can employ to resolve it.
The Skilled Labor Shortage in Construction
The skilled labor shortage in the U.S. construction industry is one of the most pressing challenges faced by contractors today.
According to the Associated Builders and Contractors (ABC), the industry will need an estimated 501,000 additional workers beyond the normal hiring pace in 2024 to meet projected demands.
This shortage has been exacerbated by several factors, including the retirement of experienced workers, a lack of interest from younger generations, and the lingering effects of the COVID-19 pandemic.
To give an idea of the scale of the construction labor gap, as of November 2023, there were 459,000 job openings in the construction sector. This is a stark contrast to the 413,000 job openings in December 2022 and the 378,000 openings in July 2023, highlighting the growing demand for skilled labor.
Moreover, the U.S. Bureau of Labor Statistics predicts that over 41% of the current construction workforce is expected to retire by 2031, adding a mounting pressure on the intensifying the labor gap.
With such significant vacancies and an aging workforce, construction businesses are facing huge personnel issues, leading to delays in project completion, increased costs, and operational inefficiencies.
Why is There a Labor Shortage in the Construction Industry?
The 4 key factors that have led to the skilled labor gap in the construction industry include:
- An aging workforce
- A lack of interest in construction from younger generations
- Economic and market forces
- Impacts from the COVID-19 pandemic
Reason 1: The Aging Workforce
One of the most significant contributors to the labor shortage is the aging 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 ABC Chief Economist, Anirban Basureports, today over 1 in 5 construction workers are over 55, with the average retirement age being set around 61 within the industry.
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 labor shortage is the dwindling interest in construction careers among younger generations.
Brian Turmail, Vice President Of Public Affairs And Strategic Initiatives for AGC (Associated General Contractors) recently discussed how one of the longest leading causes for construction’s understaffing issue began about half a century ago. During this time, the country moved from an industrial to a post-industrial, service-based business economy.
Since then, the number of young people enrolling in degree-granting postsecondary institutions has more than doubled. In 1969, 8 million students were enrolled, including 5.8 million full-time students. By 2019, this had risen to 19.6 million, with 12 million attending full-time, according to the National Center for Education Statistics.
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, which has led to a shortage of new workers to replace those retiring.
Reason 3: Economic and Market Forces
Economic influences, including inflation, rising costs of materials, and supply chain disruptions, have added to the challenges in hiring and retaining construction workers.
Labor costs have surged alongside other operational expenses, making it harder for firms to compete for the shrinking pool of skilled workers.
According to the Associated General Contractors (AGC), the percentage of companies identifying labor costs as a primary concern jumped from 58% in 2022 to 63% in 2023.
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 labor market post-pandemic, particularly in construction.
Reason 4: The Great Resignation and Pandemic Impact
It is impossible to talk about the current skilled labor shortage without referencing the still palpable effects of the pandemic.
COVID-19 increased the construction labor shortage, with many workers leaving the industry due to health risks, job insecurity, or to pursue new opportunities with a better work-life balance.
In March 2022, the construction industry saw a quit rate of 3.3%, the highest in 17 years. 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 less 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.
Access Coins ERP – Developed by and for construction experts
Access Coins is an all-in-one ERP that covers everything from cost forecasting to workforce management.
How to Fix the Construction Industry Labor Shortage
Addressing the labor 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 labor 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 labor shortage is by targeting the next generation of workers early.
Construction firms should invest in outreach programs that engage high school and college 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 labor 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.
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 prioritize this, by providing paid vacation 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 labor 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 to 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 labor-intensive.
Embracing new technologies like automation, prefabrication, and augmented reality can help reduce reliance on manual labor 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 processes 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.
Navigating The Labor Shortage
The skilled labor shortage in the construction industry is a complex challenge that requires multifaceted solutions.
Factors like an aging workforce, lack of interest from younger generations, economic uncertainties, and the pandemic’s lasting effects have all contributed to the shortage.
However, with proactive strategies such as investing in recruitment, offering competitive compensation, prioritizing training and career development, and embracing modern technology, the construction industry can reverse these trends.
Building a sustainable and diverse workforce is key to the industry's future, ensuring projects can be completed on time, within budget, and to the highest standards of quality.
Access Coins ERP – The All-In-One Solution to Manage Your Construction Business
Access Coins is designed specifically for the construction industry, offering a comprehensive ERP system that helps businesses overcome challenges like labor shortages, project delays, and rising costs.
- Collaborate, control, and connect – manage every aspect of the construction lifecycle from a single, integrated platform.
- Increase efficiency and transparency – gain real-time insights into your projects and financials with centralized data for better decision-making.
- Tailored support and training – benefit from expert implementation, ongoing product training, and dedicated customer service.
Ready to optimize your operations? Request a Demo of Access Coins today!
