At the start of the fourth quarter of 2018, the unemployment rate in the U.S. fell to 3.7 percent compared to about 3.8 percent in the third quarter of 2018, exacerbating the existing tight labor market. The sectors affected are construction, manufacturing, retail trade, accommodation & food services, and healthcare.
The construction sector, a labor-intensive work area, will be further plagued with skilled-labor shortage in the coming quarters. According to the USG + U.S. Chamber of Commerce Commercial Construction Index, the third quarter of 2018 marks the sixth straight quarter where contractors have reported concerns over the availability and skill levels of workers. As of October 2018, the unemployment rate for the construction sector stands at 3.6 percent, adding to woes. The situation can be attributed to the country’s demographics — where the population is getting older and jobs within the construction industry are not appealing to the millennials — social outlook and the new immigration policy under President Trump.
Implications of Labor Shortage
- Aggressive Scheduling and Safety Risk
Aggressive scheduling with a scarce talent pool may force the use of workers with limited experience and/or training to work longer hours, compromising the safety processes.
- Higher Project Costs
Increased demand for construction combined with the labor shortage has compelled certain construction companies to increase the base pay or provide bonuses to attract workers, which has resulted in higher project costs.
- Tactical and Unethical Approach
To stay competitive, companies are overlooking the skill requirements. Some employers have turned a blind eye to the drug use and loosened drug testing policies. In the long run, these measures will put workers in unsafe circumstances and increase wounds and liabilities.
How to Deal With Labor Shortage
Currently, there are about 200,000 vacant positions in the construction industry, and by 2022, this number is expected to increase to about 1.5 million. There are, however, ways in which the impact of the construction labor shortage can be mitigated:
The construction industry is slowly adopting technologies to address concerns caused by the labor shortage. Robotics, specialized project management software solutions, drones, autonomous vehicles and exoskeletons are technologies being used on job sites to attract younger and more tech-focused talent and perform difficult, extraneous and time-consuming construction activities. They are also helping to improve the speed and accuracy of job site communications that can prevent costly delays and rework.
- Leveraging the Aging Workforce
When non-skilled candidates are the only option to hire, the benefits of retaining the aging workers are immense, starting with their institutional knowledge to mentor younger employees.
- Re-Engage at the Student Level
The state of California has made some headway in promoting awareness on the construction industry by allocating $1.5 billion in funding to enhance vocational and technical education programs in public schools.
The labor shortage is expected to drive up wages, which will have a significant impact on operating costs. The contractors might be able to sustain the increased operating costs (to retain or attract talent) amid a stable economy and adequate new business opportunities over the next 12 to 24 months.
In the long run, technology will be helpful to alleviate the challenges caused by the labor shortage. However, the best mitigation strategy that contractors can resort to is by developing millennial workers.