The labor shortage is nothing new for this industry

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Tuesday, April 5, 2022

There’s a widespread labor shortage across the country, but that’s nothing new for the construction industry.

During the homebuilding boom of the early 2000s, there was a lack of construction workers that was briefly cured when the housing market collapsed during the Great Recession and foreclosure crisis. But the industry never quite recovered from that downturn. The droves of construction workers who joined other burgeoning industries like retail (think growing chains like Home Depot or Lowes) and energy never returned. That coupled with ongoing jobs lost due to an aging pool of skilled workers — the median age of a construction worker is 41 — has left the industry in a dire situation.

“The construction worker shortage has reached crisis level,” said Home Builders Institute (HBI) president and CEO Ed Brady in a recent statement.

The numbers are staggering. The construction industry will need to attract nearly 650,000 additional workers on top of the normal pace of hiring in 2022 to meet the demand for labor, according to the Associated Builders and Contractors. Meanwhile, the HBI said 2.2 million new workers are needed within the next three years to meet housing demand.

While COVID-19 didn’t halt the construction business since it was deemed essential, the pandemic created a behavioral shift that increased the desire for more (and larger) homes. On the commercial side, with the e-commerce boom fueled the need for more data centers and fulfillment centers. All of which increased the need for more workers.

“Pandemic-driven labor shortages are being felt across the board in nearly every industry,” Brady told Yahoo Finance in an email. “Homebuilders now must compete with far more businesses for the same workers... That’s requiring them to rethink not only wages and benefits, but also how they can improve work environments and career opportunities.”

As wages climb well above pre-pandemic levels, construction companies that pay pretty well — March’s average hourly earnings was $34.07 compared to $31.73 for all private sectors, according to BLS — are now competing against retailers like Amazon and Burger King, where the job is not as physically intensive, for entry-level workers.

“When construction company CEOs raise wages, they become less competitive,” said Associated Builders and Contractors Chief Economist Anirban Basu, noting that construction companies can’t pass on higher expenses to consumers like retailers or restaurants, for instance. Also, construction companies win projects by offering the lowest bid.

Basu prefers to call what the industry is facing “a skills shortage.”

“It’s the lack of skilled workers as much as it is the lack of bodies in the context of construction,” he added. ”With infrastructure spending set to rise and construction workers retiring at a rapid rate, skills shortages are likely to worsen going forward.”

The pandemic brought about the Great Resignation and pushed Baby Boomers to retire early. They were the “finest and most productive. They honed their skills over many decades,” Basu said. “These are folks who took shop class in high school.”

Basu added that "construction workers ages 25-54 fell 8% over the past decade."

Trade groups in the industry are aware of the problem and have amped up training programs to attract younger folks to the trade. Just yesterday, former NFL quarterback Drew Brees’ foundation announced the launch of a new educational facility in Kenner, La. for training Louisianans in the skilled trades for construction in alliance with the HBI and other firms.

“Older workers are retiring and are not being replaced because the U.S. has not produced an adequate supply of construction labor for several generations,” Brady said in a press statement. “Solving the problem will take a collective effort by the construction industry, educators, policymakers, and those who influence young people’s career decisions.”

By Amanda Fung, an editor at Yahoo Finance. Follow her at @amandafung

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