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The Impact of the Construction Labor Shortage

Employers are finding they are facing a serious challenge when it comes to hiring employees, and particularly those people that would fall into the category of skilled labor. The pandemic left a lasting impact in many ways.

While millions of Americans lost their jobs because of the pandemic and are looking for work, millions of skilled trade jobs aren’t filled.

Construction is one industry being especially hard hit. Construction work often requires skills in dealing with engineering and heavy machinery and not just anyone can fill these jobs successfully.

The following are some things to know about the labor shortage in construction right now, as well as the general difficulty employers are having filling in-demand positions.

Why Is There a Labor Shortage?

There’s been some speculation that the general U.S. labor shortage could be due to long-term enhanced unemployment benefits still stemming from the pandemic, but analysts say there’s more to it than that.

There are likely different factors all playing a role simultaneously.

For example, baby boomers are retiring in droves, and there aren’t enough people to fill the roles they’re leaving.

There is also the fact that a lot of people can’t take jobs right now because they’re still caring for kids who haven’t returned to school.

Other factors that are playing a role in the shortage of skilled tradespeople in particular include less investment into apprenticeship programs and less enthusiasm in the younger generation for this type of work. A lot of younger workers want to do jobs that are tech-driven rather than skilled labor.

The Effect on Housing Availability and Affordability

The impact of a lack of employees for skilled positions is being seen across industries, and it has ripple effects.

The construction industry is one good example.

The construction industry is facing a shortage of workers totaling 200,000, according to a report released by the Home Builders Institute.

The shortage of skilled trade workers directly employed by builders and subcontractors is affecting all regions of the country. Nationally, builders say their challenges in filling positions are among their biggest concerns.

The 200,000 figure is actually from data compiled at the end of 2020, and by January of this year, the shortage had risen to 309,000. Currently, there is an estimate that 430,000  more construction workers need to be hired this year to meet demand.

Around 60% of builders said they had a worker shortage.

This only includes the labor a builder directly employs, and around 80% of the work to build a home is done by subcontractors. There’s an even more crippling lack of supply of subcontractors.

Labor is anywhere from 30 to 40% of the total cost of building a new home, and that is going up because there is such a shortage.

Housing supply is already at a record low, and demand is high, so affordability is becoming an increasing problem.

It’s not just construction that is feeling these effects. Most other industries are as well. For example, the trucking industry has faced a massive shortage that has contributed to supply chain disruptions.

What Can Companies Do?

The above only highlights the issue for homebuilders, but across the board in commercial construction as well as other fields where skilled labor is essential, the story is the same.

So what can companies do?

There are a few things:

First, they can work with third parties to outsource as much of the work as they can.

It’s also important to use technology to improve efficiency. For example, construction software can help improve efficiency and reduce wasted resources in terms of time and money.

Employers are also going to have to start investing in training, apprenticeships, and mentorships like they used to. This is probably the single biggest way to start filling the skills gap. Companies have to dedicate the resources to fill their own talent pipeline.

There’s something else that a lot of experts are saying will be critical to fill jobs in construction and other skilled trades, and that’s raising the pay.

There’s been debate politically about raising the minimum wage, but because of a lack of employees right now, it may be that companies raise their pay on their own without legislative action in order to be competitive in their hiring.

Wages have been fairly stagnant in the past few decades, relatively speaking, so this could be the situation that gives them a spike.

If employers don’t find ways to adapt to the labor shortage, they’re going to undoubtedly face other challenges and have a difficult time staying afloat.

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