Labor Instability in the Construction Industry

Construction was facing labor shortage issues before the arrival of COVID-19. Now, the industry faces even more labor impacts, just as growth seems imminent. Let’s take a deeper look at this instability and consider how you can chart a path forward.

The cause of current instability

Unlike other industries, construction businesses have not yet felt the full impact of COVID-19. Existing backlogs and stalled projects have resumed. The impact of COVID-19 is not about the work itself, but its impact on the pre-existing shortage of laborers.

A steady number of incoming construction employees will not solve the problem as projects restart. The industry was already in need of more labor, meaning you must hire enough workers not only to meet the need, but also the excess demand. While this can bring challenges, there are a number of ways to bolster your workforce:

• Hire skilled workers away from competitors
• Look for trainable workers among the newly unemployed
• Bring on high school graduates and college students studying from home

Labor instability causes a vicious cycle: you’re forced to operate on slimmer margins to keep existing workers well paid, which diminishes your ability to attract new workers with premium wages. To survive, you must prepare to deal not only with the ongoing labor instability, but also constant global changes.

Steps to prepare

Plan your work.
You often hear, “If you can’t control labor costs, you can’t make money.” Accurately estimating materials, subcontractors (if necessary), and labor costs is critical to your success. While materials and subcontractors may be controllable through purchase orders and contracts, labor remains a huge variable. Unforeseen delays add hours, days, and weeks to a job and crush profitability. It’s imperative to plan each job, understand the details of the labor associated with it, and manage accordingly.

Work your plan.
Tracking is an area construction managers, owners, and contractors can improve. Precise coordination of where and when staff should be placed increases their efficiency. Tracking the workforce with new technology can automate this process.

Tracking isn’t about spying on your workers. Monitoring their output shows obstacles you can help remove and keeps employees from being overworked. Helping employees leads to better production and less turnover.

Reduce labor needs.
Incorporate pre-fab work as another labor-saving process to reduce the time required for a job. You also get the benefit of controlling materials costs.

Use technology to automate simple tasks and save your workers hours of toil. This decreases tedium and increases morale.

These changes might take some creative measures you’ve never considered. However, the severity of the construction labor shortage requires a thorough assessment of your business operations in order to overcome potential impacts. If the labor uncertainty isn’t directly affecting you now, there’s a good chance it will in the future.

Opportunities to improve the industry

While it’s important to keep your business prepared and identify ways to preserve your own workers, you can also help the construction industry deliver a more sought-after career.

Grassroots and corporate efforts have been initiated to spur an increase in skilled labor. Apprentice programs and scholarships aim to lure students toward skilled crafts.

For example, Home Depot has committed $50 million toward skills training, with the hope of adding 20,000 new laborers over the next decade. Similarly, Lowe’s offers tuition assistance and incentives for its employees to learn skills such as plumbing or carpentry. The company also teamed with a group of its suppliers to initiate Generation T, an online marketplace for jobs, apprenticeships, and education programs in construction.

Trade associations, contractors, and industry-supporting professionals are working at the grassroots level to form Architecture Construction Engineering (ACE) chapters, and various scholarships and investments designed to increase and supplement the future workforce. Today, skilled laborers can enter the workforce out of high school or vocational training with higher starting salaries than many white-collar college grads — and typically with far less debt.

The construction industry has resisted the tech revolution. Whether small businesses can’t justify the expense or workers carry an ingrained, old-school “this works best” mentality, it’s a mindset that needs to be updated.

Technology could be a major element in overcoming labor uncertainty — not only because it saves time and provides automation of routine tasks, but also because it enhances the role of the construction worker.

Many of today’s students don’t see construction as high-tech. Its reputation is still that of a hammer and toolbelt. Play up the different ways technology is used in construction to make the industry more attractive to potential workers.

None of these efforts alone will solve the construction workforce problem. Answers must come from many perspectives, including local involvement, technology investment, and genuine creativity with the allocation of resources and jobs. Your job is to analyze your business and compensation packages, benefits, resources, incentives, and possible ownership stakes, and to take steps to make sure you are attracting the right employees.

How we can help

Many construction businesses started with a truck, a set of tools, and a dream. A different perspective may help make the most of that dream. Our construction industry professionals can help you position your organization today for a better tomorrow.

There’s a reason we were named the number one ranked national construction accounting firm in 2019. Contact us today to learn why more than 9,000 construction clients choose to work with CLA.

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