The construction industry in the United States is expected to grow considerably over the next several years. This growth may create millions of new jobs. However, the construction industry today faces the worst labor shortage in decades, leading to significant wage increases due to intense competition among employers offering higher pay and benefits. 

Other sectors, too, including warehousing and transportation, are competing for the same labor pool. As a result, experienced construction workers are increasingly tempted to migrate to these other sectors, hoping to benefit from higher wages and improved working conditions.


The Labor Shortage Shows No Signs of Letting Up 

The shortage may persist because job openings no longer exhibit their historical relationship with unemployment. Two years following the onset of the coronavirus, the unemployment rate in the United States stagnated despite a remarkably high number of job openings. Several root causes may explain this phenomenon.  


Some are structural, while others have a short-term cyclical nature.  

  • Many baby boomers retire earlier than anticipated. 
  • Unemployed workers hesitate to return to work due to mental health, physical health and childcare concerns. 
  • Nonwage benefits, such as work autonomy and supportive management, are becoming increasingly salient among construction workers. 
  • A post-pandemic failure to quickly restart training programs restricts the influx of new construction workers. 
  • A drop in net migration due to COVID-19 travel restrictions has made it difficult for the construction industry to attract foreign workers.


The Impact of the Labor Shortage on Projects 

The labor shortage’s ripple effects reverberate through the project supply chain and life cycle. Higher wages, benefits and premiums have doubled the overall labor costs of project execution. At the same time, job-site productivity and quality issues are increasing the number of reported project delays as owners struggle to find skilled and experienced workers.  

Falling productivity correlates with sharp rises in wages, which are hitting historic highs in some US cities. Consequently, project owners have resorted to extending project timelines by up to 25 percent. The long-term impacts of the labor shortage in the construction industry may be even worse as oil companies absorb new workers across the United States. 


Restoring Balance in the Sector 

The current labor shortage calls for thoughtful plans to prevent further project delays, dips in productivity, and wage spikes. Construction companies should find new ways to minimize job-specific labor content and prop up project development by innovatively redesigning projects. 

Companies in the sector can attract workers by accelerating the training of recruits, reviewing nonwage benefits, and proactively building pipelines for future employees. This could mean reducing the time it takes to onboard candidates who pass interviews and shrinking hiring timelines.  

C-level executives could personally steer systematic programs for attracting and retaining talent to renew growth and increase profitability across the entire value chain. These programs must address availability gaps and labor needs now and in the future. Meanwhile, project contractors and owners should consider replacing traditional contracts with more collaborative ones. 


Unraveling the Labor Mismatch 

The current environment has provided the US construction industry with an opportunity to fuel inclusive growth and bolster the economy as it rebuilds the country’s infrastructure. But it must first resolve the ongoing labor shortage by uncovering diverse ways of creating better jobs, improving productivity and revitalizing the entire value chain. 

Labor shortages are just one of the many uncertainties the construction industry is facing. Equipment shortages, new regulations, and rising surcharges create a challenging environment for fleet planning. Our team of equipment experts are well-versed in these challenges and are ready to help you navigate these uncertainties. Contact us today.