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Pressure Mounting for Skilled Labor

Posted: April 24, 2018

With construction employment increasing by 228,000 jobs in March, it would appear 2018 is shaping up to be another strong year for the construction industry, placing even more pressure on the skilled labor shortage.

“Employment is rising twice as fast as for the overall economy, pay rates and growth are outpacing the private sector as a whole, and the industry’s unemployment rate was the lowest ever for March,” said Ken Simonson, chief economist with the Associated General Contractors of America.

With a proposed $1.5 trillion in government spending for road and bridge infrastructure projects, there is a lot more chatter around how the industry will cope with the continuing labor shortage. How exactly did we get here? Today’s skilled labor shortage can trace its roots back a decade ago to when the bubble burst. As a result, the industry lost roughly 900,000 skilled workers or 22% of the workforce. Even as the market rebounded, it has been difficult to attract new workers, particularly younger ones, to replace those reaching retirement age. Today over 40% of the construction workforce are Baby Boomers.

In addition, more than 70% of firms struggle to find qualified workers with contractors reporting shortages of electricians, carpenters, and most positions. Anirban Basu, Chief Economist of the Associated Builders and Contractors, told the Wall Street Journal that the situation was getting worse, even though labor costs were rising 4% to 5% annually and outpaced inflation.

Combating the Labor Shortage

Not surprisingly, competition is fierce when it comes to hiring and retaining skilled workers. Clearly, contractors are getting more creative as they deal with high demand and a low supply of workers. For example, some contractors are dedicating staff to search for workers at high schools, trade schools, and military bases. Other contractors are investing in technology like new software and encouraging workers to get trained for key roles like construction estimator.

For most contractors, it is a pretty simple proposition. If they want to ramp up hiring in the coming months, they will need to increase pay and offer lucrative benefits. This is exactly what happened in Fort Myers, FL, as workers flocked to construction jobs after Hurricane Irma caused a surge in trade wages in an already tight labor market.

As a result, skilled construction workers have seen their wages rise more than 16% over the past four years, more than double the industry average. Skilled workers should continue to experience above-average wage growth, with wages averaging above 3% growth through 2020, according to IHS Markit.

In fact, the AGC reported that hourly earnings in the industry averaged $29.43 in March 2018, a rise of 2.9 percent from a year earlier. They say these employment figures show the industry continues to create high-paying, long-term jobs and there is a critical need for more workers. The AGC is urging government officials to re-invigorate and adequately fund career and technical education programs.

Attracting Millennials is Key

The fact that most high schools have dropped vocational training and fewer young people are enrolling in colleges for technical skills has had an impact. Nonetheless, the oft-repeated advice about focusing on Millennials will continue to be true throughout 2018.

By adding younger workers, contractors can make sure the older generation’s career knowledge and intellectual capital are captured before they retire. Tech-savvy Millennials are eager to transition project data from ledgers and file cabinets into digital data. In fact, one way to attract and retain Millennials is by providing the latest and greatest technology. Practically born attached to a smartphone, they are always ready to multitask or embrace any new tool or app.

Take a Look at Your Hiring Process

With 2018 already showing strong demand, many contractors are worried about how they will recruit, train, and retain skilled workers. The Bureau of Labor Statistics reported there were nearly 150,000 unfilled construction jobs across the country in 2017, nearly double the number five years ago.Is it time to revamp your hiring process to keep pace? On Center Software can help. Recognizing that construction estimators are particularly sought after, we created a How to Hire a Great Estimator guide. Our easy-to-follow, 7-step guide provides great tips that you can apply to just about any area of the construction business. Download it now.

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