Construction Labor Shortages Pose Risk to Infrastructure Projects

According to the U.S. Bureau of Labor Statistics, the unemployment rate in the construction industry was 3.5% in July 2022. The last time it was lower than this was in September 2019—about six months before the initial lockdowns from the COVID-19 pandemic in the U.S. started.

Despite these low unemployment numbers, 93% of construction firms report they have open positions they are trying to fill. "Among those firms, 91% are having trouble filling at least some of those positions—particularly among the craft workforce that performs the bulk of onsite construction work," said Ken Simonson, chief economist at the Associated General Contractors of America (AGC).

Construction workforce shortages undermine the industry's ability to complete projects on schedule and threaten the success of new federal investments in infrastructure and manufacturing, according to data from AGC and Autodesk. "Construction workforce shortages are severe and having a significant impact on construction firms of all types, all sizes and all labor arrangements," Simonson said.

These workforce shortages are compounding the challenges firms are having with supply chain disruptions that are inflating the cost of construction materials and making delivery schedules and product availability uncertain. Two-thirds (66%) of construction firms have projects that have been delayed due to labor shortages, while 82% have projects that have been delayed due to supply chain challenges, per the AGC report.

One main reason for labor shortages is that most job candidates are not qualified to work in the industry. In fact, 77% of firms reported that candidates lack the skills needed to work in construction or cannot pass a drug test.

Another reason for the labor shortage is unfavorable conditions. "There are still some 40 million Baby Boomers in the workforce—about 25% of the total workforce, many of whom in 'old school' manufacturing roles," according to Forbes. As Boomers retire, younger workers are avoiding manufacturing jobs in favor of technology, healthcare and other means of employment where working conditions and compensation are more attractive.

"Deloitte predicts a shortage of more than two million American manufacturing workers by 2030, representing an opportunity cost of $1 trillion dollars per year," according to Forbes. These challenges are making construction more expensive. 86% of firms have raised pay rates for workers while 70% have passed along rising materials costs to project owners during the past year, per AGC.

The broader economy also is growing at a slower pace than in 2021, further hampering labor demand as firms look to protect profits, stated Insider.

In response to that, construction firms are focusing on preparing future workers for careers in construction. 51% of survey respondents—up from 37% in the 2021 survey—report they have engaged with career-building programs such as high school, collegiate or technical school construction programs, per AGC.

Simonson added that construction firms are boosting investments in training programs. 47% of firms are increasing spending on training and professional development programs, 25% are enhancing their on-line and video training capabilities and 16% are using augmented and virtual reality technology to better train workers.

-Jamilex Gotay, editorial associate