Looking for Labor: How the Labor Shortage is Increasing Costs

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Construction of homes and commercial buildings is up significantly this year. But the industry would be blazing with production if it weren’t for a substantial labor shortage.

With unemployment on the decline, the overall improved economy and labor market seems to be back on track, with everything running smoothly.

But with a lack of skilled workers, construction firms are struggling to grow. Especially considering several workers left the field during the recession and have no desire to return to the labor market.

Associated General Contractors of America (AGC) reported 85 percent of construction companies in the Northeast have a difficult time finding qualified employees.

The industry took an exceptionally hard hit during the recession and saw a significant loss in jobs during. The unemployment rate in construction has not fully recovered from the recession and is still up compared to pre-recession lows during 2005-2007.

The projects are there, but the labor crux has caused firms to turn down new business, which especially affects building activity and economic growth.

Perhaps the largest effect is the raising cost for home building and commercial projects, which has a rippling effect throughout the industry.

Meanwhile, the pipeline of new workers has thinned over the years.

Several high schools have gotten rid of shop building programs as more people pursue 4-year college programs and white-collar careers.

Not to mention, it takes companies a significant amount of time to fully train workers to get them to fully qualified.

Firms have used varying techniques to combat this trend, including an increase in pay, benefits and bonuses as the most common.

Using subcontractors and staffing firms have also increased for construction companies.

Given the current shift and upcoming labor shortage, construction firms will face a challenge in where the find eligible workers to complete jobs and projects.

In order to keep competitive labor costs in control, one likely trend in the future to manage labor shortages will be companies and associations banding together in an effort to train employees and create the skilled workers themselves.

But the issue remains: The shortage has pushed up labor costs and will increase construction durations.

Commercial builders are using computer modeling, GPS systems and drones to become more efficient in an effort to do more with a scarcity of workers.

And not only is the deficiency hurting builders’ ability to increase revenue, it is starting to affect their ability to take on projects, while increasing costs significantly.


Provided by Steve Sperling of Schoppman Company, Inc.,
(770-564-3462 or steve@schoppman.com).

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