Labor shortages have persisted in the construction industry for years—but where specifically are we seeing the most lags and what exactly comes next? Let’s explore these questions today by looking at data from new reports.
Capstone Partners recently released its May 2023 Construction Services Sector Update, which gives a glimpse into market trends. While macroeconomic headwinds have challenged the construction services space, sector participants have remained optimistic in their outlook for operating performance. Notably, contractors expect growth in sales, profit margins, and staffing during the next six months. These projections have been supported by healthy construction spending, which increased by 5.8% year-over-year as of January 2023.
Still, hurdles remain in the construction industry such as elevated interest rates, high material costs, and of course the labor shortages, which have been a main challenge for several years. The numbers paint an interesting picture of where certain segments are today and where we are headed.
What Is the Status of the Shortage?
Overall, while employment in the construction space increased 2.5% year-over-year in March, the industry lost 9,000 net jobs month-over-month.
Only two segments added jobs from the previous month: heavy & civil engineering and residential building. Notably, backlogs in the heavy industrial and commercial and institutional segments increased by 2.5 months and 0.7 months, respectively in March.
Looking to the future, industry employment will likely continue to lag demand, as roughly one in four construction workers are over the age of 55 and nearing retirement age. This demographics shift is perhaps one of the greatest concerns facing the labor shortage today. World Bank suggests in the next decade the number of people who are working age will decline in the United States by more than 3%.
One of the largest generations in size, the Baby Boomers are gearing up for retirement, if they haven’t done so already. Every day roughly 10,000 Baby Boomers turn 65, which means every year potentially millions of people are exiting the workforce in droves, and it is impacting many vertical markets, including construction.
What Comes Next?
In the years ahead, workers will continue to retire, and the construction industry will be tasked with attracting talent to the AEC (architecture, engineering, and construction) industry.
In an article penned by Claire Rutkowski, SVP and CIO Champion, Bentley Systems, she recommends if we promote the higher purpose of the industry, we should be able to bridge the workforce gap. Together, she says we can build a better world for today, tomorrow, and future generations.
Attracting and retaining the right workers is certainly the first step, which can be done in myriad ways including through mentorship, incentives, and appealing to a higher calling. Technology will also enter this equation. AI (artificial intelligence), digital transformation, and digital twin will transform jobsites as we know it. This technology will serve to fill in the gaps in the workforce, while also attracting a younger generation to consider a high-tech career that can make a difference in the world.
The bottomline is this is a challenge that needs to be addressed. Construction needs young workers—and the industry needs to bring more workers into the fold. Technology will certainly factor in. What are you seeing in your own business?
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