Construction Industry Growing Labor Shortage: General Contractors’ Universal Nightmare

Keeping projects running on time and within budget is the lifeblood of any General Contractor’s business, but with the current labor shortage, it’s becoming increasingly difficult. The labor shortage crisis is slowing down productivity and profitability and affecting the availability and quality of projects General Contractors can take on.

Key Takeaways:

• The construction industry must hire 650,000 new workers to meet the demand
• 1.2 million construction workers will leave their jobs in 2022 to seek work in other sectors
• Shifting age demographics means the number of skilled workers in the field is decreasing
• Labor shortages can lead to increased costs, delayed projects, and lost contracts
• Investing in workforce training, leveraging technology, and building relationships with reputable contractors can help mitigate the labor shortage

Construction sector labor shortages continue to plague General Contractors as hundreds of thousands of available positions remain unfilled. According to an Associated Builders and Contractors (ABC) analysis, the construction industry needs an additional 650,000 workers to meet the current demand. But the worst is yet to come, as 1.2 million workers are projected to ditch their construction jobs to work in other industries.

The lack of available workers means General Contractors are forced to work with fewer resources, resulting in delayed projects, lost contracts, and increased operating costs. When there are fewer workers, those who remain can often demand higher wages, further straining bottom lines.

Luckily, there are several steps General Contractors can take to minimize the impact of labor shortages. Working with a trusted professional with a strong and stable workforce can help you avoid productivity headaches, allocate resources more effectively, and increase overall profitability. 

Leveraging new technologies and processes like prefabrication, modular construction, off-site manufacturing, and automation can also minimize the impact of a labor shortage. Read on for more insights on why the industry is facing a labor shortage, how this poses a challenge to General Contractors, and strategies you can use to minimize its impact on your business. 

Why the construction industry is facing a labor shortage

The labor shortage in the construction industry has been a generational issue. Baby boomers, who comprise a considerable portion of the existing workforce, are retiring in droves, taking their skills and experience with them. Furthermore, millennials – the new generation of workers – are, for the most part, not interested in working manual labor jobs. They are likelier to pursue higher-paying, tech-focused careers in other industries.

As a result, General Contractors struggle to find workers with the specialized skills and required experience to complete projects efficiently. According to a survey by the Associated General Contractors of America, 77% of construction firms cite available candidates’ lack of experience as a significant challenge. Craft workers that perform the bulk of onsite labor, such as welding, masonry, carpentry, and electrical work, are in especially short supply.

High construction demand is also adding to labor shortage woes. With the economy on an upswing, demand for new projects and renovations has skyrocketed, resulting in a significant increase in project backlogs across the nation. This high demand – combined with a lack of skilled labor – has pushed wages up, resulting in General Contractors having to choose between higher costs or project delays.

The COVID-19 pandemic has further exacerbated the labor shortage, as many workers were furloughed or laid off in response to the quarantine and the economic downturn. With the industry already struggling to meet demand, the additional reduction of workers has left even fewer resources available.

Already existing supply chain disruptions, material shortages, and increased safety protocols further compound the labor shortage problem. General Contractors struggle to manage their projects efficiently, with many turning away new business due to a lack of available resources.

How labor shortages pose a challenge to General Contractors

A General Contractor’s worst nightmare is a labor shortage that leaves them unable to meet their project deadlines. There must be seamless coordination of materials, resources, and people to complete a project on time and within budget. Common challenges include:

• Costly delays: Without adequate labor, meeting project deadlines becomes nearly impossible. You may be forced to extend deadlines, resulting in unforeseen costs and penalties. A project you could have completed in six months could take eight or nine, resulting in a loss of goodwill with your clients and even potential legal issues.
• Increased wages: Reduced availability also means workers can capitalize on the increased demand and ask for higher wages. This usually increases your operating costs, leaving you with lower profits.
• Lost business: With labor shortages, you may be forced to turn away new projects due to a lack of available resources. You must also factor in delays and disruptions due to unforeseen circumstances, making it impossible to guarantee an on-time completion. Bidding on new projects can therefore become a gamble, as you cannot predict how long it might take to complete the project. You don’t want to hurt your reputation with clients by delivering late.
• Increased operating costs: Labor shortages can lead to increased costs as you scramble to find enough workers and pay premium wages. You may also need to hire temporary help or outsource work to other contractors, which can result in higher overhead costs.

To avoid the nightmare scenario of a labor shortage, you must plan and strategize to gain a competitive edge. The extreme competition in the industry requires you to be proactive, creative, and flexible to succeed.

Strategies for mitigating the labor shortage

Luckily, there are some strategies you can use to mitigate the labor shortage and stay competitive in the construction industry:

• Invest in workforce training: Proper training is essential for any General Contractor. This will help you equip your workforce with the skills and expertise needed to perform their jobs effectively. Training programs can also help you build a pool of highly skilled workers, giving you a competitive edge.
• Leverage technology: Leveraging technology can help you maximize the resources at your disposal. Technology-driven processes such as automation, data analytics, and advanced scheduling can streamline your workflow and help you complete projects faster, allowing you to take on more business. Digital tools can also help you more accurately estimate timelines for future projects.
• Build relationships with reputable contractors: Working with a trusted professional can help you reduce the risk of labor shortages. A reputable General Contractor has a strong and stable workforce, allowing you to take on more projects without worrying about labor availability. Due diligence is critical here, as you must ensure the contractor is reliable and trustworthy. Check their previous work and customer ratings and ask for references to gain confidence in their services.

While labor shortages remain a pressing issue in the construction industry, investing in workforce training, leveraging technology, and building relationships with reputable contractors position you to better handle the challenge. Working with an experienced General Contractor can also help you avoid productivity headaches and ensure the timely completion of projects. 

Partner with a professional and trusted General Contractor today

At RPC General Contractors, we understand the complexities of the construction industry and the labor challenges it faces. We have established a strong and stable workforce, allowing us to handle projects confidently and deliver timely results. 

Our team’s expertise and experience in the industry also allow us to provide creative, cost-effective solutions for your construction needs. We are committed to providing outstanding customer service and making the construction process as seamless as possible. Hop on a call with our friendly team today, and let us take the lead on your project.