Despite drastic improvements in the United States economy, job growth in the construction sector has slowed down. Experts attribute this to two main factors: workforce shortages and supply chain issues. As of June 2021, construction employment across almost all 50 states was still below the pre-pandemic high of February 2020.
Though the COVID-19 pandemic exacerbated this problem, the industry has faced labor difficulties for years. The Associated General Contractors of America released research in 2018 that claimed nearly 80% of construction companies struggled to hire craft employees. Once companies find employees, they are then at high risk of burnout. According to the 2020 Q3 Commercial Construction Index, 73% of contractors urged their skilled employees to do extra work.
From the Suez Canal fiasco to recent slowdowns at Chinese ports, port delays have slowed cargo deliveries worldwide. In 2020, United States imports totaled just $2.3 trillion while the GDP crossed $20.9 trillion. Many ships are delayed at United States ports while arriving and unloading. These vessels face long wait times to unload in Los Angeles/Long Beach and Oakland, so they cannot return to Asia immediately. This worldwide issue has significantly reduced the world’s shipping capacity.
Contrary to popular belief, labor shortages within the supply chain are the primary cause of these delays. Transportation bottlenecks also have an impact, but they play a minor role in comparison. Labor shortages can disrupt the supply chain at many different levels and cause significant damage.
The construction industry continuously expands year after year due to higher demand for additional structures. According to Statista, private building spending will increase by $500 billion between 2018 and 2022. Industry expansion makes employment within the construction sector even more enticing. If that’s the case, why is there a labor shortage?
Retiring Baby Boomers
According to the United States Census Bureau, nearly 10,000 Baby Boomers turn 65 every day. All Baby Boomers will be aged 65 or older by 2030, so most of them will retire within the next eight years. With so many people retiring within a short period, there will be more open positions to fill than the number of younger workers who could replace the Baby Boomers.
The 2008 economic recession hit the construction industry particularly hard, and countless skilled laborers lost their jobs. Many of them chose retirement or a total career change over returning to what was considered an insecure industry.
The millennial problem
According to Inc, millennials form nearly half of the entire North American workforce. Experts predict that millennials will form nearly 75% of the population by 2025. While this is good news for some industries, it is harmful to the construction industry. Many Millenials do not see construction as a lucrative industry. The United States Chamber of Commerce found in 2019 that 61% of contractors regard construction work to be a dirty job. The pandemic only made the problem worse. Many employees transitioned to working remotely, and they want to keep it that way after the pandemic ends.
The link between the suppliers and contractors participating in the overall project is known as supply chain management. This integrated approach is the basis of success. It ensures that all stakeholders have a complete awareness of the resources, logistics, and people involved in delivering the project and program on time and within budget. The following factors are partially responsible for construction job growth delays:
Shortage of skilled workers
Labor shortages in skilled crafts are nothing new in the construction sector. Experts predict that the industry needs over 430,000 additional workers in 2021 to meet project demands.
The construction industry is slowly but surely returning to its proactive state before the pandemic. Many construction companies tend to take on work at reduced rates solely to keep their staff employed. The pandemic forced many companies into this position, leaving them at a financial disadvantage.
These companies are at higher risk of facing difficulties with cash flow. As a result, the industry faces the potential of low profitability until at least 2022. Low profitability impacts the entire sector and may take years to recover.
Rising costs of materials
The COVID-19 pandemic forced the price of many building and construction materials to increase. Experts estimate that the cost of procuring goods and equipment increased by 13% from February 2020 to April 2021. The Association of General Contractors claimed that the price of other materials increased even quicker throughout the same time.
Reluctance to embrace technology
Contractors in every field tend to be the slowest to adopt sophisticated technology. If construction employees' output is low, the public and private owners must pay for it.
The COVID-19 pandemic made pre-existing labor shortages and supply chain issues in the construction sector even worse. Building/construction is considered a critical activity, but these projects slowed down throughout the pandemic. AGC and Autodesk conducted polls at various times to further understand the impact of the pandemic. In June, just 32% of organizations claimed they had to postpone or cancel a project. As of recently, that number nearly doubled as 60% of organizations had to postpone or cancel a project. The poll also revealed that contractors struggle to recruit enough trained craft workers, even as they continue to be impacted by pandemic-related project delays and supply chain disruptions. These results illustrate how the pandemic stifled job demand while simultaneously limiting the number of workers that contractors can hire.
The coronavirus is digging a deeper hole for businesses already struggling to meet demand due to a workforce shortage. Not only are skilled professionals hard to come by, but many of those available are either unable or unwilling to return to work. Workforce scarcity has always been a problem in the construction industry, but the pandemic has forced general contractors to reconsider skilled labor and the need for internal growth. Even if a company finds employees, travel bans often restrict who they hire. If an employee comes from a high-risk area, they cannot travel for certain projects. These bans cause delayed projects and even further impact the workforce shortage.
On top of labor shortages, the construction industry is also facing decreased material supplies. The construction industry in the US is heavily reliant on overseas shipments of commodities such as steel, copper, aluminum, stone, and fixtures. Many of these come from China, so the number of shipping containers drastically reduced as many people were skeptical of Chinese manufacturing companies. Many contractors face difficulties in getting the specific materials that they need.
If they can get their hands on the materials, they likely come at a much higher cost. The price of numerous building and construction materials has risen considerably. Between April 2020 and February 2021, the cost of procuring goods and equipment increased by 13%. According to the Association of General Contractors, other product expenses also increased at higher rates during the same period as highlighted below:
The copper and brass mill index is 37% higher.
Steel mill products are 20% higher.
The construction sector plays a significant role in the United States economy. COVID-19 severely impacted major construction projects all around the country due to labor shortages and supply chain issues. There are not enough trained workers to fill the open positions in the industry due to Baby Boomers retiring, unstable economies, and an increase in the Millennial workforce. This labor shortage contributes to supply chain disruptions. The pandemic created new problems for the industry while simultaneously exacerbating old ones. The industry may take years to recover, but this can be sped up by implementing intelligent technologies.