Facing the Skills Gap

 OP RESIDENTIAL 01By Terry McDonough

Even as construction spending is on the rise in the U.S., the construction industry, like many others, is facing a significant challenge: a growing industry skills gap.

In fact, the challenge facing the construction industry might be even more acute than the skills gaps confronting others. The ripple effect of the construction industry skills gap includes altering the way some firms do business, as well as project delays and price increases for many of the businesses and consumers relying upon them.

A 2015 survey by the Associated General Contractors of America (AGC) found that 86 percent of nearly 1,400 firms surveyed were having difficulty filling available positions. The survey found that carpenters, sheet metal installers, concrete workers, project managers and supervisors were particularly hard to find.

The AGC survey also found that the labor shortages are changing the way some construction industry employers do business, leading some to raise wages or rely more heavily on subcontractors or temporary labor firms. A particularly troubling finding was that some construction industry companies felt the labor shortages had the potential to put worker safety at risk.

Feeling the Impact

The impact of the construction industry skills gap is felt not only by industry employers, but other businesses and consumers as well. Shortages of skilled workers can have a significant impact on project timing and pricing. The findings of the Special Questions on Labor and Subcontractors' Availability reported last year by the National Association of Home Builders (NAHB) as part of its Housing Market Index (HMI) showed the labor shortages over the prior 12 months had caused 61 percent of the builders surveyed to raise home prices, 58 percent to have difficulty completing projects on time, made some projects unprofitable for 26 percent and caused 23 percent to turn down some projects. The cost and availability of labor topped the list of problems facing homebuilders in NAHB's HMI when they were asked to rank the challenges they faced in 2015 and expected to see in 2016.

In today's construction market, the skills shortage is so significant that one hears anecdotal accounts of contractors in hot markets seeing subcontractors trying to renegotiate prices upwards between the time initial agreements are reached and work actually begins.

Meanwhile, the pace of construction in the United States continues to grow following the Great Recession. The U.S. Census Bureau reported that during the first seven months of this year construction spending stood at $647.7 billion, up 5.6 percent from the same period in 2015. And the Bureau of Labor Statistics projects employment of construction laborers and helpers to grow 13 percent from 2014 to 2024, faster than the average for all occupations.

Against that backdrop, there's troubling news in a recent Conference Board study ranking the risk of labor shortages faced by 457 industries that ranked construction ninth.

Many workers left the construction industry following the construction downturn that accompanied the 2008-2009 recession. At the same time, many traditional training paths into the skilled trades such as high school vocational education programs have been eliminated. And the construction industry, like so many others, is feeling the impact of baby boomer retirements with older workers leaving the workforce and taking valuable skills with them.

Indeed, the AGC of America survey found exactly those factors – aging workers' retirements, laid-off workers not returning to the post-recession industry and a shortage of training programs – as key contributors to the construction industrys labor woes.

The Strayer@Work Skills Index speaks to the skills gaps that exist across a number of industries. One can look at the Skills Index for an industry like manufacturing to see employer demand outpacing supply for such skills as computer-assisted design (down 30 percent), cross-functional team leadership (down 29 percent), problem solving (down 20 percent), and leadership (down 14 percent). It's a safe bet that the construction industry faces similar gaps for those skills and others.

Development Opportunities

While the construction industry skills gap presents challenges for industry employers, it provides an opportunity for workers able to develop the necessary skills and for employers who can help workers develop the talents they seek.

Government policies that support an increased focus on vocational and technical education in industries facing labor shortages are one part of the solution to closing the skills gap in the construction industry and elsewhere. But construction industry employers must also take steps to engage and further develop existing employees in order to retain them. And they must participate in training efforts aimed at recruiting new talent into the construction workforce with the skills needed to ensure both the company's success and that of the workers.

Industry partnerships can also play a role in narrowing the skills gap. In Tennessee, for every five people who leave the construction industry only one is replaced through existing apprenticeship programs. What's more, the average construction tradesman is 50 years old. In response to these findings, industry associations have formed the "Go Build Tennessee" initiative, an effort to encourage young people to consider the construction industry, educate them about the opportunities that exist and make the point that skilled construction trades offer the potential for good paying jobs.

The organization's website provides detailed information on various construction industry trades, as well as information on training available at various two- and four-year colleges and through apprenticeship programs. It's the kind of step that's needed to close the industry's skills gap and help the builders, contractors, and developers who are looking for laborers.

The skills gap facing the construction industry is very real, and its impact is significant not only for construction industry employers but for other businesses and consumers. Still, the skills gap should be viewed as an opportunity for those in the industry to promote efforts to attract workers to construction and to deliver the training needed to create the skilled employees the industry desperately needs. A thoughtful approach to providing that training will ensure not only that the industry has workers with the right talent for the job, but that many more workers can develop the skills that will set them on the path to high-paying careers.

Terry McDonough is the CEO of Strayer@Work, a human capital consultancy. Strayer@Work helps organizations close their most critical skill gaps. 

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