OUR THOUGHTS ON:

Worker Shortage an Ongoing Challenge for Construction Firms in 2018

Construction

By Dave Foutz

In a recent survey of more than 1,600 construction firms conducted by Associated General Contractors of America, respondents reported that their companies will struggle to find and retain workers for the upcoming 2018 summer construction season.

The survey showed that the labor shortage spans all regions of the country and impacts both union and nonunion firms of all sizes, including various specialty markets.  Specialties needed include carpenters, electricians, bricklayers, concrete workers and plumbers.  Most firms surveyed believe these labor challenges will continue or even become a greater challenge over the next 12 months.

According to the survey, firms are hiring roughly the same number of workers as in past years; however, the quantity of job openings has increased significantly.  The result is that contractors are taking more time on average to fill open positions, and therefore, must pay more overtime to existing workers and spend more on training lesser-experienced hires.

In order to attract new workers, firms are engaging directly with career services organizations at high schools, colleges, and vocational programs in order to make connections with workers early in their careers and aid in recruitment.

Firms are responding to the labor shortage by increasing base pay rates and offering new benefits and bonuses to retain workers.  Firms are also increasing their usage of subcontractors to complete work as well as staffing firms to find workers.  Additionally, firms are investing in new equipment, tools and machinery designed to use man hours more efficiently.  To a lesser extent, firms are increasing their utilization of offsite prefabrication and virtual construction methods to make more efficient use of man hours.

As firms improve pay and benefits, they continue to make strides to improve their own margins on employee labor.  According to a Construction Financial Management Association annual benchmarking poll of construction companies, average revenue per full-time equivalent employee (FTE) increased from approximately $338,000 to $352,000 in 2016 and 2017, respectively.  This translated to an increase in gross profit per FTE from approximately $46,000 to $51,000 in 2016 and 2017, respectively.

While the labor shortage is not a new challenge for the construction industry, it will continue to require the attention and careful management by firms in 2018. If you have any questions about the worker shortage challenge, contact us. 

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