With no end in sight for the tight labor market, the construction industry may need to consider a new approach in order to offset cost increases for labor and materials.
A recent article by Ken Simonson of the Associated General Contractors of America (AGC) notes that, according to a Job Openings and Labor Turnover Survey (JOLTS) conducted to a Bureau of Labor Statistics in July 2018, job openings had topped 7 million. This is the first time the difficulty in finding workers has been that high in the 18 years the Bureau of Labor Statistics has been doing the survey.
Similarly, an AGC workforce survey undertaken in August 2018 indicates that the impact of craftworker shortages is growing dramatically. Eighty percent of the construction firms surveyed are reporting difficulty in hiring, while 62% report a need for increased base pay and 27% are quoting longer completion times for their projects.
With workforce shortages intensifying, it has been reported that contractors are raising pay faster than other industries in an attempt to attract and retain workers. Average hourly pay for all construction industry employees reported in October 2018 was over $30 per hour. But it doesn’t stop there. Contractors also report that they are paying more bonuses for referral, hiring, and retention; introducing or increasing benefits and travel allowances; and spending more on recruitment, training, and overtime.
To minimize the impact of cost increases, Simonson reports that property owners and developers should be prepared to work with their design professionals and contractors to seek alternative materials or supply sources.
Just as important, they should remain open to ways of reducing construction labor input, perhaps through more standardization of components or architectural elements, offsite prefabrication, and providing contractors with complete and accurate plans to avoid a wasteful onsite redesign.