The Construction Workforce Paradox

Last week, we looked at the four big culture trends in construction—one of which was labor market. There is a huge cultural shift already underway in construction that is ushering in a new way of working. Let’s dig into that today.
 
We are only going to scratch the surface of the challenges and opportunities that exist with the construction workforce today. From labor force trends, to the rise of the new worker, to the impact of the gig economy, there are myriad underlying factors driving this new era of work.
 
Labor Force Trends
 
Let’s start with the most obvious condition: the market itself. We know the construction industry faces a shortage of skilled workers. A report from the Home Builders Institute in April puts that shortfall at roughly 200,000 workers. The HBI Construction Labor Market Report notes shortages of skilled trade workers directly employed by homebuilders and subcontractors remain widespread throughout all regions—and is one of the top concerns.
 
Add in a pandemic and the labor force dynamic changes came fast and furious. After a lockdown of three months in 2020, the labor market trends have undergone a drastic change in terms of loss of employment, government regulations, and salaries falling. According to Beroe’s labor market analysis report, the industry will experience only a partial recovery in 2021. According to World Economic Forum, the age group between 18 and 24 has been most affected. This age group is also highly correlated to economic growth.
 
The pandemic has also made it difficult for many firms to fill open positions, especially for hourly craft jobs. AGC (Associated General Contractors of America) says 52% of construction professionals report having a hard time filling some or all hourly craft positions, especially openings for laborers, carpenters, and equipment operators. This is just the beginning—we also need to consider the rise of the new worker.
 
The New Worker
 
Today’s young worker wants ethical leadership, DEI (diversity, equity, and inclusion), work flexibility, and other traits from their employer—and these young workers, who make up roughly half of the U.S. workforce, will shape the future of the workplace.
 
Who are they and what do they want? A Gallup poll looked at what Gen Z and Millennials expect from their workplace. Here is the general takeaway: They want an organization that cares about employees’ wellbeing.
 
Digging deeper, Gallup has identified five elements of wellbeing: career, social, financial, community and physical. Older millennials want open, transparent leaders, while those younger generations was ESG (environmental, social, and governance). While ESG measures have a strong relationship to financial performance, a broad benchmarking standard does not exist for the “people pillar” of ESG.
 
Here is what Gallup suggests: start leadership-level conversations that address wellbeing, transparent leadership, and DEI; coach managers to communicate and deliver on your organization’s promises; and integrate these into every stage of the employee lifecycle.
 
If you think this all doesn’t apply to construction, think again. There are articles that exist on the Internet right now with the best cities for construction workers in 2021, taking into account things like opportunity, demand, pay, and cost of living. So not only is your business competing with other local businesses for the best skilled workers—your business is literally competing with other cities for the best talent.
 
Will your potential young worker jet set off to Dallas? I bet you know the answer to that question. Let’s prepare our businesses for these young, up-and-coming workers.
 
The Gig Economy
 
Another big trend to explore is how the movement toward a “gig” economy has impacted the construction industry. Temporary workers are contract-based workers and this kind of employment is preferred for labor-intensive work like construction. Candidly, construction has been a gig economy before it even became trendy.
 
A 2020 report by Mark Erlich, a Wertheim Fellow at the Harvard Labor and Worklife Program, points to this gig economy, specifically with a historical context for construction. In the report, he says, “In particular, non-union construction employers have misclassified their workers for decades in order to lower costs, largely motivated by the desire to avoid the high workers’ compensation premiums that accompany work in a dangerous industry. They now have a well-established system in which workers function as employees in every respect but are classified as independent contractors. The practice has been one of the principal elements underlying the loss of union market share and the inexorable decline of wage and safety standards in the U.S. construction industry.”
 
Somewhere along the way something changed—and some might say even accelerated with the rise of gig jobs like Uber and Lyft. Instead of independent contracting being a cost-saving method of employment that eradicated workers’ rights, it now represents the allure of independence, individualism, flexibility, and entrepreneurialism.
 
What has come with this is a number of regulations on the gig economy. For example, in September 2019, California Governor Gavin Newsom signed Assembly Bill 5, which imposes stringent criteria to determine whether a worker is an employee or an independent contractor.
 
Erlich explains, “AB 5 codified a 2018 California Supreme Court ruling that established the “ABC test” as the determinant of employment status. The ABC test presumes a worker is an employee unless three clear and simple criteria (the contractor is free from control and direction by the hiring company, performs work that falls outside the usual course of its operations, and is “customarily engaged” in similar independent work) are met.” At the federal level, the U.S. Dept. of Labor has also become more engaged in the discussion.
 
Here is the bottomline: the workforce is changing—in more ways than one. The industry has a shortage that needs to be filled and needs to take into consideration worker wellbeing, alongside new regulatory factors.