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Labor Shortage: An Industry in Crisis

A shortage of labor is delaying and slowing projects, and skilled trades are being hit the hardest

Mcn Special Feature Sept17 1
Photo courtesy of MMS Northeast Inc.

It’s no secret that the construction industry is facing a crisis due to the lack of labor, and for the niche that is metal construction, the issue is even more acute because we rely so heavily on skilled trades such as ironworkers and metalworkers.

Every year during our Top Metal Builder survey, we ask respondents what was the biggest challenge they faced. Four years ago, the labor shortage began to take the top spot in responses, usually followed by weather and the regulatory environment. In the results for 2017, which were reported in the May 2018 issue, labor shortage accounted specifically for 60 percent of the respondents. (See the graph below.) Some of the other categories, such as material prices, increased competition and growth, have finding skilled labor as components.

It’s not just among metal building contractors and erectors that this issue is arising, of course. It’s happening across the industry. In fact, a the most recent USG Corp. + U.S. Chamber of Commerce Commercial Construction Index, released at the beginning of June, says that for four straight quarters more than 90 percent of contractors have expressed concern over labor shortages. Just in the first part of this year, the problem has worsened. According to the report from the index, “concerns increased quarter-over-quarter, with 47 percent of respondents expecting problems finding skilled workers to worsen in the next six months.”

Metal builders surveyed in as part of the Metal Construction News "Top Metal Builders" featured point to the shortage of labor as the biggest challenge they faced in 2017.

“Contractors’ pipelines for new business are consistently healthy, however, that optimism is challenged by a growing shortage of workers—a trend that’s persisted for more than a year,” says Jennifer Scanlon, president and CEO of Chicagobased USG. “In order to sustain the strong pipeline of work, it’s important that industry leaders think about process and product innovations that can help complete projects on-time and advance the industry.”

The shortage spreads across the entire construction industry from commercial to residential, and from general contractors to trade contractors. In a time of industry expansion, we are seeing projects being delayed or slowed because contractors can’t find workers to put on the job sites.

So, how did the industry get into this position?

Before we get into that, it’s worth remembering that the shortage is not a new problem, just a recently acute one. In fact, during the 1990s, the trade press often reported on skilled labor shortages. Back then, the main driver of the shortage was a simple demographic issue. The primary source of construction labor in the ‘90s, as was widely reported, was 18- to 34-year-old white males. As the Baby Boomers aged out of that age range, they were replaced by Gen-X workers, which was a much smaller pool of workers.

“Contractors’ pipelines for new business are consistently healthy, however, that optimism is challenged by a growing shortage of workers—a trend that’s persisted for more than a year,” says Jennifer Scanlon, president and CEO of Chicagobased USG. “In order to sustain the strong pipeline of work, it’s important that industry leaders think about process and product innovations that can help complete projects on-time and advance the industry.”

The shortage spreads across the entire construction industry from commercial to residential, and from general contractors to trade contractors. In a time of industry expansion, we are seeing projects being delayed or slowed because contractors can’t find workers to put on the job sites.

So, how did the industry get into this position?

Before we get into that, it’s worth remembering that the shortage is not a new problem, just a recently acute one. In fact, during the 1990s, the trade press often reported on skilled labor shortages. Back then, the main driver of the shortage was a simple demographic issue. The primary source of construction labor in the ‘90s, as was widely reported, was 18- to 34-year-old white males. As the Baby Boomers aged out of that age range, they were replaced by Gen-X workers, which was a much smaller pool of workers.

Photo courtesy of Chief Buildings

The problem was only solved by the construction slowdown in the early 2000s. Then it began to rear its head again and only disappeared when the construction industry—especially residential—collapsed in 2008. Now that construction is on a yearslong expansion, the issue is back. This time, though, it looks like it might become a more permanent state of the industry, rather than just appearing during expansion and disappearing during contraction.

Demographics

At the Metal Construction Industry Summit in Chicago on April 12, keynote speaker William Good broke down the reasons into three categories. Good is the retired CEO of the National Roofing Contractors Association (NRCA) and has been involved in the construction industry for decades. He says the labor shortage “is not a new problem, but it is for sure a big problem. I remember being in meetings in the mid-1990s about the coming workforce problem. It wasn’t hard to predict. You could look at the demographics of the people in this country, and you could figure out 25 years ago that exactly what is happening today was going to happen.”

“There are three overriding causes to the problem,” he says. “They’re all big causes. They’re all complicated. And none of them can be solved, I’m afraid, either cheaply or easily.” They are:

  • Demographics: The population of the country is getting older.
  • Societal Issues: Changes in attitude about going to college and the value of a construction job.
  • Immigration Policy: The lack of immigration policy has created a black market for construction labor.

First, demographics. The U.S. Census Bureau projects that through 2030, the U.S. population will grow at a greater rate than its workforce, which means there will be greater demand for goods and services than people able to deliver those goods and services. As first reported in Barron’s magazine, the head of research at Fundstrat Global Advisors, Thomas Lee, says the country will face a shortfall of 8.2 million workers between 2017 and 2027.

So, while contractors are desperate to find workers, they are competing with other industries that may be equally squeezed, such as hospitality, agriculture and trucking.

But the demographic issue is especially difficult in construction, and that is because of the age of the population. Pointing to statistics from the roofers union, Good says, “The average apprentice roofer, first day on the job, is 30.4 years old. We used to think about hiring 18 or 22 year olds. Kids coming out of high school or tech schools, and what’s happening instead is we’re hiring guys and women who have tried something else and not succeeded generally. Or they may have tried two or three things and not succeeded.”

"In 2015, 52% reported a shortage in their organization; two years later this had grown to 67%"

2018 Union Craft Labor Supply Survey, the Association of Union Contractors

Photo courtesy of Alpine TrusSteel

One of the consequences of hiring older workers is that their years of productivity are shorter. That makes sense, of course, but that issue becomes especially acute in the construction industry. Good explains, “The rate of accident and injury in construction industry, and specifically in roofing, takes a big spike when a worker turns 45 years old. Joints start to go. Shoulders, knees, hips, backs. If it takes three to five years to get someone productive starting at 30, and at 45 they start to get hurt more, that’s a really short window of productive life. That’s part of our challenge. How do we get them into the trade before they’re 30, and another part of the challenge is how do we keep them productive employees after they turn 45? If we don’t think about those two things together, we’ll be stuck in the situation we’re in now where we have this very short window of productivity.”

In fact, the aging population is affecting other industries that may result in shortages affecting construction. According to the U.S. Bureau of Labor Statistics, the average age of a truck driver is 55 years old. A shortage of truckers means that building materials are more difficult to get to job sites. And, increased regulatory requirements forcing drivers to take mandatory breaks means that vital materials on their way are delayed because drivers need to pull over to take a break.

Social Attitudes

The demographic issue is simple to grasp and makes sense. But the change in societal attitudes toward construction is the area that seems to rankle contractors the most. Go to any trade show or conference, and you will hear grumbling about how young people no longer value the importance of hard work. They’re being coddled and unwilling to face the hard truths of life. The word “Millennials” is often said with an almost dismissive sneer. As several speakers at the summit pointed out, those young people didn’t become that way— if, indeed, they truly are as work averse as some claim—on their own. They were raised to be that way. And that is where societal attitudes toward construction come into play.

Good explains the issue. “When I was in high school, going into the construction trades was considered a really attractive alternative. It was well paid and provided a good career path. It was a good opportunity for kids who didn’t want to go to college. Today, we have high school guidance counselors telling their students ‘you have to go to college’ even though we know a third will flunk out the first year. Half won’t graduate. We’re setting them up to fail, and taking away an opportunity for a different kind of career.”

This attitude is so pervasive that it infects how we value high schools. Many rankings of the best high schools, such as the Washington Post’s “Most Challenging High Schools” list place heavy emphasis on percentage of graduates attending college, participation in Advance Placement and International Baccalaureate programs, and college entrance exam scores. In some states, high schools receive financial incentives to send more kids to college. They get more state money if they have a higher percentage of graduates enrolling in college.

"The country will face a shortfall of 8.2 million workers between 2017 and 2027."

Thomas Lee, head of research at Fundstrat Global Advisors, as reported in Barron’s magazine.

As a society, we have defaulted to the attitude that college provides the best career opportunities for all students, regardless of desire or aptitude.

Good tells the story of a roofer in Texas who visited the local high school and the guidance counselor had a poster of a construction worker at work on her wall. “Underneath, she had written, ‘This is what will happen to you if you don’t go to college.’ That’s the mentality that we’re dealing with,” he says. When he related that story at the summit, the people in the room were visibly angry and grumbled.

The problem is that construction has a great story to tell, but it’s not winning the argument where it counts. Good said he recently spoke to high school guidance counselors and told them, “Give me an 18-year-old who can pass a drug test, who will work hard, will show up to work every day and will go through three or four years in some kind of apprentice program, and in four years, that 22-year-old will make more money than any of you are.”

“That’s the truth,” he says. “We all know it is. And for some reason we haven’t been able to get the message across.”

Supporting that idea, Good talked about a study done by a sheet metal workers union in Iowa a few years ago. “They followed two 18 year olds. One went to college and one went to work for the sheet metal company, and he went through the union apprenticeship program in Iowa. The kid who went through the apprenticeship program, by age 22, was making $35 per hour, had full benefits, was able to buy a car, was able to put a down payment on a house and had no debt.

“The other one who went to college wound up studying sociology and would up at age 22 $120,000 in debt, no money, no job prospects except some entry level thing. The question from the study is ‘Which would you rather have your kid be? A journeyman sheet metal worker at 22 making a good living without all the load of debt and the beginnings of really productive life? Or a 22-year-old who has to live with mom and dad, pay off that college debt while he works at Starbucks? It’s a fair question, and we have to have that conversation.”

College isn’t for everyone, and the pendulum seems to be swinging back the other way now. More and more parents of college-bound students, who are looking at huge debts and unlikely prospects, are beginning to question the value of college in a way that previous generations never did.

Immigration Policy

The third area affecting the labor shortage today is the immigration policy, and in the current political climate, it is the most fraught. President Donald Trump has made restriction on immigration a hallmark of his presidency because it appeals to a large segment of the population concerned about the changing demographics of the country. At the other end of the spectrum is political movement urging free and open borders with little restriction of movement from country to country.

Photo courtesy of Queen City Roofing

This push and pull has paralyzed the political leadership, resulting in no action addressing immigration. For the construction industry, which has been fueled by an immigrant workforce, this is exacerbating an already acute problem.

According to Pew Research, there are about 11 million undocumented workers in the U.S. today. Of those, 58 percent have been here for more than 10 years, 31 percent own homes, and 33 percent have children who are U.S. citizens. Their kids were born here and are popularly identified as “Dreamers.”

Citing research done by the NRCA, Good says, “55 percent of today’s roofers are Latino. In some places, it is virtually 100 percent Latino.”

That movement toward a heavily Latino construction population goes across all trades and has been going on for years. Any visit to a job site in any state, either commercial or residential, will show a heavily Latino dominated workforce, that has its point of origin in Mexico and Central America.

That reliance on a Latino workforce means the construction industry, like much of the country, is focused on movement across the southern border. Over the last few years, illegal border crossings have been occurring at a much lower rate than in previous decades. In fact, during a period at the height of the recession, there were more people crossing into Mexico than coming into the U.S. In recent months, that trend has reversed and border crossings are up. Even so, the Pew Research shows that 42 percent of undocumented workers enter the U.S. by airplane, not on foot. Consequently, our focus on border crossings has created the political stalemate that is affecting the industry.

Good says, “We’ve created a black market for labor. We’ve got work that needs to be done, and obviously it’s getting done. We’re doing it increasingly through a black market we politely call ‘subcontract labor.’ Twenty three percent of construction workers today are self-employed, working as independent contractors or part of subcontract crews. If done right, they get a 1099 form and are expected to pay taxes. Often they’re getting paid in cash and not paid benefits, taxes or insurance. And we’re competing with them. It used to be confined to residential, homebuilding and residential reroofing. Now it’s moved into the commercial industry.”

Of all the intractable problems affecting the labor shortage, dealing with the immigration policy and bringing the black market for labor into the light is the most difficult. In many ways, contractors are powerless to address it. Good says, “I’ve talked to some really good, professional contractors who say, ‘if I’m going to compete, that’s what I need to do because all my competition is doing it.’” Not only are we nurturing a black market, we are opening homeowners and building owners to liability issues because of uninsured workers. It would be perfect if we could get every worker E-verified, and demand that homeowners and building owners see documentation of all workers on-site, but so much work is subcontracted to subcontractors who further subcontract it that general contractors are often in the dark about the legal status of workers on their jobs.

Solutions

There are solutions, though, and increasingly the industry and society are addressing them. While no one can stand up and wave a magic wand that immediately gets everyone to understand the value of a construction job and make society respect blue collar workers, the industry can make its case louder and more vociferously. That needs to happen at both the industry level and the individual contractor level.

The following two articles deal with how contractors can compete for skilled labor using both marketing techniques and management talent to attract and retain the quality people they need.

The attendees at the Metal Construction Industry Summit broke out into work groups to identify solutions.

Here are 10 things the industry can do right now to help attract people to the skilled labor workforce.

  1. Use the breadth of our marketing experience to demonstrate the excitement and satisfaction of construction work. Show people on the job and working with pride.
  2. Reach out to young people to get them excited about the possibility of a career in construction. Somewhere between “Bob the Builder” and high school, children lose their fascination with construction. We want to continue that fascination.
  3. Develop outreach programs for high schools— for both teachers and guidance counselors—that inform them about the value of careers in construction. They should be educational and offer a direct alternative to a college path.
  4. Showcase the newest technology in the industry. Our workers are using BIM, virtual reality and 3-D modeling, technologies that are attractive to young workers.
  5. Lobby and engage the political class to get them to understand contractors don’t want just cheap labor, they want good labor. To address that, we need to solve the immigration policy stalemate.
  6. Adapt our management styles to the new workforce. That means addressing the way Millennials and Gen Z workers want to be engaged. It also means working with non-English-speaking workers in ways that meet their cultural and educational interests.
  7. Improve product efficiency so there is greater ease of installation, reducing training time.
  8. Educate homeowners and building owners about the importance of verifying workers on-site so they are protected from liability issues, and we decrease demand for a black market labor force.
  9. Support the growth of trade schools and establish strong relationships with them.
  10. Systematize training across the industry so that young people understand the clear career paths available to them.

As mentioned previously, there are signs the pendulum is swinging the other way. Last March in Henrico County, Va., school officials held a ceremony called “Career and Technical Letter-of- Intent Signing Day.” Students who earned industry- based certification sign letters of intent with employers outlining the next stage of their careers. The program brings excitement and attention to students who have chosen career paths that don’t include college but are still demanding, fulfilling and potentially lucrative. In a Facebook post, Mac Beaton, director of Henrico Schools’ Department of Career and Technical Education, writes, “They’ve chosen to maximize their high school opportunities for career training and industry certifications, with an eye on becoming successful and financially secure much earlier in life.”