New Research Reveals Depth of Construction Labor Shortages

A comprehensive white paper from The Freedonia Group titled Addressing Labor Challenges and Driving Growth in the Construction Industry has shed new light on the construction industry's labor shortages, which are causing widespread project delays and cost increases. The analysis uncovers a complex web of challenges facing the sector and the need for industry-wide solutions.

Demographics and Training Gaps

Job openings in the construction industry have been increasing overall since the 2008-2009 recession. In the post-pandemic era, job openings in the construction industry have maintained levels double those of 2001, despite a dip in 2020.

According to the 2024 Workforce Shortage Survey by the Associated General Contractors of America (AGC), an overwhelming 94% of firms are struggling to fill open positions. One key factor is the rapidly aging workforce, with the median age of construction workers reaching 41.9 years in 2023. In addition, 21% of workers are now 55 or older, nearly double the percentage seen in 2003. This demographic shift poses particular challenges in an industry known for its physical demands.

Compounding the problem is a significant breakdown in the traditional pipeline of new workers. The decline in vocational education programs and union-connected apprenticeships has left a noticeable gap in skilled labor development. AGC's 2024 survey reveals that 62% of firms find candidates lacking essential skills or certifications. The industry also faces challenges in attracting younger workers, who often gravitate toward other sectors offering more predictable hours, safer working conditions, and what they perceive as better opportunities.

Immigration Policies and Retention Challenges

Immigration policy changes have further exacerbated the situation. Stricter enforcement and limited seasonal worker programs have constricted the flow of skilled and semi-skilled labor. The AGC survey shows that 43% of construction firms encounter candidates who lack basic requirements such as driver's licenses or work permits. Even more troubling is the retention rate, as half of the surveyed firms report new hires either failing to show up or quitting shortly after starting.

Construction Project Delays and Rising Costs

The impact of these labor shortages reverberates throughout the construction industry. Project delays have become increasingly common. What’s more, the scramble for workers has driven up wages and, consequently, project costs. According to The Freedonia Group's August 2024 National Online Consumer Survey, this trend has not gone unnoticed by consumers, with 62% expressing concern about rising prices for home improvement services.

Industry Response and Potential Solutions

Industry leaders are actively pursuing solutions on multiple fronts. Companies are implementing more aggressive compensation strategies and investing in education and training initiatives. Technology adoption, including prefabricated components, ergonomic tools, AI-driven systems, and construction robotics, is also playing a key role in addressing the labor gap and attracting a tech-savvy workforce.

The labor shortage in the construction industry is a complex problem that will require a multi-faceted approach involving policy changes, educational reforms, and shifts in industry practices.

Find Out More

Want deeper insights into construction's workforce challenges and to learn more about opportunities to gain competitive advantages in recruitment and retention? Download our comprehensive white paper for a detailed analysis. Authored by Research Manager Jennifer Mapes Christ, this research draws on decades of industry expertise from The Freedonia Group, a premier international business research company.