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Dealing with Labor Shortages in Construction

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It is no secret the COVID-19 pandemic has upended society as we know and the norms we are used to. But was we begin to recover and try to obtain a semblance of normalcy in our personal and professional lives, remnants of the pandemic remain. One often discussed problem in the construction industry is the shortage of materials and the increased prices that brings. Another issue that is equally as pressing is the shortage of labor in the construction industry. Before construction was deemed “essential,” the industry lost approximately one million workers at the start of the pandemic. It has yet to win back all of those workers.

The Numbers
While it certainly was exacerbated by the pandemic, this labor shortage issue is not entirely a product of the pandemic. The field of skilled construction labor is aging. More people are retiring than are being hired. For instance, the average monthly turnover rate in construction is 5.2%, compared to 3.6% in all other industries. The average age of someone in the construction workforce is 43. Workforce shortages exist despite the fact that commercial and residential construction is on the rise and despite the fact that the average hourly wage for a construction worker is $32.86 compared to $18.23 for a restaurant or hotel worker.

What can you do?
How do you combat such a problem?  For starters retain the employees you already have. It may seem like a no-brainer, but with a limited supply of skilled labor, employees are subject to be poached by rival companies. As such, construction companies should pay attention to the market salary for its skilled labor, benefits, and their employee morale. Construction companies should also have a plan to identify future leaders within its current workforce and prioritize retaining those future leaders.   

In addition to retaining the employees you have, it is important to efficiently manage those employees to avoid workforce shortages at projects. Keeping a detailed and accurate system of the employees available by noting when they are on vacation or when they are on other projects may seem like an obvious step, but if you cannot rely on a surplus of labor you have a lower margin of error when deploying your workforce to project sites. Moreover, failing to provide an adequate workforce on a given project may be grounds for breach of contract if the reduced workforce fails to perform in accordance with the contract. Many construction contracts allow the owner or general contractor to supplement work on such an occasion at the contractor’s expense.

Owners and contractors are impacted by this workforce shortage. For each party to protect their interest, it is important to turn to the contract. Owners and general contractors should look to include a contract clause that allows them to supplement work when there is insufficient manpower. They could also require workforce commitments in the scope of work to make sure their project is sufficiently staffed. On the other hand, general contractors and subcontractors should include contractual provisions establishing the opportunity to cure. They should also look to protect themselves from manpower shortages that are outside of their control, for instance if laborers catch COVID-19. Contractors with narrow workforce margins could also benefit by building in additional time in the project schedule to account for difficulties in providing sufficient manpower.  
Challenges to the skilled construction labor force will likely outlast the pandemic. Therefore, it is important for construction companies to have a management plan for their manpower needs and contractual protection in case the lack of manpower becomes a problem in a given project.

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