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Survey Reveals Labor Shortages Continue to Pose Challenges for Construction Industry

As within any industry, there are critical issues and areas that keep every business owner up at night. The construction industry is no different and comes with its own unique challenges.

The Bonadio Group explores these challenges through our 2022 New York Contractors State of the Industry Study, which is an annual construction industry survey that focuses on four key topics for today’s construction companies: contracts, profitability, critical issues, and outlook for the future. The information in the report is designed to help construction industry executives evaluate their position and standing on issues ranging from financial management techniques to economic outlook in order to provide an assessment of whether their organization is competitive with other area construction companies.

Unsurprisingly, the most important issue within the construction field, according to the study, is the labor shortage. Almost everyone within the industry is aware of the labor shortage as more individuals turn away from blue collar jobs. From not having qualified personnel or being unable to retain qualified personnel, the labor shortage is hitting the industry hard, creating a competition over labor between competitors. Of the survey respondents, 82% reported this single issue as extremely important. Aside from the labor shortage, survey respondents also felt that supply shortages and the rising cost of materials were other critical issues that contractors face today. Again, none of these answers come as a surprise given the current environment construction companies are operating in.

Since 2014, attracting and retaining qualified personnel has maintained the top spot as the most critical issue within the industry. While a large focus has been placed on this problem, it certainly is not going away any time soon. But is this just a myth that everyone is believing and repeating to the next person? Are all companies in the construction industry actually impacted by the labor shortage? Well…not all, but a significant number of companies are facing issues with attracting and retaining qualified personnel. The vast majority (75%) of survey respondents reported their company is struggling to find enough labor to meet their current demands. That is no small number and is a strong indicator of why this has been the most critical issue within the construction industry for the last decade, if not longer.

With all else being equal, we asked survey respondents to determine how much they would increase their workforce by to meet their current work demands. Approximately 57% of respondents noted an increase of 6% or greater was needed, and 37% noted their company would need to increase their workforce by 1%-5%. These are staggering numbers for any company to attempt to add to their workforce, let alone to try and predict if the workforce will be available as work is being bid out weeks or months in advance.

Within the industry, several tactics are being taken to try and help develop and retain qualified personnel. One of the most common ways is through a company sponsored internal training program, which can provide benefits outside of just attracting and retaining qualified personnel. If your company has enough resources, it is wise to create an internal training program, which has been done by approximately 60% of the survey respondents’ companies, a slight increase from our previous survey. The creation of an internal training program can be used as a recruitment tool, as individuals will be able to advance their professional standing and skills. Additionally, by investing in your employees, they will feel rewarded and appreciate the additional opportunities provided to them that cannot be provided everywhere.

Companies are spending a lot of their efforts (time and money) investing in recruiting practices, which is no surprise to anyone in the industry. Other companies have found no other choice but to increase their compensation and benefit packages, during this highly competitive labor environment. This strategy saw a sharp increase from our previous survey. Other common strategies used by companies are the focus on improving company culture and employee retention practices. These tactics have been important areas to focus on. Companies without strong employee engagement and a positive, meaningful environment, are seeing their employees disengage and look elsewhere for work. When a strong company culture is created, employees ultimately will want to stay and will actively recruit their friends within the industry to come work for the company, becoming your most important recruiters.

One of the underutilized strategies based on survey respondents is the automation or use of technology on job sites to help offset the lack of qualified labor. While individuals can never be replaced by automation and artificial intelligence, the use of technology on job sites will continue to expand and if you are late to change, you will be left behind. Historically, the construction industry is one of the slowest industries to make changes, however, this should not be a reason to avoid innovation within your company. Where feasible, management should look to invest in technologies that allow their company to create efficiencies at job sites to help offset some of the labor issues within the industry.

Lastly, a trend that is gaining some momentum is reducing the amount of work for laborers, particularly top performers, to avoid burnout. Companies should focus on simplifying work when possible, implementing design thinking, and improving the work environment to help laborers focus and relieve stress at the job. The focus is learning to do less better, rather than doing more with less.

If you need further guidance or have any questions on this topic, we’re here to help. Please do not hesitate to reach out to our trusted experts to discuss your specific situation. The full study can be downloaded here.

This material has been prepared for general, informational purposes only and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. Should you require any such advice, please contact us directly. The information contained herein does not create, and your review or use of the information does not constitute, an accountant-client relationship.