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Many of America’s best and brightest students do not consider construction when contemplating their respective career paths. The dearth of workers entering the industry has construction executives and stakeholders very concerned about productivity and profits. The construction industry skilled workforce falls short of demand by almost 1.8 million positions, based on the latest estimates by the U.S. Department of Labor (DOL).

The numbers don’t lie: America’s skilled construction workers are getting old. An Economic Modeling Specialists Intl. analysis
reports that more than half of trade workers are over the age of 45, which is both a reflection of the passage of time and the lack of market entry among younger workers. A separate report indicates that one-third of electricians are over the age of 55. The number of plumbers and pipefitters is actually declining in certain markets due to accelerating retirements.

Many impacts are associated with skills shortages, most of them negative. First and most obviously, the lack of workers drives up unit labor costs and drives down profits. That translates into fewer resources available to invest in technology, which means workers are being paid more without necessarily becoming more productive over time.

Wages are rising because of scarcity, not because of expanding marginal output. With the pace of retirements accelerating and too few young people entering the industry, profit margins stand to be placed under greater pressure.

According to an article published by the National Society of Professional Engineers (authored by Paul Teicholz and Matt Stevens, professors at Stanford University and the University of Melborne, respectively), productivity in the U.S. construction market has changed little during the past three decades. “If you look at curves of labor productivity, the manufacturing industry has been taking off for quite a long time at a rate of 5 percent to 6 percent a year,” Teicholz says. “If you look at the growth data for the whole [construction] industry, if anything, labor productivity is getting worse.”

Other researchers have determined that output per construction worker has been in decline for decades. Part of this may be attributed to the influx of lower-skilled workers. Consider that four low-skill, low-wage sectors—helpers, painters and paperhangers, carpenters, and construction laborers—accounted for 41.7 percent of the increase in construction employment from 2013 to 2014, according to the Bureau of Labor Statistics’ Occupational Employment Statistics. Their abundance may have induced some construction firms to adopt more labor-intensive (as opposed to capital-intensive) production methods, meaning that less equipment and technology is utilized on a per-worker basis. The result is both lower average wages and reduced productivity, which are bad for long-term profitability and the broader economy.

Of course, myriad factors may be contributing to this decline. Inefficient use of materials and time are two relatively unknown metrics that can play an integral role in the relationship between production and profits. Organizations such as the Lean Construction Institute are dedicated to researching and measuring these variables so that construction firms can learn to eliminate waste and improve project schedules and processes. 

Certain Things Must Change
The good news is that there are many existing pipelines though which younger, highly qualified workers can enter construction. According to federal apprenticeship data published by the DOL, of the top 25 apprenticeship program categories in fiscal year 2014, approximately 75 percent relate to construction activities.

At the top of the list are electricians, with nearly 33,400 active apprentices in fiscal year 2014. Next are carpenters with roughly 10,700 active apprentices and plumbers with slightly more than 10,000. Other leading occupational categories in terms of apprenticeship program participation are craft laborers, pipefitters, roofers, millwrights, drywall applicators and painters.

Through Associated Builders and Contractors’ (ABC) national network of 70 chapter offices, these apprentices and craft students can train in more than 20 construction crafts and get on a path toward earning a competitive salaries—and help employers regain their productivity by filling the workforce void.

The bad news is that the construction industry doesn’t enjoy exclusive control over its destiny. Parents of young people need to be convinced that construction represents a productive pathway into the middle class and potentially to entrepreneurship. Educators must reestablish career-oriented education for students in their junior and senior years of high school. Society must rethink its obsession with college attendance for all, and must pragmatically consider how America can push more people into pursuits that can realistically position them to climb the economic ladder.

Here’s another big issue. Once people learn to do certain activities in certain ways, they tend to not want to alter how they deliver services or produce products. The ongoing aging of construction’s workforce might help explain the lack of technology adoption. A younger workforce would be more likely to embrace the latest technologies, thereby bringing construction toward a new age. 

Anirban Basu is chief economist of Associated Builders and Contractors. For more information, visit abc.org.

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