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The construction industry is facing one of the most significant labor shortages it has ever seen. This labor shortage has far-reaching implications for worker safety and construction quality—both of which could adversely impact a company’s bottom line if investments are not made to address the issue.

What’s causing the labor gap?

There are two underlying trends driving this phenomenon:

  1. More experienced workers have either not returned to the industry after the Great Recession or are now retiring as they’ve concluded their careers.
  2. The construction industry has long struggled to attract new, younger workers to the industry, and this problem has only worsened as the broader economy boomed. As a result, construction firms must compete with other industries, such as health care, technology and engineering, for young talent.
The potential impact on construction firms

One area that can be dramatically affected by the shortage of skilled labor is worker safety. According to the U.S. Chamber of Commerce Commercial Construction Index, 80% of contractors are highly concerned about the safety risk caused by a lack of skilled workers at their jobsites. Rightfully so, as the U.S. Bureau of Labor and Statistics data shows 34.9% of new, untrained workers in the construction industry are injured during their first year on the job.

However, another area of impact that many construction company owners may overlook is the impact the lack of skilled tradesmen, including project managers and supervisors, can have on productivity and construction quality. One overseas study examined how inexperienced project managers lead to ineffective management strategies in the early stages of the project, and ultimately costly delays and poor construction quality. The study noted increases in project costs and delays, as well as reduced construction quality, as the top three impacts of the skilled worker shortage. This last issue of poor construction quality is particularly noteworthy given the cost, complexity and contentious nature of construction defect litigation in the United States.

How to attract a younger workforce

To attract younger workers, construction firms must consider how to compete with other booming industries. More competitive pay and benefits—such as 401K plans, educational support and reimbursement, or hassle-free paid time off—are just a few of the options firms should consider.

Recent data illustrates that workers will leave a firm for just 25 cents to 50 cents more per hour—particularly younger workers. To safeguard against this turnover, competitive salaries can be supplemented with 401K plans that include a company match and/or profit sharing. Performance bonuses also may be a way to reward lower level employees for superior work, while simultaneously reaping benefits for companies in the form of more engaged employees and better quality work.

Additionally, companies should invest in partnerships with local high schools, community colleges or trade schools to establish a career pathway for young talent. This way, employers can begin to build skills and loyalties in potential future employees early on.

Most construction companies offer standard vacation time, but employees cite the hassle of taking vacation days—especially when a project is delayed or otherwise under pressure. Construction managers should consider offering paid time off (PTO), with no questions asked, as a way of supporting employees’ need for work-life balance. Employers may also consider enhancing their vacation or PTO plans by implementing time-off increases based on the number of years of service to the company.

Training and development are key to retaining employees

Attracting younger workers with competitive wages and benefits is just the beginning. Smart construction company owners know that retaining good employees is the key to growing their business. After all, some studies show that it costs six to nine months’ salary to attract and train new employees versus retaining existing ones due to costs associated with separation (e.g., severance and unemployment), recruitment efforts and the costs of lost productivity. So, companies are best served by investing in new, younger workers as well as current workers through regular training programs.

One important area of training for employees is safety, including new employee orientation training programs as well as ongoing safety training such as OSHA 10-hour. Training demonstrates to employees that the company cares about them and wants them to go home safe at the end of each work day, and it can pay dividends to the company’s bottom line by reducing costly workplace injuries and accidents.

A short-term business cost, for a long-term investment

Some construction company owners may raise concerns that a focus on attracting top talent, and actively investing in training, safety and quality programs, carries costs that adversely impact profits. While all of these options bear some costs, construction owners should consider the consequences of not taking action—such as not being able to attract enough new employees to successfully complete backlogged projects on time and with good quality. This can not only affect the firm’s top and bottom lines, but its brand and reputation as well. Also consider the costs of increased worker injuries that could result from a lack of safety training and new employee orientation programs. These worker injuries can spiral into increased workers’ compensation cost, which is already a significant line item cost for most construction firms.

Selecting an insurance agency and carrier that have expertise in the construction industry can yield significant reductions in the total cost of risk. Some agencies and many carriers have products, programs and staff that are dedicated to helping construction firms control their costs and improve their bottom lines through the implementation of programs such as:

  • Quality assurance programs;
  • Return-to-work programs;
  • Fleet safety programs;
  • OSHA training;
  • Ergonomic and manual handling; and
  • Nurse case managers.

For help implementing these programs, construction firms can derive significant value and lower cost of risk by partnering with their agency and carrier.

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