Expert Strategies To Adapt To Construction Labor Shortage

Real Estate

The labor shortage is impacting every industry in the US, but the construction industry is extra challenged by decades long challenges that have recently been exacerbated by the pandemic.

Mischa Fisher, the chief economist at the home services marketplace Angi, outlines some of the issues creating the shortage. First, is a major shift in the starting age of new workers entering the trades.

“The people in the trades now started at 16 to 20 years old mostly,” he said. “But now, workers mostly enter at 25 to 30 years old.”

This delay in entering the field means that the employees have different expectations. They are post-college and looking for careers that will fulfill their education and also need salaries that will reduce their accumulated college debt.

Some are noticing a different trend, such as more millennials and Gen Zs entering the trade who don’t want to go into college debt, plus an underrepresentation of Gen X in the trades. Russ Kathrein, the vice president of lumber and building materials at building products distributor Do It Best Corp, has seen that void when it comes to Gen X. He believes the Gen X generation suffered from the 2008 recession, when they were laid off as the most inexperienced employees and never came back.

Fisher cites a variety of ways that the construction industry will be growing and changing during the next year, which will impact the need to recruit. For starters there is the nearly unimaginable amount of home equity that was gained in the past two years, reaching an astounding $7.6 trillion, and putting outstanding equity at$27 trillion. So, record home values mean record home service spending.

“People typically spend about 2% of home equity on improvement,” said Fisher, which is he forecasts to reach a whopping $475 billion this year. “This is largely concentrated in home improvement, not in maintenance and emergency repair. So, in terms of companies attracting labor to complete that work, they will be competing with multiple sectors and need to think about where they are pulling from.”

Plus, the majority of the national housing stock was built in the 1940s and 1950s, which also means failing systems and outdated styles. And, as the interest rates go up, more people are making their current residence fit their needs, so you also can factor in renovations for family formation and aging in place.

On top of the burgeoning home equity, mortgage interest rates are lower than inflation rates, so homes are still a better deal than just looking at the sticker price would make them appear. While labor demand for home construction dips with interest rates, the home service economy is steady year over year. Rising rates will also incentivize people to stay in their homes, which will benefit remodeling at the expense of moving. If interest rates continue to rise, remodeling will be a better deal.

Together that means competition for labor will be intense, so companies still need to get recruitment and retention strategies right. When or if there is a downturn, there will be an opportunity to recruit. These tips will help for just that occasion or being competitive during the tight job market.

Strategies To Recruit

First, Fisher says that compensation should become a science, because the construction industry does not pay enough to be competitive with other industries.

“Overall, the national story is that compensation in construction is not a science, but it is now competing with a labor market that has come a long way in compensation and benefits,” he said. “The industry is conservative, but it means the payment side needs innovation, so take a look at how you structure benefits.”

Laura Conover is the president at Conover Consulting, a firm that specializes in compensation and leadership, and points out that the entire employer-employee contract has turned upside down since COVID.

“Employees as a group have more power than they had a few years ago and that power is reflected in higher wages,” she said. “Paying competitively now means raising the floor on compensation while ensuring those with more tenure and/or higher performance are not paid less than those new to the organization. Increases in pay must also be informed by pay equity and pay transparency issues, hot topics that many states have addressed with legislation. Along with raising the minimum hourly rate offered, employers are also having to ensure they are competitive with pay for all of their jobs. Many employers instituted mid-year across the board increases of 4 to 5% in 2022.”

But, as Branka Minic, the CEO of the Building Talent Foundation, suggests compensation is only part of the puzzle. Her organization partnered on the 2021 Homebuilding Workforce Engagement Study that revealed a need to prioritize employee engagement.

“The number one thing that every employer can do is keep the people you have,” Minic said. “Before you hire and struggle to hire, then try to keep the ones you have.”

According to the study, doing that requires engagement on all levels, plus the right compensation.

“The top reason people love their jobs is not compensation, it’s actually access to training,” she said. “Also very high on the list was their immediate supervisor and their leadership skills in being able to motivate and engage crew members. Those are the nonmonetary benefits or parts of the job that came as very important for engaging and retaining workers.”

From what the report outlines, offering career advancement and skill training within your organization takes dedication and commitment at every level. For instance, supervisors need to understand their reports’ motivations and goals and provide mentorship. The path to advancement should be clearly communicated, while employees also have to be given time specifically for skill development.

Tapping Into Women

Fisher’s second strategy is to look at how to dip into the untapped well of female talent.

“Women are 50% of the general population, but they represent only 2.4% of carpenters, 4% of construction laborers, 2.4% of electricians, 1.8% of plumbing, and 3.7% of construction supervisors,” he said. “Polling and surveying show that women are just as happy in their jobs in the trades, but they are just not recruited.”

The Building Talent Foundation also commissioned a research project that resulted in the Women Breaking Barriers guide to recruiting, training and retaining women in the residential construction trades.

“If you look at the best employers that recruit underserved groups, they never do it alone,” Minic said. “It’s all about partnering with organizations where you can draw that talent and help you get to a diverse group. You can’t just place an ad on a job board.”

A skim through the report outlines the best practices to hire more females as directly reaching out to women by meeting them where they are, communicate with them via images and language that reflect who they are, share information to build awareness, and measure progress.

“You cannot make things happen unless you have certain targets and you measure progress toward targets,” she said. “You can say that you want to have 25% of female candidates, you cannot say you will hire a woman over a man every time. But you can commit to a number of candidates and then let the best candidate win the job. By the fact that you are measuring the candidate’s diversity, you will improve the results.”

Angela Gardner serves as the director of business development and marketing at Hill Electric and also as the co-founder of Women Talk Construction, a podcast and social site to celebrate women’s non-traditional career journeys, and shares that so much of recruitment starts with getting involved at the local level.

She is working hard in her market to help teachers and counselors understand the opportunities available for women in the industry, going so far as to create a series of testimonials from the field, included in these powerful videos.

“You need to reach out to your local career centers and get involved,” she says. “Our Women Talk Construction has done several presentations at a local career center and at Greenville Tech. We share stories, bring several of our members, and offer a Q&A. Don’t be intimidated. They are craving this at the career centers because it helps them recruit and keep sophomore students.”

Her visits to career centers highlight the interest in the field. Students want to know what kind of classes to take, the importance of internships to get a job in the field, the attire, working conditions, and the tools. The students are eager to hear stories from successful women on how they entered the industry and they are shocked at the variety of jobs and opportunities.

Another thing that Gardner is sure to highlight is helping them understand the benefits of being a female owner, which should be introduced at a young age.

Gardner also advises to put strong structures in place to support them once they are in the job.

“I feel like all women entering a nontraditional role need to find their tribe of women they can bounce things off of,” she said. “The young females we have in our group reach out to one of us older members for guidance when they experience challenges, and they do! From being treated bad on a job site, not getting equal pay, not the same access to advancement opportunities like male peers, or managers who aren’t accepting of family responsibility.”

Modernizing Recruitment Channels

Next, Fisher says that recruitment channels need to be modernized because word of mouth is still the most common hiring source. While word of mouth is an effective tool in terms of trust, it cannot scale, so the industry needs solutions that can bring in the volume of workers that are in demand.

His data shows that nearly half of candidates come in through word of mouth, whereas Facebook posts and online job postings are both around 35%; followed by Craigs List posts and classified ads at around 25%; job fairs at 23%; and trade associations and trade vocational schools at 20%.

Minic agrees and offers services to support the companies in need of more sophisticated processes.

“Ninety two percent of employers in the sector are very small employers in construction so they don’t have very sophisticated multichannel recruiting strategies,” she said. “Big employers can do this on their own, but a small employer doesn’t have the resources for it, so we are trying to fill that gap.”

Focus on Nonmonetary

Finally, Fisher says that it’s necessary to highlight nonmonetary benefits of the job.

“People in the industry are very satisfied mostly with meaning and value in the work,” he said. “This means developing a better understanding of how to optimize wage rates, profit sharing or other forms of equity payments, retention and signing bonuses, and other benefits.”

In addition to that, nonmonetary processes also have room to grow in terms of developing clearer career trajectories, increasing levels of ownership that follow a predictable path, highlighting the satisfaction and meaning and value in the work involved, and creating more engaging cultures, just as the Engagement Study reported.

Future Labor Expectation

Fisher doesn’t hesitate to link a company’s recruitment process to its overall business success.

“I think we’ll see leading companies continue to innovate in the above ways to attract and retain top tier talent, and they’ll gain market share in the industry because they can actually meet consumer demand with their larger workforces,” he said. “I also think we’ll continue to see new product innovation from manufacturers that improves install speeds to also save on labor.”

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