Solving the Construction Worker Shortage
The US has a shortage of more than half a million construction workers, and the problem is only getting worse. Who is trying to fix it?
While interest rates have attracted much of the blame for rising development costs, the real estate industry faces another major challenge: a massive and growing shortage of skilled workers. Earlier this year, Associated Builders and Contractors estimated that the country would need an additional 546,000 construction workers in 2023 on top of the normal pace of hiring to meet demand. And this doesn’t include related shortages of labor in maintenance and repair roles driving operating costs up and leading some owners to defer maintenance.
The problem is likely to get even worse over the next decade, with almost a quarter of US construction workers over the age of 55. Certain specialties such as ironworking and steamfitting are in even more dire straits, with a majority of workers approaching retirement age.
The growing shortage can be addressed from either the supply side (creating more workers) or the demand side (reducing the demand for workers). We’ll address each in this letter, specifically:
Demand-side solutions: New construction methodologies, workflow and management solutions, and other tech-driven approaches;
Supply-side solutions: Apprenticeship programs, vocational education, policy solutions, and other marketing-oriented proposals;
Read on for more.
Demand-Side Solutions
While it’s easy to see the appeal of supply-side proposals—creating more workers—some of the most interesting solutions address the demand side by decreasing the number of specialized and skilled workers we need to do given construction and maintenance tasks.
New Construction Methodologies
New approaches to development such as modular construction and 3D printing promise to reduce the need for skilled construction labor by centralizing, simplifying, and automating many construction tasks. With a majority—in some cases, up to 90%—of construction tasks happening in factories, those tasks can be specialized and more easily automated, increasing the productivity of each skilled worker. While automation has enabled manufacturing productivity to rise by 8x since 1947, construction productivity has been flat at best. In theory, automation would allow construction productivity to catch up to its peers in other sectors.
Construction automation also changes the skills needed to complete a given construction project. When larger and more complex components of a home are manufactured on the assembly line—an entire shower, for example—machine operators and software engineers can replace plumbers and stonemasons, reducing the demand load on those trades.
Interior "modules" are also gaining appeal for specific use cases, replacing custom-built interiors with pre-made furniture-like installations. ROOM’s soundproof phone booths is a simple example, while Bumblebee’s storage solutions and Ori’s movable walls offer a bit more complexity. But these factory-made solutions can replace some on-site framing, millwork, and electrical without flipping the entire construction model on its head.
Unfortunately, modular and in-factory construction has been slow to gain traction, with high-profile failures like Katerra casting doubts on the entire sector and scaring many developers away from exploring new methods of construction. But newcomers like ICON and Cuby are pushing the sector forward with innovations like robotic 3D printing and transportable factories which promise to radically simplify the on-site construction process, reducing the need for traditional skilled on-site trades.
Workflow & Management Solutions
While modular construction companies seek to wholly reinvent how construction works, other new concepts are taking a more incremental approach: make construction teams more productive within existing construction methodologies.
Bridgit, for example, is building a tool to help construction companies assess and optimize their workforce utilization rate with better measurement and planning tools. Their client roster includes some big construction names such as Skanska, Fortis, and Clayco. Incumbents like Procore have also rolled out more usable field apps for workers, while newer entrants like HappyCo have attempted to improve maintenance tech efficiency through better monitoring and dispatching.
Unfortunately, the construction industry still sits at the bottom of technology adoption comparisons across sectors as well as technology spending as a percentage of revenue. While some of this is surely due to a lack of quality tools—many of the people building new tech don’t have friends working in construction and are unlikely to see their problems firsthand—there is also resistance to new tech tools from within the construction industry itself and few internal voices advocating for more tech-forward approaches. The high degree of unionization in many skilled trades also adds friction to the adoption of any new tech tool, especially tools that may lead to increased monitoring or job losses down the road.
Supply-Side Solutions
While demand-side approaches may ameliorate the labor shortage by reducing some of the need for skilled trades, technology is unlikely to solve the problem on its own. Supply-side solutions—increasing the pool of skilled workers available—are necessary.
Immigration
Thesis Driven is not a political publication, but we’d be remiss to not include the most obvious solution to the construction worker shortage: let them in. The US remains the most desired destination for international migrants by a wide margin, with almost a billion people worldwide expressing a desire to migrate. If it chose to do so, the US—or any developed country, really—could solve its labor shortages by creating quotas for immigrants with certain skills like plumbing, masonry, or carpentry.
Other countries have succeeded at this approach; for example, Canada's Express Entry system saw a 32% increase in invitations for Federal Skilled Trades candidates from 2019 to 2020, which they achieved through a public awareness campaign as well as targeting invitations to specific skilled trades with strong demand.
Unfortunately, an immigration-based solution for the United States seems farther off than it ever has, with Obama’s attempts to reform immigration laws—and encourage skilled immigration in particular—failing. No administration since has approached the issue of comprehensive immigration reform, making this an unlikely path to solving the construction worker shortage in the near term.
Apprenticeships
Outside of immigration, the majority of skilled tradespeople in the US today were trained in a formal apprenticeship program. In general, apprenticeships in the skilled construction trades last between one and six years—with an average of four—and are paid. This allows apprentices to gain on-the-job experience and training while remaining debt-free. Many apprenticeships also include a component of classroom training, which typically takes place at a private trade school.
Promisingly, construction apprenticeships are picking up steam. According to the U.S. Department of Labor, registered apprenticeships in construction increased by more than 60% from 2013 to 2022, going from 375,425 to over 600,000 apprentices. With the Infrastructure Investment and Jobs Act—passed in late 2021—creating grant programs for "pre-apprenticeship" programs, the number of registered apprentices in the United States will likely continue to grow.
New companies are also playing a role in the growth of apprenticeship programs. BuildWithin, launched last year by former Washington DC schools chancellor Michelle Rhee, helps companies build and manage their own in-house apprenticeship programs—and tap into federal, state, and local grants to do so. I expect to see more innovation and new entrants in this space in the coming years as companies pursue apprenticeship programs as a path to solve talent shortages.
Education
Trade education goes hand-in-hand with apprenticeship programs, which often mandate a certain number of classroom hours. Many trade schools also offer a pipeline of talent into formal apprenticeship programs through recruitment and placement activities. As with apprenticeship programs, trade school enrollment is showing signs of growth. Vocational enrollment growth has exceeded that of 2- and 4-year universities over much of the past decade, including a double-digit bump from 2021 to 2022.
Trade education has been comparatively untouched by innovation. While some classes have moved online—with a "flipped" classroom model gaining some steam—education in the skilled construction trades generally operates as it has in past decades with few new entrants into the category.
Unlike colleges and universities, trade schools aren’t governed by regional accrediting bodies. Instead, they’re regulated by state consumer protection agencies such as the BPSS (New York) and the BPPE (California). These agencies maintain tight control over trade school practices, approving individual instructors and curricula. (Interestingly, coding schools like General Assembly are also regulated by these agencies, and getting GA’s web development and design classes approved by New York State was this author’s first serious interaction with the regulatory apparatus.)
Making Skilled Labor Cool
Despite rising wages and appealing training and apprenticeship terms, skilled labor suffers from a marketing problem: young people today don’t want to be plumbers or ironworkers.
Surveys of Gen Z’s views of skilled trades are mixed at best. While some surveys show that young people have high and growing respect for the skilled trades, others indicate only a small minority would consider pursuing the trades themselves. Unfortunately, survey data here is sparse and poor, with most polling coming from private companies with a specific agenda. But the numbers speak for themselves; despite rising wages and freedom from student debt, vocational school enrollment shows only modest gains. The skilled trades have a marketing problem.
Fortunately, the solution is obvious: Taylor Swift should date a plumber.
Barring that, our institutions should probably stop driving every student down the college path. While college graduates certainly earn more than non-graduates, it’s difficult to tease out the causative element: people more likely to be financially successful in life are also more likely to go to college, so it’s not clear how much college caused the success in any given case. And it’s easy to find specific examples of people saddled with student debt who would’ve been better off had they gone to vocational school. So while college is probably a good choice for many or even most students, it’s likely a bad decision for the marginal student who chooses to go to college due to family or school pressure.
And as a society, we’re failing to get young people excited about jobs that offer stability and good pay. In a recent YouGov poll of US teens’ career aspirations, the skilled trades did not even register—unlike "professional streamer" (9%), musician (7%), "e-sports star" (3%), and "activist" (1%). Suddenly, all the Soviet propaganda glorifying construction workers begins to make sense.
Ironically, modular and automated construction—a demand-side solution—may help solve skilled labor’s marketing problem. When sealing a pipe fitting involves sitting behind a computer monitoring the robots doing the work, it feels less low-status than getting down on your knees with a wrench and a caulk gun at a construction site.
With rates rising and housing starts finally on the decline, the skilled labor shortage may lose relevance over the next several years as demand wanes. But that doesn’t mean the problem will go away. As a society, we need to build things: more housing, more manufacturing and logistics, more energy production, and more transit. We also have to maintain the things we already have. All of this requires skilled labor: plumbers, electricians, steamfitters, HVAC specialists, and more.
In the absence of radical immigration reform—which is unlikely to come—there is no silver bullet here. Solving the problem will require not only demand-side innovations but also an increase in the training of far more skilled workers here in the United States and elsewhere in the developed world. Unfortunately, attracting people to these fields will require a dramatic mindset shift among the young and perhaps a reinvention of the way we teach.
Creating a better future will require a lot of building. We need more people who know how to do that.
—Brad Hargreaves
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