A Smaller Construction Workforce, But Still Less Productivity

by | Mar 2, 2023

Where Did the Construction Workforce Go?

The construction industry cannot hire enough workers, and has an historic workforce shortage. And Construction has had a workforce shortage for very long time. Academic research into the topic goes back to the 1990s.

The most recent narrative goes something like this:

  • The residential construction boom of of 2003-2007 brought many workers into the industry, including workers from abroad.
  • The great recession bust of 2008-2013 forced these workers out of the industry except for low cost immigrants.
  • In the meantime, the workforce has aged and underinvested in workforce development and recruiting.
  • So not enough new workers are entering the industry to offset those retiring, especially with greatly reduced immigration.

If the construction workforce has shrunk or at least not kept up with demand, why is construction workforce productivity stayed depressed?

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What Happened to Construction Workforce Productivity?

Construction labor productivity has steadily declined, even with automation on the jobsite. Even a simple tool like a nail gun can easily increase the productivity of framing, and all tool costs have decreased dramatically. Even “dumb” phones make communicating with crews easy today. Dozens of examples easily come to mind, even before we get to advanced tech such as digital sensors, image and video tech, drones, AI, etc. 

If productivity is output versus cost, if you get the same output at less cost, you get more productivity. The construction workforce has shrunk or at least not kept up with demand. Workers are equipped with more productivity enhancing automation. So why has construction workforce productivity stayed depressed?

Labor productivity stagnation is especially surprising since union representation has steadily declined over the fifty year period as well. Because unions likely raise wages more than output, unions are largely seen as a drag on productivity. But the decline of union representation continues today.  

Have Safety Regulations Depressed Productivity?

Are increased worker safety practices really a cause of lower productivity? Fifty years ago the cost of injuries and deaths onsite was borne almost entirely by the workers, not the builders. Prospective workers that shun construction often cite dangerous job conditions as a reason to avoid the industry.

With a shrinking workforce, logic dictates you keep your remaining workforce healthy. Making sure your workforce is warmed up physically and mentally before beginning a shift (as mentioned in the NY Times op-ed) makes sense.

Would we prefer that all safety related claims and costs were adjudicated by lawsuit? Even with liability insurance, lawsuit costs are astronomical. Most builders are small and can hardly afford their part time lawyer, much less a lawsuit. Everyone in the USA pays for their own lawyer. Most cases will bankrupt a small firm even when they are blameless.

I doubt we want the Turkish industry’s practices, now seen in the aftermath of an earthquake. Quibbles about particular rules aside, safety regulation is a benefit to builders, workers and the public. If OSHA is regulating all builders equally, the costs and benefits should equalize. We need to look elsewhere to raise productivity versus shaving safety costs.

Does the Construction Workforce Need More Education?

Is poor training part of the explanation? Are our workers less skilled, motivated and “productive”? Is our education system to blame?

Most labor market experts agree that an over emphasis on classroom instruction is probably more to blame. Building is highly experiential, a physical experience where you learn by doing. There’s limits to what can be learned in a classroom when going from apprentice to journeyman takes five years.

Since much training is outsourced to unions, perhaps the decline in union representation is to blame. Most construction firms are not large enough to fund a major training program. Poorly designed education systems, with too much book learning and not enough fieldwork training, is likely a factor of poor productivity. And poor training amplifies the worker shortage effect.

What If Minority and Skilled Immigration is Needed?

Is minority discrimination part of the explanation? Construction is overrepresented by white males –  to put it mildly. Even without outright bigotry and exclusion, recruiting minority and female workers will need to overcome resistance, fear and just not fitting in.  And that’s before they begin to acquire skills that typically takes five years to learn.

And then there is immigration. While the industry is loath to talk about it, it’s pretty obvious how dependent the construction industry became on low cost undocumented labor. How many jobsites have you walked by where Spanish, not English, was the language of work? How often is fear of deportation been a management strategy?

I have said for years: Either the work can be done locally, or eventually it will be done remotely. Or not at all, if it becomes too expensive. 

Last I checked, immigration has been increasingly restricted for over twenty years with the big exception of the tech industry. Tech has always understood the necessity of recruiting foreign-born workers. But today, we’re still preventing skilled construction workers from immigrating, even if only temporarily.

Fix the Workforce Shortage and Raise Productivity

My view is that the current labor and productivity shortage will only be fixed via:

  • Near term, 1-2yrs: Increased use of automation so we need fewer workers
  • Medium term, 2-5yrs: Minority and underrepresented group recruitment and more effective training
  • Longer term, 5+yrs: Immigration reform to replace retiring baby boomers