May 22, 2024
The labor shortage creates a problem in that there's funding but not people to start several projects.

Contractors are struggling to find construction workers as demand for projects picks up following the passage of the $1 trillion bipartisan infrastructure spending legislation.

While labor shortages have existed across the country and in a wide array of industries for more than a year, the sting of trying to hire and retain workers has been particularly painful for the construction industry, which was already suffering from long-running structural problems with its workforce before the pandemic.

The shortage of construction workers is an even more glaring concern considering President Joe Biden signed the bipartisan Infrastructure Investment and Jobs Act into law in November after passing through the Senate 69-30, with $600 billion of the legislation for transportation-specific funding.

Ken Simonson, chief economist with the Associated General Contractors of America, told the Washington Examiner that the industry is in a complicated position.

He said there is a record number of job openings in the construction industry and that it’s been that way for several months. However, he pointed out that while the sector has hiked wages, there is still a big shortage of workers for projects across the country.

“Workers who might otherwise choose construction seem to be heading elsewhere. So I don’t see any short-term fix except the most dire one, that the demand for projects drops off,” Simonson said, adding that while demand for homebuilding is likely heading down, nonresidential construction, such as infrastructure projects, appears to be strong.

He said the construction worker shortage has “gotten worse for the right reason” because there are more construction projects than there have previously been. The infrastructure spending bill has produced more demand for the industry.

Transportation Secretary Pete Buttigieg even acknowledged the strange situation in which the industry now finds itself. He said that instead of constraints related to funding, having a suitable workforce to match the infusion of funding is now the goal.

“A lot of my lifetime, the big constraint on infrastructure work has been just a lack of funding and a failure to invest,” Buttigieg said. “We got the funding. Now we have got to make sure that we have the raw materials, the technical capacity, and the workforce to actually get it done.”

As a result of the labor shortage, many of the infrastructure projects tied to the legislation may end up being delayed and not completed according to schedule.

Moody’s Analytics predicted that the Infrastructure Investment and Jobs Act’s impact on the labor market will peak in 2025 and bring nearly 900,000 more jobs, more than half of which will be in the construction industry.

The fact that the impact of the infrastructure plan is expected to peak further down the line rather than right now could be positive because, given rising mortgage rates and a slowing economy, it means that other types of construction, including residential, will tamp down and workers may be more plentiful for projects related to the infrastructure plan.

Anirban Basu, chief economist for Associated Builders and Contractors, told the Washington Examiner that a factor other than wages that is also behind the labor shortage is age.

It has gotten harder to recruit and retain younger talent in the labor force because many high school students have been persuaded that the pathway to wealth is through a four-year degree.

The preferences of those recently graduating have been trending toward working in controlled indoor settings as opposed to outdoor environments such as construction, according to Basu.

“Those younger generations have not tended to look at construction as a first or second option in terms of their vocations, so we have these structural shortfalls in the number of construction workers,” Basu said.

The pandemic worsened labor problems, particularly with aging construction workers, Basu explained. He noted that older people comprise many of the most experienced construction workers and are more susceptible to COVID-19. In addition, some experienced employees retired earlier than anticipated for several reasons, including fear of getting infected.

Meanwhile, as older workers retired and younger people gravitated toward other work, demand for construction work skyrocketed. After the Federal Reserve slashed interest rates to ultralow levels for a sustained period and the country saw an incredibly rapid economic recovery from the pandemic, the construction market boomed, resulting in red-hot demand for workers.

Overall, inflation and supply chain problems have continued to make construction more expensive. Consumer prices rose 8.6% in the 12 months ending in May, the fastest clip since 1981.

Another contributing factor to the shortage is slowed legal immigration, Basu said.

While people born in the U.S. might be inclined to snag a job in a different industry, immigrants looking for work may be more willing than those who aren’t immigrants to choose a job on a construction site.

In addition to attracting up-and-coming younger workers, Simonson said construction firms have also been trying to attract women, minority workers, and people who might not have blemish-free criminal records to work for them.

“But none of this is a quick fix. It’s all going to take a while,” Simonson said.

In the end, taxpayers are set to get less bang for their buck than was initially expected from the infrastructure spending legislation. High inflation, rising wages, and longer timetables for projects due to a lack of workers will all contribute to less work getting done with the funds that Congress allocated.

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