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Qualified construction workers have been difficult to find since before the 2008 market crash. During that economic downturn, the workforce was depleted by retirements, job changes, layoffs and a serious lack of new talent in the pipeline. Construction projects were suspended, postponed or abandoned.

From 2010 to the present, electricians, carpenters, welders, bricklayers, plumbers, masons and many more trades workers represent the highest rate of job vacancies. Research indicates it will cost the industry nearly $100 million in lost productivity by 2025. The COVID-19 pandemic exacerbated the situation as construction projects ground to a halt and workers were often forced to leave the industry because of the lack of work.

Many firms experience delays as a result of labor shortages, and many candidates are not highly qualified. All of this has combined to create situations where there were too few workers—with too little experience, putting in too many hours. This affects a construction company’s ability to successfully bid on projects as well as complete them on time and on budget.

It also has a fundamental effect on insurance costs.

The main problems created by the construction workforce situation is additional risk in safety and quality of construction. Unfortunately, some in the industry have attempted to make up for the lack of workers by hiring unqualified labor. These workers often don’t carry proper insurance and construction firms sometimes don’t have proper controls in place to manage them.

What if they don’t properly care for equipment? Or jeopardize the integrity of the structure? Or allow environmental damage—water intrusion, for example, or an improperly installed HVAC system that creates mold build up? Underwriters are paying close attention to project delays and safety concerns. And industry experts are blaming unskilled workers for being the number one cause for subcontractor default insurance claims.

Contractor overreach is another potential red flag issue. Underwriters are concerned about commercial contractors venturing into the residential project area where they don’t have the knowledge or skill set, as well as contractors trying to enter new markets too quickly.

Less trained workers can result in higher MOD rates

The losses caused by safety issues, delayed completions and coverage extensions and overall risk potential have resulted in many construction firms having higher experience modification rates (MOD). The MOD rate is used primarily to calculate workers’ compensation premiums, but many government agencies rely on it as a method to evaluate contractors and construction firms bidding on projects. A high MOD number can ultimately disqualify a company from submitting bids at all.

How do you rebuild a strong, sustainable construction workforce? The younger generations have watched the generations before them lose their construction jobs and they don’t necessarily see the industry as a strong possible career choice. That said, many in Gen Y and Gen Z are passing up college because of cost, among other reasons. A trade may be a welcome alternative if it’s positioned correctly. Some employers have already started or are supporting programs to attract new talent.

What can employers do to attract employees? Find ways to make the construction industry and skilled trades seem like a more rewarding career choice, with better salaries and benefits, a promise of long-term employment, and a path to career growth. Work with trade contractors to find good people and develop apprenticeship and mentoring programs. Encourage local high schools to create trade programs and provide support. And embrace diversity—especially programs to train women.

Once contractors find new workers, how do they keep them from leaving? Create a culture that engages workers and makes them want to stay. Make safety a priority. Make sure salaries are more than competitive, and continue to provide paths to career growth. Provide excellent health insurance and focus on employee wellness. Develop 401k plans. Provide paid sick leave and vacation.

A skilled, sustainable workforce isn’t the cure-all for insurance issues, but it can go a long way towards stabilizing costs and coverage. To secure the most advantageous insurance coverage, work with professionals who have a proven track record in the construction business. Ask if a they have the hard-earned experience to understand everything that makes up a construction company risk profile and what makes the construction industry unique. Make sure they understand your basic coverage needs and risk appetite, and offer risk management strategies optimized specifically for a company—strategies that help a contractor proactively manage risk, take advantage of opportunities and meet emerging needs.

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