The slow recovery of U.S. home construction since the housing bust has been exacerbated by a shortage of labor, lots and lumber and, although all three are important, labor tends to draw the most attention. The following article explores the severity of the construction labor shortage across the states, and traces it back to the loss of young construction workers during the housing bust.
It can be tricky to measure the intensity of a shortage because it requires observation of the extent of unmet demand–in this case, unfilled or ill-filled positions. One way to accomplish this is to observe how difficult it is to hire workers in one place compared to another. This study uses online construction job postings data to observe the share of postings that remain online for more than 45 days. A higher share indicates that employers are having a harder time filling roles.
The greatest severity of the shortage is in expensive states such as Massachusetts, New Jersey and California.
Why is there a greater shortage in more expensive states? There are many factors at play. Higher priced areas can reduce the supply of laborers (e.g., they can’t afford to live there) and increase the demand of projects (e.g., more wealthy residents undertake larger and more frequent projects). Working the other way, a shortage of laborers can also raise construction prices due to extended timelines and higher wages. Perhaps most importantly, expensive states usually have strong economies that generate intense competition for housing and labor, making both of them more costly and difficult to obtain.
The greater relative shortage of construction labor in expensive states is likely to be a longstanding feature of the US economy. However, not all expensive states exhibit as severe a shortage as others, and some states such as Pennsylvania and Michigan exhibit a relatively severe shortage of construction labor despite being less pricey, suggesting there is more to the story.
Despite gains in employment rates since 2010, the construction workforce has declined and so has the share of younger workers.
Between 2005 and 2010, a stretch that spans the worst of the housing bust, the construction employment rate fell sharply from 80.3 percent to 69.4 percent and then recovered to 80.5 percent by 2016. However, the construction workforce contracted throughout the entire 11-year period, falling from a high of 11.7 million in 2005 down to 10.2 million in 2016.
This holds true at the state level. Despite a 9.4 percent increase in the U.S. population from 2005 to 2016, 41 states saw their construction workforce decline (some by more than 20 percent).
The decline of the construction workforce was especially pronounced among young workers. With less experience and less of a likelihood of being securely self-employed, young workers were most vulnerable to layoffs during the housing bust. From 2005 to 2016, the share of construction workers less than 25 years old fell, typically by about 30 percent, in all but two states.
The severity of the current shortage across states corresponds to the decrease in the share of young workers, not the overall decline of the construction workforce.
States that were hit hardest during the housing bust also incurred the greatest loss of construction workers and the greatest declines in the share of young workers. However, it is the decline in the share of young workers—not the overall decline in the construction workforce—that correlates with their current level of difficulty in hiring construction workers.
Whereas the housing bust decimated the construction workforce, the recovery has done little to undo the damage. Indeed, states whose home values recovered more vigorously in the last few years have failed to see a corresponding recovery in the share of young workers.
What’s Next?
Why aren’t young people flocking back to construction? Some blame a loss of instructional institutions, such as high school vocational training programs and technical colleges. Others point to the loss of construction role models because of the workforce contraction during the housing bust. Yet others point to fluctuations in the supply of immigrant labor.
Regardless of the housing bust, the construction industry has long suffered from a broader, long-term challenge in marketing itself to younger generations—as have blue-collar jobs in general. The blow dealt by the housing bust affected the industry above and beyond this broader trend, but rebuilding the construction workforce requires addressing both factors.
The original study, including notes, methodology and data sources, can be accessed in full on the BuildZoom blog.
