Talk of a labor shortage, skills challenge or even skills crisis is now omnipresent in U.S. construction. However, we are not alone—the problem is systemic and global. Across the 46 markets covered by Turner & Townsend’s International Construction Market Survey, more than half are suffering from skills shortages. As the global economy recovers and new projects come online, the construction sector at home and abroad is grappling with the challenge of delivering more work with fewer workers.
Skills shortages have been a major force behind cost escalation in U.S. construction. New York has retained its title as the most expensive place to build in the world, with the average cost of construction in the city climbing 3.5 percent to $362 per square foot ($3,900 per m2). Acute demand means that New York construction workers command an average cost of labor of $98.30 per hour—the second highest in the world behind Zurich, Switzerland.
On the west coast, a lack of resources and the growth in the tech sector is contributing to Seattle’s and San Francisco’s forecast to see the fastest construction price inflation in the United States during 2018—with costs predicted to rise by approximately 5 percent. Turner & Townsend also is seeing construction costs in some sectors of San Francisco now rivalling New York.
What receives considerably less airtime than labor issues are the steps that the industry must take to mitigate the impact of shortages and the part it can play in attracting new talent to the industry.
It’s a fact that construction has been too slow to reform, a little sluggish in embracing data and technology, and sometimes reluctant to change working relationships between contractors and clients. The effects are being felt in lengthening project timescales, inconsistent performance and low productivity.
What should the construction industry do to mitigate the impact of a lack of people? The problem can only be solved by moving toward a better-structured industry that is more resilient, less cyclical, more automated and is adopting the best of global expertise and innovation.
NEW TECH AND NEW SKILLS
It is critical that contractors and clients become technology enabled. Even on major projects, technology such as BIM is not consistently used. The result is field clashes and widespread inefficiency. This is a missed opportunity to not only maximize site productivity but also to provide a digital tool that can aggregate data, enable informed decision making and measure performance.
Embracing new technology is also a way contractors can drive change by attracting new industry talent. First and foremost, the increased adoption of technology on major projects is important to drive efficiency, but it’s also fundamental to attracting new entrants and changing the perception of construction as dirty, lower skilled and lower paid.
INCENTIVIZING CHANGE
There are steps that commercial and industrial clients must take, too. To compete for the best contracting teams, developers need to incentivize contractors and set up progressive procurement and management models. Reviewing payment terms is an essential first step, as many contractors in New York are typically being paid on a 45 to 60 days cycle. When taking into consideration what those payment terms mean for the wider supply chain, it’s a model that isn’t going to attract businesses or attract new people to the construction industry.
However, a move to a more progressive model doesn’t happen overnight. It requires clients to carefully set up projects with excellent controls and clear governance in place from the outset. On the West Coast, progressive tech sector real estate clients, who were once known for overspending, are now adopting program and project management models that are more progressive to do just this. It is a positive step. The challenge now is to see this approach embedded nationally and used by clients operating across all parts of the commercial and industrial markets.
None of these steps provides a silver bullet to tackle labor shortages, nor do they all rest on clients or contractors alone. However, they are important to help create an industry fit for the future, built on incoming new talent, technology and better productivity.
