The Talent War: How Construction Contractors Are Solving the Labor Shortage

Since founding New York construction management firm Omnibuild in 2003, principal John Mingione has worn many hats, but until this year, he hasn't needed to put on a detective's cap. With the company short-staffed, Mingione has had to keep a close eye on whether subcontractors can maintain adequate staffing when assigning them work.

"I'm constantly on alert, trying to spread resources around and not put all my eggs in one basket," he said.

In Los Angeles, Landmark Construction founder Ezra Laniado is also struggling to attract labor, and he's working hard to keep a poker face. He's found that the "simplest and hardest" approach is paying higher wages to retain workers, but he must be careful not to appear too desperate, or workers will demand even more.

"It's a delicate balance," he said. "We have to be very savvy."

The construction industry's inability to attract and retain talent—a chronic problem that has persisted for over a decade—has escalated into a full-blown crisis since the COVID-19 pandemic began. According to CNN, of the 1 million construction workers unemployed early in the pandemic, only 80% have returned to their jobs. The Associated Builders and Contractors announced that the industry needs to hire 430,000 workers this year and another 1 million over the next two years to meet demand. Construction is competing for these workers with eager companies in every other industry, and U.S. Chamber of Commerce CEO Suzanne Clark has called the labor shortage a "national economic emergency."

The War for Talent

Although the pandemic exacerbated the problem, the industry's talent drain began long before COVID-19 appeared. Contractors have been forced to adopt increasingly creative methods to find and retain workers, and industry leaders have formed coalitions to study and address the issue. Facing an aging workforce (the average construction worker is 41 years old) and a monthly quit rate of 5.2% (compared to the all-industry average of 3.6%), construction faces numerous obstacles.

"It's a war for talent, and it's really bad," said Branka Minic, CEO of the Building Talent Foundation (BTF), a coalition of the nation's largest residential construction companies dedicated to advancing education, training, and career development for young and underrepresented workers. "Not just our industry—everyone is saying they're short on people. We have to fight for everyone, and we have to be more flexible."

When Minic took the helm of BTF two years ago, she set out to align education and training programs with industry needs and partnered with schools, churches, foster care agencies, and community groups ranging from veterans to Girl Scouts to reach new populations.

"We're definitely pushing for diversification of the industry," Minic said. "That's clearly one of our goals—to open up new sources of talent and make sure they get good opportunities."

Raising Wages

Raising pay seems like the simplest way out of the crisis, but the cost is rising every day. According to the Federal Reserve Bank of New York, the average minimum wage (reservation wage) that Americans without a college degree would accept for a new job has risen 26% over the past year to $29.56. And the trend is far from over: A Willis Towers Watson survey found that wage increases for production and manual labor workers will rise from 2.5% this year to 2.8% in 2022.

Hadar Raz, chief marketing officer of the Preferred Contractors Association, observed that in hard-hit areas, construction firms have raised wages by as much as 10%.

"All industries have proven common practices, and construction must first meet those standards," Raz said. "The basic thing is to start raising wages—that's the first step."

Raz said the next step is attracting younger people by adopting employee-friendly practices common in other industries, including bonuses, flexible working hours, and career training. "You can give someone a job, or you can give them a career path. We need to show people that this is a profession, a trade they can master forever."

What Millennials Want

Joe Flanagan, senior employment advisor at career-matching platform VelvetJobs, said more than 50% of millennials will stay in a job if they see potential for career growth, making training programs and reward systems an important part of company structure. These programs, Flanagan said, "confirm to employees that their contributions are valued."

Millennials won't tolerate militaristic hierarchies where "the foreman is God and everyone has to listen to him," said Carol Sigmond, a partner in the construction practice at New York law firm Greenspoon Marder. She said younger workers demand a more collaborative approach, "and I'm not entirely sure that approach doesn't bring some value."

To attract younger workers, contractors must stop treating construction as transient work, Sigmond said. "Jobs have to become more stable. The idea that people work nine months a year and then lie on the beach for three months has to change. They can use that time to train and prepare for the next year—but they need more stable employment."

"The construction industry, like any other, pays based on the value of the skills employees bring," said Rolf Bax, chief human resources officer at career resource site Resume.io. "It's hard to find general laborers on job sites because too many companies treat these workers as disposable. If you make it clear that people willing to learn new skills will get opportunities, you'll see more applicants."

Attracting New Workers

Younger workers are less driven by money and more by what a company can offer them. They are attracted to and retained by companies with purpose and a people-first approach, said Pat Wadors, chief talent officer at construction technology firm Procore Technologies and former senior vice president of global talent organization at LinkedIn.

Contractors need to articulate their organizational purpose and then create what Wadors calls an "employee value proposition"—a commitment to pay fair wages, respect every individual, and foster an inclusive culture. "That creates clarity when you're attracting talent," she said. "Employees will hold you to that promise in ways they never have before."

For Sacramento-based Otto Construction, that means focusing less on what skills employees bring and more on whether their personality and work ethic fit the company's culture of honesty, integrity, and compassion. "The construction industry is great, but it's not rocket science," said CEO Allison Otto. "If you're willing to learn and want to be part of our team, we'll teach you. Our culture is very important. If we find the right person, we'll mentor them and develop them."

"Culture isn't something you can measure in money—it's not a health benefit," said Laura Newbrough, HR director at virtual design and construction firm Zelus, which relies almost entirely on employee referrals for hiring and boasts a retention rate above 90%. "Culture is about leadership, teaching, allowing people to learn on their own and try new things. It's always been the most important thing to me. I'm constantly checking—how's the culture, how's the culture, what are the cultural threats?"