The labor shortage in the construction industry is projected to last another three years, requiring increased emphasis on safety training and supervision, according to a recent industry report.
The third quarter USG Corp. and U.S. Chamber of Commerce Commercial Construction Index 6 reveals that 88% of contractors surveyed expect to feel at least a moderate impact from the workforce shortages in the next three years, with more than half (57%) expecting the impact will be high to very high.
The USG and U.S. Chamber quarterly report draws on surveys conducted of a contractor panel consisting of more than 2,700 commercial construction decision-makers. They are polled each quarter for USG and the Chamber by Dodge Data & Analytics, offering their views on the strength of the industry and its prospects.
Although the skilled labor shortage has been consistently identified as a major challenge facing the industry, it is now reported by 80% of contractors to be having an impact on worker and jobsite safety. In fact, the Q3 report found that a lack of skilled workers was cited as the No. 1 factor impacting increased jobsite safety risks by 58% of the contractors.
“The commercial construction industry is growing but the labor shortage remains unresolved,” says Jennifer Scanlon, president and CEO of USG Corp. “As contractors are forced to do more with less, a renewed emphasis on safety is imperative to the strength and health of the industry. It continues to be important for organizations to build strong and comprehensive safety programs.”
The quarterly report also found that addiction and substance abuse issues have become a factor in decreasing worker and jobsite safety. Almost 40% of contractors say they are highly concerned about the safety impacts of worker use/addiction to opioids, followed by alcohol (27%) and marijuana (22%).
Notably, the report showed that while nearly two-thirds of contractors have strategies in place to reduce the safety risks presented by alcohol (62%) and marijuana (61%), only half have strategies to address their top substance of concern: opioids.
The opioid epidemic cost the U.S. economy $95 billion in 2016 and could account for approximately 20% of the observed decline in men’s workforce participation, the researchers assert. Efforts at all levels have been mounted to attack the problem, ranging from individual employer initiatives to a number of legislative proposals.
“The opioid crisis has both human and economic costs,” says Neil Bradley, chief policy officer of the Chamber. “The U.S. Chamber of Commerce remains committed to helping combat the opioid epidemic, which continues to devastate too many families, communities and industries every day. While there is no one-size-fits-all answer, a multipronged legislative approach is a critical first step.”
Meeting the Issue Head On
As contractors grapple with a scarcity of skilled workers, the survey findings also show that a majority of construction employers are working to improve the overall safety culture on their jobsites (63%) and at their firms’ offices (58%).
However, the indicators reported to have the highest impact on improving safety culture and outcomes are the kinds that have been found to engage employees throughout the organization, the researchers point out. This includes developing training programs for all levels of workers (67%), ensuring accountability across the organization (53%), empowering and involving employees (48%).
Other indicators reported include improving communication (46%), demonstrating management’s commitment to safety (46%), improving supervisory leadership (43%) and aligning and integrating safety as a value (42%).
“Construction projects are increasingly complex and technical, which makes adequate skills essential to a safe work environment,” the report says. As a result, it isn’t surprising that contractors say the top factor increasing safety risk on the jobsite is a lack of workers with sufficient skills.
Shorter construction schedules compound the labor problem. Nearly half of respondents cite tight schedules as a safety risk. Aggressive scheduling may cause contractors to use workers with less experience or training and can push employees to work longer hours, which also could subsequently compromise safety processes, the researchers explain.
More than two-thirds of general contractors (68%) rated a lack of workers with sufficient skills as a top three safety risk factor, compared with less than half (45%) of trade contractors. Regionally, contractors in the West (67%) most frequently cite the lack of workers with sufficient skills as a major safety risk factor. However, only 25% are likely to consider shorter construction schedules a serious risk compared with builders in other regions.
Around one-third of contractors in the Northeast (34%) and West (31%) find language barriers to be a leading safety risk.
Asked to select from a list of safety practices which have the highest impact on safety outcomes, training at all levels was selected by 67% of respondents. More than half (53%) of contractors also believe that ensuring accountability at all levels has a high impact, while 46% cite demonstrating management commitment to safety.
There is broad agreement about the positive impact of the remaining practices, with most landing in the 40 percentile range. According to the poll, empowering and involving employees in safety programs was cited by 48%, improving communication about safety by 46%, improving supervisory leadership by 43%, and aligning and integrating safety as a value by 42%
The researchers also reported that encouraging owner/client involvement is an emerging tactic, with just 24% citing a high impact. More general contractors consider empowering and involving employees (58%) and demonstrating management commitment (55%) to have a high impact on safety outcomes, compared with trade contractors (35% and 34%, respectively).
The USG-Chamber researchers contend that this suggests general contractors are more focused on safety as a companywide initiative than are trade contractors.
Factors directly affecting risk and financial performance, such as reduced insurance costs and reduced liability, are the top ways safety programs are contributing to a competitive advantage, contractors report. Four out of five (80%) contractors experience some competitive advantage from the safety programs they have instituted.
Large contractors (65%) believe safety programs give them a major or moderate advantage, compared with just 25% of small contractors. “This is likely because large firms typically have the resources to create more robust safety programs,” the report states.
Overall Outlook Is Good
Contractor optimism remains high even in the face of these growing concerns. Overall contractor sentiment saw a slight boost in optimism with an Index score of 75 in the third quarter—up two points from the second quarter.
The Index looks at the results of three leading indicators to gauge confidence in the commercial construction industry. These are: backlog levels, new business opportunities and revenue forecasts, and this data is used to generate a composite index on the scale of 0 to 100 that serves as an indicator of the health of the contractor segment on a quarterly basis.
The survey results from the three key drivers to generate the report’s conclusions are:
Backlog: Optimal backlog rose from 73 to 81, the largest change in any of the three components of the CCI in the last six quarters. The average current backlog was 10.3 months, up from 9.3 reported in the previous quarter.
New Business: The level of overall confidence was 74, relatively steady quarter-over-quarter (it was 75 in the second quarter), but down two points from the 76 reported in the first quarter.
Revenues: Expectations slipped from 72 to 69, the most notable change coming in a decrease in the percentage of contractors who now expect an increase in revenues, which dropped from 83% to 72%.
Contractors report overall optimism about the construction market in the third quarter, in spite of their ongoing challenges in building and maintaining a skilled workforce, as well as concerns about the looming impact of tariffs, USG and the Chamber note.
In a separate report, the Associated General Contractors of America (AGC) noted that construction spending increased 0.1% from June to July and 5.2% for the first seven months of 2018 combined, with year-to-date growth for most major public and private categories.
For the first seven months of the year, AGC reports that spending was 5.4% higher than in January through July 2017 for public construction and 5.2% for private construction. Within private construction, there were increases of 7.7% for residential projects and 2.2% for nonresidential.
Ken Simonson, chief economist for AGC, predicted nonresidential construction spending will rise by 3% this year, driven largely by transportation and lodging projects, when he spoke at the American Trucking Associations Annual Economic Summit in early September.
Spending year-to-date through the first seven months of 2018 was 5.4% higher than in January through July 2017 for public construction and 5.2% for private construction, Simonson reported. Within private construction, there were increases of 7.7% for residential projects and 2.2% for nonresidential.
“Contractors are optimistic that demand for projects will continue, but many report that workforce shortages are leading to longer construction schedules and higher costs,” Simonson says. “Firms overwhelmingly plan to hire more workers, but 80% report difficulty filling hourly craft positions, leading to longer completion times for projects. This trend could drag down further gains in spending.”