During the pandemic, supply chain challenges have dominated the news. Materials costs have skyrocketed, forcing contractors to pay significantly more out of pocket to procure materials, seriously depleting cash flow. Over the last 18 months, lumber costs increased 122%, steel mill products 123%, copper and wire cable 101% and diesel fuel 201%, while demand continues to rise with little relief in sight. While rising materials costs are clearly a major challenge for commercial contractors, another equally daunting dilemma is battering the construction industry: the worsening labor shortage.
As with materials costs, the post-COVID-19 labor crisis is impacting nearly every industry from retail, restaurant and service sectors to even Wall Street, but few have been hit harder than construction. Overall, the industry will need to hire 1 million workers over the next two years to keep up with residential and commercial demand.
Meanwhile, the labor crisis is a serious challenge for commercial construction. The recent U.S. Chamber of Commerce Commercial Construction Index (CCI) showed over 90% of commercial contractors reported some level of difficulty finding skilled workers, while 55% indicated high levels of difficulty—a 10% jump from Spring. The worker shortage is crushing contractor’s bottom lines, with 73% reporting difficulty meeting project deadlines and 61% reporting significant project delays. Furthermore, contractors have increased bids by only 5% while their costs have risen almost 30%.
Unlike restaurants, retail or hospitality, pay increases are not a silver bullet for construction. First, the average hourly construction wage is nearly 50% higher than the average $11.26 hourly U.S. wage, and 73% of contractors have already increased base pay rates during the past year, with scant results.
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Gary Fleisher is the Editor in Chief of Modular Home Source and Offsite Builder. Email at [email protected]
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