The Bureau of Labor Statistics reported this month that 7.8 million Americans are unemployed, while at the same time 5.8 million jobs remain unfilled in America, according to a press release from the Career Education Colleges and Universities. CECU says the crisis exists because employers demand “job ready” employees, but prospective employees can’t bridge the skills gap without appropriate education and training.
This assessment mirrors earlier ones and it appears accurate to some degree. The claim by some is that this is a classic paradox visiting many sectors, and is driven mainly by what people call a “structural change” in job skill requirements. This structural change is blamed for high unemployment coexisting at the same time with unfilled jobs.
The diagnosis however, didn’t just apply in the U.S., and in 2012 the head of the Organization for Economic Cooperation and Development spoke of an “obvious mismatch” when referring to unemployed graduates on the streets while jobs went unfilled across the globe.
Others reported the dismal employment rate of youth in Europe was because there was a mismatch between the educational paths the youths had chosen, and the needs of the labor market.
These assessments originally came from the manufacturing sector where companies said they couldn’t find job candidates with skills to match many positions in production. Those positions, according to Deloitte, included machinists, operators, craft workers, distributors, and technicians.
Thing is, the wages for the people interested in those positions weren’t going up as you would expect them to do if there really was a shortage of people with those skills who were also available to do the work.
Late in 2012 the Construction Labor Market Analyzer reported there would be an expected shortfall of two million construction workers in the U.S. through 2016.
This added to the warnings sounded since at least 2006, even before the great recession, when FMI, a construction management and investment firm, called a construction labor shortage the “biggest issue facing the industry for the next five to 10 years.”
Structure Is Part of the Story
But structural change, or skills mismatch, doesn’t tell the whole story in the U.S.
According to the Chicago Federal Reserve Bank, in its letter dated July 2012, the “degree of mismatch has abated since early in the recession, and there is evidence that many employers appear hesitant to fully commit to hiring.”
It went on to say that if there is a skills mismatch that it is most evident in the mid-skills group since their skills are in the greatest demand. Middle-skill jobs are those that require more than a high school diploma but less than a four year degree.
Hoarding Plays Its Part Too
Also blamed for high unemployment existing simultaneously with unfilled jobs, is labor hoarding.
This is where companies hold onto valued workers even when there is not enough work for them. A Goldman Sachs economics research team claimed hoarding caused construction’s value-added per worker to drop $20,000 from 2006 to 2013.
A New Toolkit
Regardless of the reasons for construction’s labor woes it is clear that a multi-pronged approach is needed to reduce the impact in the coming years.
A strong beginning would include reducing the emphasis on four-year degrees and substituting with career/technical/advanced training for both new entrants and existing people.
Figuring ways to keep older employees on the job beyond traditional retirement ages, changes in immigration policies, and embracing new technologies to make the work more productive and appealing can also make a difference.
It’s also important to note that construction has had labor warnings for decades, so this isn’t really a new challenge. Leave a comment and tell us why you think construction has always had such a difficult time keeping its ranks full.
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Mid-Level Skills Gap
Ensuring young workers are prepared to replace retiring baby boomers will be a crucial component of limiting the effects of the construction worker shortage on the American economy. Career colleges and universities can help fill this need. As the Conference Board pointed out in its recent study, businesses will have to be proactive in finding a solution to the shortage of skilled trade labor, either “on their own or in partnerships with training and education institutions.”
Construction's Labor Numbers
- 180,100 new construction jobs
- 13% growth in the construction sector from 2014 to 2024 (+ 6% above average growth rate)
- 20% replacement rate for retiring baby boomers makes a total new demand in the decade ahead of 457,380 for construction
A recent study by Conference Board analyzing 457 occupations ranked construction workers ninth in its labor shortages index, and found that the occupation faces a higher risk of labor shortage than 91.4% of all others examined. Skilled trades, such as electricians and welders, are at an especially high risk of experiencing a scarcity of labor.
Census Bureau economists noted the limited number of new entrants in the sector. “The percent of hires accounted for by the 19-25 age group declined from approximately 18% at its peak before 2006 to 13% in 2012-13,” Hubert Janicki and Erika McEntarfer told The Wall Street Journal.
*Data Courtesy of CECU