Construction Industry Institute®
Is There a Demographic Labor Cliff that
Will Affect Project Performance?
Research Summary 318-1
Construction Industry Institute
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Is There a Demographic Labor Cliff that
Will Affect Project Performance?
Prepared by
Construction Industry Institute
Research Team 318, Is There a Demographic Labor Cliff that
Will Affect Project Performance
With assistance from
Construction Users Roundtable (CURT),
Construction Labor Market Analyzer (CLMA), and
National Center for Construction Education and Research (NCCER)
Research Summary 318-1
September 2015
© 2015 Construction Industry Institute™
The University of Texas at Austin
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Contents
Chapter
Page
v
1. Introduction
1
2. Demographic Data Analysis
7
3. Impact of Craft Labor Availability on Project Performance
21
4. Conclusions and Recommendations
25
Executive Summary
After decades of facing periodic workforce challenges, many
construction industry leaders seem to have become habituated to the
idea of a looming skilled workforce cliff. With increasing concerns that
imminent severe labor shortages could affect many projects—even as
the industry continues its recovery from an economic downturn—the
industry response is once again likely to be, “We’ll find the workers we
need,” or “No shortage will exist if we pay enough.” While true to some
extent, these statements are short-sighted and do not acknowledge the
deeper problem.
CII chartered Research Team (RT) 318, Is There a Demographic
Labor Cliff that Will Affect Project Performance, to determine whether
the industry is in fact now facing a skilled labor cliff. The team found
that such shortages are expected in the southwestern and southeastern
United States among welders, pipefitters, and electricians. However,
the more pressing issues are the long-term structural changes in the
construction craft workforce, including the following:
• At a time when the wage gap between construction craft labor
and all other industries has shrunk, construction craft workers are
increasingly more motivated by higher wages than they are by job
satisfaction.
• The average age of the construction craft workforce is increasing
three times faster than the average age of workers in all other
U.S. industries.
• Lack of educational attainment among the Hispanic workforce
serves as a barrier to Hispanic workers moving into the higherskilled trades that are more in demand, such as welding,
pipefitting, and electrical.
• The decline in career and technical education among high
schools across the country and the emphasis on four-year
degrees as a path to career success have contributed to the
shortage of experienced high-skilled workers.
v
This research summary presents empirical project-based evidence
that workforce shortages are directly correlated with at least three key
elements of project execution:
1. Safety – A labor shortage could cause OHSA TRIR rates on
projects that range from 0.26 to 0.94, depending on the severity of
the shortage.
2. Cost – A labor shortage could cause project cost escalations of
more than 17 percent, depending on the severity of the shortage.
3. Schedule – A labor shortage could cause projects to experience
schedule delays of more than 22 percent, depending on the
severity of the shortage.
The research team used this analysis to develop Implementation
Resource (IR) 318-2, Craft Risk/Availability Forecasting Tool (CRAFT),
a predictive model to determine craft labor availability for specific
projects. The team also produced Research Report (RR) 318-11, Is
There a Demographic Labor Cliff that Will Affect Project Performance?,
to document the research process in technical detail.
The skilled labor market for the construction industry has a serious
structural problem, and the longer industry leaders erroneously assume
that the market will take care of itself, the more severe the problem
will become. All industry stakeholders must contribute to the solution.
As the ultimate buyers of construction services, owners must demand
robust workforce development efforts to level the playing field for labor
providers. Labor providers must invest in establishing a skilled workforce
pipeline to ensure a sufficient numbers of workers when and where they
are needed. By diligently planning for their workforce needs earlier in the
project planning process, all stakeholders can muster greater capacity to
influence their projects’ labor components and more effectively manage
labor risk.
vi
1
Introduction
The North American construction industry has experienced multiple
boom and bust economic cycles over the past half-century, forcing
all construction stakeholders to adapt to constantly changing market
conditions. Construction craft workers are no different. In 2014, the
average age of a skilled construction craft worker was 41 years old.
Assuming this average worker entered the workforce at the age of 18,
he or she would have experienced three significant recessionary periods
to date. While the severity and length of these recessionary periods may
have differed, members of the previous generation likely experienced
similar cycles during their time in the construction industry. So, the
question arises as to why anyone would assume that the current labor
market is different?
Since the 1980s, construction industry groups such as the Construction
Business Roundtable and the Construction Users Roundtable have
predicted shortages of skilled craft labor in North America. Since then,
the construction industry has seen craft labor shortages emerge at
the ends of several periods of economic growth. However, because of
the economic contraction that followed the growth each time, the craft
labor shortage was “solved” by the resulting labor surplus. Because this
pattern has been repeated so many times, some in the industry view craft
shortages as simply an inherent temporary problem that the industry has
to endure at the tail end of economic growth periods. However, others
argue that the craft labor shortages experienced over the past several
decades are indicators of a more significant problem; they see it as a
craft labor “cliff” that will permanently debilitate the construction industry.
1
Considering the recurring nature of craft shortages over the past
several decades, RT 318 was charged with determining whether the
frequency and extent of craft shortages are increasing or decreasing
over time. To do this, the team formulated the following objectives:
1. Analyze the trends of craft labor availability in the United States
and Canada.
2. Examine the ways craft availability affects individual project
performance.
3. Determine how companies and projects can mitigate the effects of
craft shortages or at least estimate their likely effects.
The research methodology used to achieve these objectives involved
an extensive statistical analysis of data from publicly and privately
available databases, as well as data collected from an RT 318 projectspecific survey. The database data were collected from the following
sources: the National Opinion Research Center General Social Survey;
the U.S. Bureau of Labor Statistics’ current U.S. population survey and
current employment statistics; Alpha Resources; the National Center
for Education Statistics; the National Center for Construction Education
and Research; Statistics Canada; Build Force Canada; the Construction
Users Roundtable Construction Labor Market Analyzer; and the CII
Benchmarking & Metrics database. All told, the team collected more than
two million individual data points from 12 different databases.
Before attempting to identify a labor cliff, the research team determined
that it would first need to define the term; and it defined it as a craft
labor state in which project performance is significantly affected by
one or more workforce issues (e.g., labor quantity or quality). The team
derived this definition from its analysis of project performance of 29 of
the projects it surveyed and 68 projects from the CII Benchmarking &
Metrics database. (All these projects were located in North America.)
2
Table 1 shows the changes in project performance (for safety, cost,
and schedule) for projects that experienced three different categories of
staffing difficulty. The table shows that craft labor shortages can have a
significant impact on project performance and provides one example of
how awareness of a craft labor cliff would be important foreknowledge
for construction organizations.
Table 1. Performance of Projects Affected by Craft Labor Shortage
Craft Labor
Staffing
Difficulty
OHSA Number
of Recordable
Incident Cases
per 200,000
work hours
Moderate/
Severe
0.94
17.3%
22.5%
Slight
0.43
3.2%
12.8%
No Difficulty
0.26
–6.2%
6.4%
Average Cost
Change (%)
Average
Schedule
Change (%)
Data Source: RT 318 Project Survey and CII Benchmarking & Metrics Database
In addition to finding these general performance impacts of labor
shortages across the entire North American continent, RT 318 also
determined that a craft labor cliff exists for some regions of the U.S. for
specific trades. Figure 1 projects the availability of pipefitters by region
in the first quarter of 2018, based on owner- and contractor-supplied
data to the Construction Users Roundtable Construction Labor Market
Analyzer and Industrial Project Reports. This color-coded map reveals
that some regions of the U.S., especially the Southwest and Southeast,
are expected to experience severe pipefitter shortages, while other
areas will experience surplus labor conditions for this trade. RR 318-11
provides projections for welders and electricians that display similar
regional patterns.
3
4
Workers Surplus (%) Workers Shortage (%)
1% to 10%
1% to 10%
11% to 20%
11% to 20%
21% to 30%
21% to 30%
31% and More
31% and More
Source: Construction Labor Market Analyzer and Industrial Project Reports
Figure 1. Future Pipefitter Deficit/Surplus for First Quarter 2018
While Table 1 and Figure 1 respectively show general performance
impacts and the likelihood of regional craft labor shortages over the next
several years, these scenarios depend greatly on market conditions
(e.g., rising and falling energy prices) and other factors. So, although the
near-term cliff may be avoided due to falling construction demand, more
alarming long-term trends are also evident. For instance, the finding that
some regions have significant shortages while others have significant
surpluses indicates that some craft workers may not be as mobile as they
were in previous periods. Indeed, emerging research shows significant
increases in construction craft worker spousal employment over the
past four decades, a shift that may significantly limit construction worker
mobility currently and in the future.
The RT 318 analysis also indicates that the industry has underlying
structural factors that are precipitating a craft labor cliff different from
the ones generated at the ends of economic cycles. These short-term
and long-term trends are examined in Chapter 2. Chapter 3 presents
a statistical analysis showing how these trends could have negative
impacts on project performance.
5
2
Demographic Data Analysis
There is no one measurement for detecting the kind of craft labor
cliff brought on by structural changes within the construction industry.
However, by examining several key measures and demographic trends,
RT 318 found evidence for significant upcoming changes in the North
American craft labor market. These metrics and statistical trends included
the construction unemployment rate, craft labor age demographics, craft
worker preferences, construction craft wage data, construction staffing
difficulties by trade, and worker education and training.
Construction Unemployment Rate
RT 318 studied the construction unemployment rates for the U.S. and
Canada from 1994 to 2014, and found that, between 2011 and 2013, the
U.S. rate declined faster than at any other time over the past 20 years.
(See Figure 2.) The similarity in magnitude of the U.S. trend line’s positive
slope (from 2008 until its 2010 peak) and its negative slope (from 2010
until 2014) may indicate that its rate of decrease is partially related to the
rapid rise in unemployment during the 2008–2010 recession in the U.S.
(represented by the blue shaded area in the figure). Moreover, the similarity
in the slopes of the rising unemployment trends in this time frame in the
U.S. and Canada is noteworthy. Yet, as the recession has ended, the U.S.
unemployment rate has fallen faster than the Canadian rate.
It is also important to note that the U.S. unemployment rate is
approaching the natural construction unemployment rate (i.e., effectively
reaching zero unemployment, represented by the yellow-shaded area
in Figure 2). For the U.S. construction industry, this natural rate is
typically defined as ranging between five and 10 percent. When the
unemployment rate enters the region of the natural unemployment rate,
the overall quality of workers entering construction workforce typically
drops significantly. (See RR 318-11 for additional information on the
natural unemployment rate.)
7
25
Canada
United States
Unemployment Rate (%)
20
15
10
5
2014
2013
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
0
U.S. Source: Data Ferret – Current Population Survey, U.S. Bureau of Labor Statistics
Canada Source: Statistics Canada
Figure 2. Actual Construction Unemployment Rate [U.S. vs. Canada]
Craft Labor Age Demographics
Figure 3 compares the average age of the U.S. construction industry
workforce to the average workforce age of all other U.S. industries. It
shows that the U.S. construction craft labor workforce is currently aging
more than three times faster than it was from 1994 to 2001, and that it
is aging at a faster rate than all other U.S. industries. In comparison,
the average age of the Canadian construction workforce has remained
relatively constant at age 39 since 2006. (See RR 318-11 for details.)
After the aging rate of the U.S. construction workforce had leveled out
from 2003 until 2006, it continued its steady increase—possibly due, at
least in part, to layoffs of younger, less experienced workers during the
2008–2010 recession.
8
43
42
Average Age
41
40
39
37
94
19
95
19
96
19
97
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
36
19
9
38
Construction Industry
All Other Industries
Source: Data Ferret – Current Population Survey, U.S. Bureau of Labor Statistics.
Figure 3. Average Age [Construction vs. All Other Industries]
Craft Worker Preferences
RT 318 studied the General Social Survey on Craft Job Satisfaction
conducted by the National Opinion Research Center and found that
construction craft worker job preferences have changed significantly in
recent years. (See Figure 4.) The survey investigated the prevalence of
three motivations for getting and continuing in construction work: high
income, job security, and work satisfaction. The study found that, over
the past 20 years, work satisfaction has become less of a motivator for
construction workers; indeed, it showed that people are now significantly
more interested in getting and keeping construction jobs to obtain high
wages and job security. This finding represents a significant and alarming
shift in the motivations of construction workers; although, since it is
concurrent roughly with the 2008–2010 recession, temporary economic
factors may also be at play. The bright spot is that General Social Survey
data show that construction workers have reported higher rates of job
satisfaction over the past three decades than have workers in all other
industries. (See RR 318-11 for details.)
Construction Craft Wage Data for Craft Labor
In spite of the fact that craft workers have been more motivated by
higher wages and job security over the last 20 years, the gap has shrunk
between real wages for construction craft trades and wages for workers in
all other U.S industries. (See Figure 5.) As expected, construction wages
are still higher than the wages paid in all other industries; but, real wages
in all industries, including construction, started declining in the mid-1970s
and continued to fall until the mid-1990s, when all wages began a steady
increase. In 1974, hourly construction wages were approximately nine
dollars an hour higher than the wages in all other industries, but by 2014,
the gap between construction wages and all other wages had shrunk to
approximately four dollars an hour. Starting in the mid-1990s, the motivation
of craft workers shifted from work satisfaction to a desire for higher wages.
(See Figure 4.) This indicates that, as construction wages have come closer
to the wages of all other industries, workers have become more focused on
higher-paying opportunities (Figure 5). It is important to note that, although
workers no longer report being principally motivated by job satisfaction, this
does not mean that craft workers no longer take pride in their work.
10
60
11
Preferences in the Job (%)
50
40
30
20
10
0
1970
1975
1980
High Income
1985
1990
Job Security
1995
2000
2005
2010
2015
Work Accomplishment
Source: National Opinion Research Center, University of Chicago, General Social Survey on Craft Job Satisfaction. Note: The
data collection frequency rate decreased after 1995.
Figure 4. Job Preferences Rate in Construction by Year
limited to years participants answered job preferences question from 1974 to 2012)
29
27
25
23
21
19
17
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
12
Average Hourly Income (2014 $ Amount)
31
Total Private
Construction
Source: Current Employment Statistics (CES), U.S. Bureau of Labor Statistics
Inflation Adjustment Source: Consumer Price Index – All Urban (CPI – U), U.S. Bureau of Labor Statistics
Figure 5. Real Wages ($2014 Amount – Inflation Adjusted) [Construction versus Total Private] Craft Trades Only
Changes in real wages for the trades most closely associated with
industrial construction have been mixed. For example, the U.S. oil and
gas pipeline construction sector has experienced significant wage
increases over the past two decades, while other U.S. construction
sectors have experienced more moderate increases. Localized wage
surveys from Alpha Resources show significant wage increases in the
U.S. Gulf Coast region for industrial trades (e.g., welders) and, notably,
indicate the increased use of per diem pay for craft labor to increase
compensation in the region and elsewhere. (See Figure 6.) Wage data
analysis shows that certain skilled trades and geographic regions are
experiencing increases in wages in the both the short- and long-term,
and that the use of per diem pay as a form of alternative compensation is
on the rise. The risk in this approach is that the U.S. Department of Labor
has started investigating allegations of inappropriate per diem use more
aggressively.
13
14
Source: Alpha Resources.
Figure 6. Use of Per Diem and Per Diem Rate for the Greater Houston Area
Construction Staffing Difficulties by Trade
RT 318 distributed a project-specific survey to CII member and nonmember companies to examine the impact of craft labor on project
performance. The survey respondents indicated that the most difficult
trades to staff and the trades for which their workers were inadequately
skilled were as follows, in ranked order: pipe welders, pipefitters,
structural welders, and electricians. The respondents also reported that
actual wages for the following trades exceed the planned wages for
the project by more than three percent. (See Table 2.) The survey also
indicated that, on average, specific skilled trades such as pipe welding,
pipefitting, structural welding, and electrical are currently difficult to staff.
Table 2. Percent by which Actual Wages Exceeded Planned Wages
for Specific Trades
Trade
Percent
Pipe Welders
6.04
Pipefitters
5.37
Ironworkers
4.83
Boilermakers
3.19
Structural Welders
3.05
Education and Training
An examination high school graduation rates for construction workers
in the U.S. and Canada uncovered a series of alarming trends that
could have long-term impacts. There is little difference in high school
graduation rates among Canadians by birth (80.5 percent), Canadians by
naturalization (78.8 percent), and non-Canadian citizens working in the
construction industry (79.2 percent). This is in contrast to the comparison
in the U.S. of the graduation rate of non-Hispanic construction workers
with that of Hispanic construction workers, who are part of a growing
immigrant workforce. In the U.S., non-Hispanic construction workers
graduate high school at 87.3 percent, while Hispanic construction
workers graduate high school at a 50.3 percent rate. This might explain
15
why Hispanic workers have yet to penetrate the high-skilled trades (e.g.,
welding, fitting, and electrical) in significant numbers. (See RR 318-11 for
more detail on Hispanic worker representation in the high-skilled trades.)
Training organizations such as the National Center for Construction
Education and Research (NCCER) also report that, despite training
and testing material being available in multiple languages, a significant
number of Hispanic craft workers are functionally illiterate in both English
and Spanish. If it persists, the lack of educational attainment by the
Hispanic workforce will serve as a barrier to filling the demands for the
high-skilled trades.
A number of data points indicate that, across the U.S., career and
technical education (CTE)—previously called “vocational training”—is in
decline. Figure 7 shows that CTE credits have been declining among
public high schools in all regions of the country. Rural areas report the
highest number of CTE credits among U.S. public high school students,
but unabated long-term shifts in U.S. populations from rural to urban areas
mean that the pool of students exposed to CTE is declining. Furthermore,
data from the U.S. Department of Labor show that the percentage of
the experienced civilian workforce working in the construction industry is
declining across all regions.
NCCER data show that the number of new workers participating in
formal training programs related to their respective trades had declined
by more than 15 percent between 2005 and 2014. (See Figure 8.) The
same data also demonstrate that workers taking their first trade-specific
NCCER certification exam have an average of 7-8 years of experience.
The pool of potential young entrants into the construction craft workforce
is declining, and there is a time lag between entering the workforce and
completing formal construction training. At the same time, as mentioned,
the number of Hispanic workers graduating from high school continues to
lag significantly behind the non-Hispanic graduation rate.
16
17
Average Number of Credits Earned
5
4.5
4
CTE
3.5
English
3
Fine Arts
2.5
Foreign Language
2
Mathematics
Science
1.5
Social Studies
1
0.5
0
1990
2000
2005
2009
Source: U.S. Department of Education, Institute of Education Sciences, National Center for Education Statistics, National
Assessment of Educational Progress, 1990, 2000, 2005, and 2009 High School Transcript Study.
Figure 7. Average Number of Credits Earned in Each Subject Area by Public High School Graduates [1990 - 2009]
100
90
18
Percentage (%)
80
70
NCCER
60
No Formal Training
50
Other
40
Union
30
Formal Training
20
10
0
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Source: National Craft Assessment and Certification Program (NCACP), National Center for Construction Education and
Research (NCCER). Note: “Formal Training” is the summation of “NCCER,” “Union,” and “Other” training.
Figure 8. Percentage of Crafts Receiving Training and Not Receiving Training
To summarize, several indicators point to significant structural changes
in the construction craft labor sector that could pose long-term workforce
risks:
• The construction industry is currently experiencing
unprecedented rates of decline in unemployment.
• The U.S. construction craft workforce is aging at a faster rate
than workers in all other industries, while the Canadian workforce
is showing no appreciable change in the average age of its
workers.
• U.S. construction craft workers no longer report being motivated
by work accomplishment more than by high wages and/or job
security.
• The gap between real wages of all construction craft workers
and those of workers in all other industries has declined at a time
when construction craft workers are increasingly focused on high
pay.
• Real wages are rising for some skilled trades, while for others
they are stagnant.
• Surveyed projects across North America between 2008 and 2014
indicated difficulty in staffing pipe welders, pipefitters, structural
welders, and electricians for their projects.
• High school graduation rates for Hispanics in the U.S. remains
low and likely prevents their movement into high-skilled trades.
19
3
Impact of Craft Labor Availability on Project Performance
In the course of its research, RT 318 determined that construction
organizations in the southwestern and southeastern regions of the
U.S. will experience a shortage of skilled craft labor for specific trades
within the next five years. (See Figure 1.) To help mitigate the effects
of this looming craft labor cliff, the research team developed a model
to predict the impacts of craft labor shortages on project performance.
Using data from its project-specific survey (of 29 projects) and from
the CII Benchmarking & Metrics database (from 68 projects), the team
performed a statistical analysis of the impact of craft labor availability on
the performance of these North American projects. Of these 97 mostly
industrial projects, 87 percent were located in the U.S. and 12 percent
were located in Canada. All were completed between 2001 and 2014.
They had an average construction cost of $231 million and a median cost
of $41 million. Their average construction duration was 913 days, with a
median duration of 623 days. The data allowed for analysis of effects of
craft labor shortages on the cost, schedule, and safety performance of
these projects. The team used this analysis, to define the severity levels
of these effects. (See Table 3.)
Table 3. Severity Level Definitions of Craft Labor Shortage
Level
Definition
Very Severe
Staffing difficulties led to project delay.
Severe
Staffing difficulties led to delay of
completing project milestones.
Moderate
Staffing difficulties led to delay of
completing project activities on time.
Slight
Staffing difficulties led to consumption of
schedule float and/or contingency.
No difficulty
There was no shortage. Able to staff the
project with no delay on construction.
Data Source: RT 318 Project Survey
21
Table 4 shows the expected impact (with 95-percent confidence
intervals) of construction craft staffing difficulties on project cost,
schedule, and safety performance of the 97 projects studied. Because
of the distribution of the data, the table combines the “Very Severe/
Severe/Moderate” categories to provide adequate sample sizes for good
statistical results in each category. Linear regression was used to develop
the cost and schedule performance models, while a Poisson regression
was used to develop the safety risk estimate model. The models are
statistically significant for safety (p = 0.0044), cost (p < 0.0001), and
schedule (p = 0.0149). It is important to note that the average cost
changes and confidence intervals of the models shown in Table 4 are
based on the performance of historical projects. This means that the
models should not be used as a cost projection tool.
Table 4. Estimated Performance of Projects Affected
by Craft Labor Shortage
Craft Labor
Staffing
Difficulty
OHSA Number
of Recordable
Incident Cases
per 200,000
Work Hours
Average Cost
Change (%)
(95%
Confidence
Interval)
Average
Schedule
Change (%)
(95%
Confidence
Interval)
Moderate/
Severe
0.94
(0, 2.84)
17.3%
(8.4%, 26.2%)
22.5%
(11.5%, 33.4%)
Slight
0.43
(0, 1.72)
3.2%
(–0.9%, 7.3%)
12.8%
(7.7%, 17.9%)
No Difficulty
0.26
(0, 1.25)
–6.2%
(–10.7%, –1.8%)
6.4%
(1%, 11.8%)
Data Source: RT 318 Project Survey and CII Benchmarking & Metrics Database.
Table 4 shows that craft shortages have a number of significant impacts
on project performance. If no improvements are made in craft availability
and if the demand for craft remains the same, future projects could use
the experience of these past projects to estimate the cost and schedule
22
performance of future projects. However, it is not reasonable to accept
the potential increases in the number of OSHA number of recordable
incident cases. The finding of increased injuries resulting from the lack
of available craft workers should alone be enough of a reason for the
industry and our society to pursue long-term solutions to the coming
shortages of craft workers. Chapter 4 discusses a number of possible
avenues for increasing the availability of craft workers.
23
4
Conclusions and Recommendations
By examining a wide range of studies, RT 318 determined that the
construction industry is currently experiencing a regional and tradespecific craft labor cliff. Specifically, the southwestern and southeastern
United States are now having skilled craft shortages, particularly among
welders, pipefitters, and electricians, while other regions of the country
are still experiencing a surplus of skilled trades. The results of the RT 318
project-specific survey show that, in the Gulf region, not only are the
required numbers of welders, pipefitters, and electricians not available,
the necessary skills are lacking among the available workforce. One
respondent, a large industrial contractor, provided a real-life illustration
of this problem, reporting that after testing more than 500 welders, it only
found 25 qualified welders for a project. The best current available supply
and demand projections indicate that this problem will worsen over the
next few years. By performing a statistical analysis of the impact of craft
labor availability on project safety, cost, and schedule performance,
RT 318 determined that this cliff will have significant negative impacts
on the industry. However, with crude oil prices recently reaching nearly
10-year lows in the course of only a few months, construction related to
the upstream oil and gas sector is likely to slow down significantly—at
least in the short term—and this may temporarily “solve” the regional cliff
problem.
The research team used past project data to quantify the impacts of
craft labor shortages on project performance. (See Chapter 3.) The team
then used this analysis to develop the Craft Risk/Availability Forecasting
Tool (CRAFT) to help project managers analyze the risk of craft labor
availability on the performance of their particular projects. Specifically,
this tool helps project managers (PMs) make craft availability risk
mitigation strategy decisions during the project planning phases. (See
IR 318-2 for a full discussion of this tool and user guidelines.)
25
While the CRAFT tool can help PMs make informed decisions regarding
project labor risk mitigation strategies, and while market conditions may
solve the near-term cliff problem, several alarming long-term industry
trends reveal the looming presence of a farther-reaching and more
intractable craft labor cliff. Over the past decade, the construction craft
workforce has aged at a rate three times the rate in the preceding decade.
Craft workers appear to be motivated more than ever by higher wages
at a time when the gap is shrinking between construction wages and
other private industry wages. The lack of educational attainment by the
Hispanic workforce serves as a hard barrier to these workers’ entry into
more industry-focused trades such as pipefitting, electrical, and welding.
Finally, declines in vocational training and formal craft worker training
are indicative of underlying structural problems in the North American
construction sector that can have serious long-term impacts. These
changes will not only negatively affect particular companies or industry
sectors, it will have far-reaching impacts on the entire North American
economy.
As these trends gain momentum, it will become increasingly difficult
to find qualified workers for construction projects. Moreover, the effects
will go beyond the safety, cost, and schedule risks identified in Chapter 3;
they will likely precipitate a reduction of the number of projects executed
and will drastically increase project costs. While the impacts of this cliff
will initially be felt in the southwestern and southeastern regions of the
U.S., they have the potential to spread to other regions. These shifting
regional shortages are likely to be exacerbated by the reluctance of dualcareer families to relocate. (More research is needed to gain a better
understanding of craft worker mobility.)
These structural changes to the construction craft labor infrastructure
did not happen overnight to any particular companies or U.S. regions,
but instead reflect societal changes that have occurred over decades.
For example, North American society has increasingly pushed young
people away from vocational fields like construction and encouraged
them to attend four-year colleges and universities. No one organization
or single initiative, however well-meaning or aggressively pursued, will
26
fully redirect such structural shifts. Addressing these issues will require
a coordinated effort across the entire construction industry and, indeed,
beyond. To this end, RT 318 formulated the following challenges for the
North American construction industry:
• The construction industry must reach out to other technical
industries and initiate a national conversation about the
critical role of technical jobs in the future North American
economy. A continued focus on moving people away from
technical jobs is likely to have a significant negative impact on the
North American economy.
• The RT 318 findings show the clear value of education
as it relates to craft workers advancing to supervisory
positions, and even to the better-paying craft positions.
Craft professionals who entered the workforce with a high school
degree tended to gravitate to higher-paying crafts such as
electrical or pipefitting. Conversely, craft professionals without
high school diplomas tend to participate in the lower-paying, less
technical craft professions and do not advance into supervisory
positions at the same rate as their better-educated counterparts.
This gap points to a deeper global issue for education and
supports the notion that a high school diploma gives workers
more opportunities in the construction industry.
• A number of initiatives have been set in motion to recruit
and train craft professionals.
Career and technical education (CTE) in the construction
trades provides students with a course of study that combines
academics with industry-recognized classroom learning and
hands-on skills training in real-world situations. Recruiting
students from these programs is facilitated through strong
relationships with local and state educational partners, and
through direct contact with interested students to introduce them
to the industry.
Military veterans are an excellent recruitment source. Leveraging
these skilled men and women will contribute to building a
diverse construction workforce pipeline, and provide meaningful
civilian employment to those who have served our nation. As of
2013, approximately 850,000 U.S. veterans were unemployed,
including more than 250,000 post–9/11 veterans. And each
27
year, the military discharges another 250,000 service members.
By developing relationships with local bases and personnel in
their Transition Assistance Program (TAP) offices, employers
can identify and implement processes to recruit former service
members.
• The accomplishments of the construction industry and
craft labor were often celebrated and memorialized in the
20th century. For a number of reasons, the industry has
developed an “image” problem in recent decades, with
careers in the construction trades often being considered
among the bottom tier of occupations. (See Figure 4.) While
compensation and benefits for craft labor are competitive, craft
workers expressed a clear shift away from being motivated by
the sense of accomplishment that comes from construction work.
This change of feeling probably stems from society’s greater
recognition and valuation of higher education and professional
careers. This starts at home, with parents pushing their children
to get college degrees, regardless of their aptitudes and
passions. This trend is also reinforced by the school curriculum
and by counselors who promote higher education over vocational
schools. This is a structural problem which deserves the attention
of our society, families, educators, and politicians. Some western
countries (e.g., Norway and Germany) have adopted two-track
high school curriculums that cater equally to higher educations
and vocational education. Without changing the status quo,
the industry’s image problem will only aggravate the craft labor
shortage in the long run.
• A key element of retention and attraction is to illustrate
clearly the career fulfillment and satisfaction that can come
from working in the construction industry. It is imperative
that the full business dynamics and upward potential of the
industry are clearly and widely understood. People must see that
construction is not simply wearing a hardhat and driving a pickup
truck, and that it means more than just coming home from work
in sweat-soaked shirts and muddy boots. Although these are
certainly a part of the process, there are also leadership aspects
and operational components that offer excellent opportunities
for career growth. To retain and attract craft professionals,
industry leaders must publicize the real potential for their upward
28
development and growth. As craft professionals gain experience,
they can migrate to craft leadership as foremen, general foremen,
or superintendents. Or they can move to professional team
leadership as project coordinators or project managers. They can
also move into business operations areas such as estimating,
scheduling, planning, and accounting. Whichever path they
take, it is important that industry leaders continue to promote
those deserving of advancement. Doing so will convey clearly
that working in industrial construction provides an excellent
opportunity for a fulfilling life-long career.
• As the pending labor shortage becomes evident, many
recruiters will opt for non-traditional methods of gathering
information on potential candidates. One method that is
becoming more popular is to use third-party firms that specialize
in the recruitment of potential craft personnel through various
networks, including social media, word of mouth, and past
work experience. These firms typically use a three-to-ninemonth “contract to hire” structure, through which the employee
becomes a direct hire to the contractor after the negotiated term
has expired. As with any recruiting method, due diligence must
be done with proposed candidates to ensure that their skill sets
will be a good fit. Another possible option to help mitigate the
shortage of skilled craft workers in the U.S. is the importation of
foreign craft workers. However, this option is severely limited,
given that only 66,000 H2B visas are issued annually in the
U.S—a number well below the number of skilled workers needed
across all U.S. industries. Under the current visa system, very few
craft workers are permitted to work within the U.S. Addressing the
skilled craft shortage through the use of H2B visas would require
significant changes to federal immigration policy.
• One challenge to addressing the skilled craft labor problem
is that it is difficult to track the demographics of skilled
craft labor in the U.S. Arguably, the single best source of
occupational titles exists within the Bureau of Labor Statistics.
But, even then, these titles broadly describe the occupations that
are in such short supply in the industrial sector and, more often,
better capture those in the residential and commercial sectors.
For example, pipefitters are found within the same category as
pipelayers, plumbers, and steamfitters for all sectors (47-2150).
29
Welders, for some reason, do not make the list. With such
overlaps and omissions within the central occupational statisticskeeping federal agency, it is difficult to know where else to look
for data that accurately captures the entire industry.
RT 318 found that a potential craft labor cliff likely exists at some
point in the near future. However, the location and steepness of the
cliff are dynamic and subject to forces both internal and external to the
construction industry. A concerted effort to address these forces can
lessen the fall whenever and wherever the cliff is encountered.
30
Notes
31
Notes
33
Research Team 318, Is There a Demographic Labor Cliff that
Will Affect Project Performance
*Mohammed Albattah, University of Colorado-Boulder
Kevin Blair, Matrix Service Company
Scean Cherry, Day & Zimmermann
Kimberly Corley, Shell
Brandon Davis, AECOM
*Marco Giron, Lauren Engineers
*Paul Goodrum, University of Colorado-Boulder
Steve Greene, National Center for Construction Education and
Research
*Daniel Groves, Construction Users Roundtable/
Construction Labor Market Analyzer
Shaddy Hanna, ConocoPhillips
*Dean Hamrick, Fluor
Don Jones, LyondellBasell, Co-Chair
*Hossein Karimi, University of Kentucky
Mitch Lee, Victaulic
Chris Maxson, CCC Group
James MacDonald, ConocoPhillips
Jennifer Sulak-Brown, Barton Malow, Co-Chair
Jon Tate, Zurich
*Tim Taylor, University of Kentucky
*Principal authors
Editor: Jacqueline Thomas
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