Modus

Is there a labour crisis in the construction industry?

Demand for new building projects is high, as markets get back up to speed after a tumultuous year. Three experts tell Modus why finding enough workers is proving to be a major challenge

Author: Gela Pertusini

03 August 2021

Pink toned images of buildings and construction

Much of the world is experiencing a building boom, as pandemic-related restrictions recede and the construction sector picks up pace to meet demand for new housing. However, the availability of labour is struggling to return to pre-COVID-19 levels as many countries find the workers who went home to see out the pandemic are yet to return.

Combined with a shortage of building materials, it means the wheels of industry are slowly creaking back into action rather than going full steam ahead. We spoke to experts in the US, Singapore and UK to find out what the various socio-political causes of labour shortages are where they operate.

What's happening in North America

Chris Smith MRICS is based in Phoenix, Arizona, where he is a senior director of cost consultancy at CBRE. He sits on the RICS’ Americas board as the construction sector lead.

“COVID-19 has had a huge impact but labour shortages are always an issue. Frankly, the market is always in constant flux and it varies from city to city,” says Smith.

“We are seeing shortages in carpentry and general labour but there is also a problem with logistics: the American Trucking Association said that 60,800 truck drivers are needed - if you can’t get the materials, that causes a lead-time increase and that’s connected to other costs. I was speaking to one of our general contractor partners and they are having to be a bit more selective about the projects that they are choosing.

“Some people suspect the CARES Act payments are a factor – people could claim up to $600 per week in benefits which is probably a comparable amount to what some labourers had been earning so that could have been a deterrent for some people to return to work. More anecdotally, there have been articles about people within the construction industry being reluctant to be vaccinated – although I haven’t had experience of that first-hand. There is also anticipation that if Biden’s infrastructure bill is passed, it would create high demand for labour on state construction projects and make it even harder for private companies to recruit.

“There are other things that have been driving the problem – the current wildfires in the west and it will soon be hurricane season on the east and Gulf Coast, which contribute to labour shortages. You can start to look at the bigger picture around training: we have an ageing population among tradespeople and not enough young trainees coming through. It must affect the commercial developers’ ability to find labour – house prices are going up like crazy here and demand must be having an impact.

“On the flipside, people are trying to counteract the shortage by investing in technology and prefabrication – one of the construction companies did a survey and found that there was a 20% increase in prefabrication compared to pre-pandemic, to offset some of the manpower shortage.

“CBRE research suggested that, generally speaking, salaries haven’t gone up – the stats show that increases trail slightly below non-construction-based workers. There will be lots of variables geographically and by trade though: electricians, plumbers and carpenters are always in high demand.”

Chris Smith
Chris Smith MRICS
The view from Singapore

Kenneth Loo is the chief operating officer and executive director of Straits Construction Group in Singapore, which won the Construction Team of the Year at the 2020 RICS Southeast Asia Awards.

“The unemployment rate tends to be very low in Singapore,” says Loo. “People have a lot of choice of work and, generally, they shy away from construction – it’s a cultural issue. So, our construction sector is very reliant on foreign manpower; the number of foreign construction workers in the system is about 330,000 [Singapore’s population is 5.7m] – and about 70% of these workers come from India and Bangladesh.

“In 2017-18, the sector had been experiencing a downturn, so the number of workers had dropped a little, but we saw a resurgence at the end of 2019 and started to experience a labour shortage. Then came March 2020: we had lockdown, our borders were closed, and all work stopped on site. The foreign workers were locked in dormitories for two months, there were outbreaks of infections there – in a way they were like prisoners, they were confined to a room. A lot of them suffered mentally and when the circuit-breaker was over, they understandably wanted to go back home.

“From August 2020 onwards, you could see activity picking up. By October we were probably at about 40 or 50% of pre-COVID-19 output and by new year it was up to 60 or 70%. Normally, we had about 8,000 foreign workers leaving each month, but they were always replaced by about 8,000 people coming in - after the circuit-breaker, that wasn’t the case.

“Last summer, the Singapore authorities started allowing workers to come in again but in very small numbers and then, in April of this year, we closed the borders again because of the numbers going up due to the Delta variant. Now there is pressure on all the trades across the construction sector: supply and demand mean wages are going up – about 30-50% for labour contractors. So that’s taking a toll on business as our contracts might be signed a year or more in advance.

“The only solution is to get the numbers in. I’m part of the Singapore Contractors Association and we are looking at how to bring workers in in a safe manner – quarantine workers at source before putting them into the system, for example. But, at the moment, we can’t say when this problem will be solved. We need up to 50,000 workers but the rate we are currently bringing people that’s quite a way off.

“The biggest impact on us now isn’t workers though, it’s the supply chain. Our construction materials, our pre-cast materials, our aggregate, our aluminium windows come from Malaysia which has been locked down. I was talking to a business associate recently who said that two months ago we had no workers, now we have no materials!”

Kenneth Loo
Kenneth Loo
Spotlight on the UK

Sarah Beale is chief executive of the Construction Industry Training Board (CITB), the public body that oversees skills and training within the UK’s construction sector.

“Construction has bounced back from the pandemic far quicker than the industry anticipated and we are hearing from our customers that they need quick access to a higher degree of skilled labour. Housing and big infrastructure programmes, such as HS2, are causing strong output growth so labour shortages are absolutely a concern.

“There were already issues with worker shortages created by the end of freedom of movement for EU citizens, given that the UK does have a reliance on migrant labour. Our research shows that just over 8% of the building sector workforce is from the EU. In 2019, 15% of the sector’s employers were reliant on migrant workers and that’s only fallen to 13% now. We thought that people in high-demand areas such as carpentry and management would be added to the protected occupations, but the new immigration system didn’t allow for that. And then many workers returned to their country of domicile and have stayed there because of the pandemic.

“Construction was able to respond to the pandemic in a way that many sectors couldn’t. We produced new operating practices very quickly to get sites up and running but it has still been working at a much-reduced capacity because of social distancing. It’s only now that we’re heading back towards normal capacity, with the industry expecting to return to pre-pandemic levels in 2022 and we are already seeing shortages. Although the CITB has not commissioned any specific research to substantiate wage increases, anecdotal evidence and a number of reports suggest wage inflation has been quite acute.

“The furlough scheme has been critical in ensuring the industry has been able to keep a skilled workforce over the pandemic. However, it is now adding to the problem. In April, the figures showed that nearly 168,000 workers – about 13% of the construction workforce – were furloughed and even provisional estimates for May show that has only decreased to about 139,000. If the construction workforce isn’t all out there working, that is exacerbating the problem. We need to get people off furlough and back into work as quickly as possible.

“The silver lining of the situation is that I have seen the construction industry unite in an unprecedented way to bring the workforce back to our industry, and to attract and grow a new generation of talent. We want to offer real career options for people who have suffered in ours and other sectors but, while we recognise that we need to train more of our own, apprenticeships take the time that they take. It’s not a switch that can be flipped overnight.

Through schemes such as Go Construct STEM Ambassadors, the Go Construct website, the Talent Retention Scheme and TalentView, we’re addressing some of the long-term problems such as a lack of diversity.

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Sarah Beale
Sarah Beale
Narrowing margins

Cost of building materials soars Read more

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