Tariffs, Diversity Quotas Contributing To Construction Hiring Challenges
Construction firms are racing to find top-tier talent to launch projects nationwide. But a shortage of skilled laborers is leading to a mounting number of unfilled jobs.
A strong national economy means more cranes in the sky, AmeriConstruct founder and CEO Neil Lockhart said. However, the workforce shortage is staggering and he said it is halting construction timelines.
A number of factors (including construction costs, salary challenges and a focus on seeking diverse candidates) are intensifying the challenge.
According to the Associated General Contractors of America, 70% of construction firms report having a hard time hiring. There is a growing list of 250,000 unfilled jobs nationally, Lockhart said. The construction industry is near full employment at 4.1%.
Texas added the most construction jobs nationally on a year-over-year basis at 22,700 jobs or 3.1%, according to the AGC. Florida recorded 22,400 new jobs, or 4.2%, followed by Arizona (16,500 jobs, 10.7%), West Virginia (16,000 jobs, 46.4%) and Georgia (14,600 jobs, 7.6%).
"The record number of job openings in construction reported in the government's Job Openings and Labor Turnover Survey for January shows that finding qualified construction workers is still a challenge," AGC Chief Economist Ken Simonson said in a release.
AmeriConstruct recently expanded into Houston from its headquarters in San Francisco. It is actively working with seven construction companies and maintains a database of nearly 11,000 potential candidates.
The consulting firm focuses on ground-up commercial development and typically fills positions such as project manager, assistant project manager, superintendent, estimators, engineers and schedulers.
Those jobs often required an undergraduate degree and technical experience, he said. Some companies also prefer candidates who show job stability. But it is very hard to find people like that.
“You want this guy right here, he is not available. You want that guy, he is not available. No one is available," Lockhart said. "If you are good right now, you have a job. If you don't, I am concerned. Why don't you have a job?"
Bisnow spoke exclusively with Lockhart to discuss the construction labor shortage, solutions and how the U.S. government policies and rhetoric impact the industry as a whole.
Bisnow: What is it going to take to get more qualified professionals to enter the construction industry?
Lockhart: It is going to take a fundamental change in how society views construction. Recruiting should start with young people — high school and college students. What are they studying? What is being promoted? What is the hot and sexy thing to do? Largely, it is not construction. People fall into construction later.
In the Bay Area, millennials and the next generation coming out of college are interested in software, programming and IT. Facebook and Google — that is where they all want to work. That is where the so-called money is and where the prestige is. By graduation, the percentage of qualified workers in construction is just not there. There are also not nearly enough trade schools, where people can go and learn and obtain an apprenticeship or internship.
Salary is a motivator for young people, and it should be. They want to make as much money as they can. Also, this expectation comes from parents who tell their kids to get into an industry that makes money. Construction doesn't pay as well compared to software and technology jobs, the earning potential is less and it is harder to advance. Within the technology industry, a person can make rapid advances only a few years out of college. In construction, an employee has to pay their dues.
Bisnow: Does the construction hiring shortage become exacerbated when companies start to consider diversity?
Lockhart: Yes, the numbers get even worse when you start to consider minorities and women. Only about 9% of the construction workforce is female. A couple of the companies we work with have a policy that at least two or three diverse candidates have to be interviewed before anyone is offered the job. You seldomly hire before you have interviewed at least three people, and that is a loose number. There is no real science to this. It is an arbitrary number. The object is to give everyone a fair shot. If we do not have a number, whether it is one or two, then no one will get a shot other than a Caucasian man.
Bisnow: Are diversity quotas a growing trend in the construction industry?
Lockhart: The way the market is right now, most companies will take anyone qualified right now. You are seeing less and less of what I just described. When the market changes and it is a more client-driven market instead of candidate-driven, I expect that companies will be able to do that more. In a client-driven market, more candidates are available. More companies will say "let us keep interviewing." That allows us to interview more diverse candidates when there is not a time crunch. There are a lot of time restraints right now, so it is about finding the right person fast.
Bisnow: Is diversity hiring a part of the responsibility of AmeriConstruct?
Lockhart: We cannot and should not dictate what a company’s hiring processes are. We are servicing them and their needs, but we will also put ourselves in a position to influence. We can influence the direction that a company takes because we are also consultants. We provide direction and information on various topics in construction and hiring. If you do enough research digging and direct recruiting, the groups are out there to recruit from. No matter the demographic, there is a group for it in the construction industry. A company can get there if they take the time to do it.
Bisnow: How does the rise of construction costs impact construction hiring?
Lockhart: We are working with a Houston-based steel company. One of the things they are facing because of the tariffs is material costs are going up. That cost has to be passed down to everyone they are engaged with. We have noticed it has impacted the new employees' salaries. Companies with high costs tend to pay lower, depending on the size of the company and the other metrics in place to defray those expenses and have an impact on the bottom line.
The industry standard is to pay between $95K to $100K for an estimator with structural steel experience. Both parties were interested, and the candidate went through the hiring process. The steel company came back with an offer that was 20% lower than what the candidate was currently making. The candidate rejected the offer. The company admitted that higher construction cost was a factor in the lower offer. People will take lower or the same pay if they gain in other factors such as a closer drive to work from their home. But, most people are going to want more money.
In California, we cannot ask candidates how much they make but only what they want to make because sometimes they are underpaid. You can be making $20K less than the industry standard. It is almost discriminatory to ask that question to prospective candidates. It is about how much you want, how much the position pays and if you have the experience that merits the compensation.
Bisnow: How do the current political rhetoric and the economy impact the construction industry?
Lockhart: We all have strong opinions about the state of the country, our president and what we see day-to-day. We are much more than what we do every day. I hope everyone has that second life. We are not a fan of this administration or the president. The divisive nature of the country is just crazy, and we feel that it is a problem.
[But most people in construction can feel good right now.] Are you better off than one, two or five years ago? If you can say yes then someone might say "then what are you complaining about?" The government is doing that — making the economy good. Relating that to construction, this is an industry very much driven by a good economy. The reason why we see so much new commercial build now is because of the economy. There is money, people are spending and there is money to be had. People are feeling good, but not everyone. For every good story, there is a hard-luck story that a good economy covers.