There are several reasons why modular buildings are up to 20% less costly than conventional stick-built structures. In this installment, we examine the fourth reason behind the cost savings associated with modular buildings: skilled labor shortage.
The construction industry in the United States is currently facing a significant and ongoing labor shortage, a challenge that has worsened since 2020. This shortage impacts project timelines, budgets, and worker safety, and it’s a critical concern for both residential and non-residential construction.
Current State Of The Construction Labor Shortage
- Significant Need: The Associated Builders and Contractors (ABC) projected that the industry would need to attract an estimated 439,000 net new workers in 2025 to meet demand. Other estimates, such as one from the National Association of Home Builders (NAHB), indicate an even greater annual need for 723,000 skilled workers.
- Widespread Impact: Around 70% to 90% of construction companies report struggling to find enough workers, forcing many to decline work due to staffing limitations.
- Project Delays and Increased Costs: The shortage directly leads to significant project delays, increased labor costs, and strained budgets. Companies may need to decline new opportunities, which could impact their growth potential.
- Quality and Safety Concerns: With fewer experienced workers and pressure to complete projects, there’s a risk of reduced quality and increased safety risks. Rushing the training of new workers can expose them to more hazards, with studies showing that a significant portion of workers’ compensation claims come from those with less than one year of experience.
What Is Causing The Labor Shortage In Construction?
- Aging Workforce and Retirements: A substantial portion of the existing construction workforce is nearing retirement age. Over 20% of construction workers are over 55, and the National Center for Construction Education and Research (NCCER) estimates that about 41% of the workforce will retire by 2031.
- Shrinking Pipeline of New Workers:
- Decreased Interest: Younger generations have shown a declining interest in vocational trades, often preferring higher education and less physically demanding jobs. Less than 3% of young people consider a career in construction.
- Negative Perceptions: The industry has struggled to shake off the stereotype of being solely manual labor with low pay and limited advancement opportunities.
- Decline in Vocational Programs: There has been a decline in high school programs dedicated to teaching trade skills, resulting in reduced early exposure to construction careers.
- Increased Job Opportunities Outside Construction: Many individuals who left the construction trades during the “Great Resignation” or due to the COVID-19 pandemic have not returned, finding opportunities in other sectors.
- Immigration Trends: Historically, foreign-born workers have made up a significant portion of the construction labor force (around a third of construction trade jobs in 2022). However, the annual flow of new immigrants into the industry has decreased significantly since 2010, limiting a traditional source of labor.
- Demanding Working Conditions: Construction worksites can be physically demanding, with risks of injury, and can impact mental and emotional well-being.
- Booming Demand: Rapid urbanization, ongoing construction activity, and significant federal investments in infrastructure (like the Bipartisan Infrastructure Law) have created a surge in demand for skilled labor that the current workforce cannot meet.
How Has The Labor Shortage Affected Modular Construction?
Modular construction companies, such as Palomar, have largely avoided the labor shortage that has affected conventional site-built construction companies. Palomar has maintained a highly skilled workforce comprised of tradespeople who prefer the climate-controlled work environment, the absence of travel to sites, and consistent employment scheduling that our modular construction method offers.
