Lack of Skilled Labor Stymies Construction Firms

Contractors are increasingly turning to unskilled labor for construction projects due to a shortage of skilled workers.

After the industry was decimated during the wake of the 2008 financial crisis, general contractors are finally enjoying the fruits of a slow but steady recovery in the construction sector. While new buildings are going up left and right all over the country, obstacles that could ultimately lead to major issues for contractors still remain.

Construction on the rise
New housing starts have been on the rise every month while construction firms in general are seeing higher growth rates. In fact, residential homebuilders are expressing confidence in the market in numbers not seen since before the housing crash.

According to The National Association of Homebuilders, although homebuilders’ confidence level dropped three points in November to 62, this comes after a reading in October that had reached a point not seen since 2005, during the peak of housing boom.

“Even with this month’s drop, builder confidence has remained in the 60s for six straight months – a sign that the single-family housing market is making long-term headway,” said Tom Woods, NAHB chairman. “However, our members continue to voice concerns about the availability of lots and labor.”

As general contractors look to grow their enterprises, they must do so without the help of adequate numbers of skilled workers.As general contractors look to grow their enterprises, they must do so without the help of adequate numbers of skilled workers.

Lack of labor
One of the biggest problems currently facing the industry is the lack of skilled labor. Many individuals left the sector during the financial crisis, and now that construction rates are improving, these people are not returning to their previous positions. This is not only affecting job sites, but supply chains are also being impacted as well. As contractors turn to unskilled labor to get the job done, it increases the potential for on-the-job accidents.

With the lack of skilled labor on the job front, general contractors are forced to dip into the ranks of less-experienced workers. Without skilled workers, construction companies will be restrained from meeting the ever-growing market demands.

According to The Associated General Contractors of America, the construction industry shed jobs in 144 out of 358 metro areas, despite the need for both residential and commercial construction in cities across the country.

“As contractors turn to unskilled labor, it increases the potential for on-the-job accidents.”

“It appears that many of these job losses have more to do with a lack of workers than they do a lack of work,” Stephen Sandherr, the association’s chief executive officer, explained. “While some markets are seeing a softening in demand, overall construction spending continues to rise while the sector’s unemployment rate continues to fall.”

As these individuals come to the job without the knowledge base built up through years of on-the-job experience, it can lead to serious problems not only in the quality of the finished product, but also the safety levels at the work site.

General contractors who need to expand operations can only handle so much volume with a limited staff. In an effort to grow their operations, contractors will hire individuals who, although might look promising, do not have the necessary skill set to effectively contribute to the team without causing serious mistakes. This leaves construction companies between a rock and a hard place: They want to extend their reach and capture a bigger market share, but they don’t want to risk the safety of their job sites if an inexperienced worker causes an accident that results in personal injury or private property damage.

As a result, construction firms are turning to unskilled labor to fill the roles. This combination of contractors growing their businesses in light of a skilled labor shortage can ultimately create an environment that increases the likelihood of workplace injury as well the need for significant limit of liability insurance coverage.

How McGowan can help
McGowan Excess & Casualty is a program manager that creates unique umbrella and excess liability products for commercial and residential general contractors. With our access to “The Power of the Pen,” McGowan can provide brokers with extraordinary service, competitive premiums and broad coverage. Available in all 50 states, McGowan Excess and Casualty underwrites on behalf of “A” rated carriers.

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