Tag: construction

Addressing Labor Shortages in Construction Amid Investment Boom

On By Paul DeffenbaughLeave a comment

The Infrastructure Investment and Job Act, signed into law in Oct. 2021, injected $1.2 trillion into the U.S construction market over a ten year period. To date, there have been more than 40,000 projects and awards across 4,500 communities in every state in the union. The impact on the industry, especially the roads and bridges segment and other infrastructure projects, is immense.

There is another factor at work in the ups and downs in the industry that works against the benefit of a steady investment, and that is its price-focused mentality.

That investment also represents huge vote of confidence in the U.S. construction labor market. The general thinking is that a steady supply of money should help attract more people to the trades because the vicissitudes of the market — its wild swings up and down — will be smoothed out and become more predictable. In turn, that means contractors will be able to provide reliable employment for their workforce, and trades people can count on not getting laid off at the next downturn.

The industry has always claimed it provides good-paying jobs, and it does. But the industry does not do a very good job of providing careers for trades people. After you get laid off the second time in 10 years because of an economic downturn, you begin searching around for other opportunities. You might even end up writing for a trade publication.

The hope is that this supply of steady investment will overcome those problems. But there is another factor at work in the ups and downs of the industry that works against the benefit of a steady investment, and that is its price-focused mentality. Much of the work that will be generated by the IIJA will rely on government financing. Because of that, much of that work will go to the lowest bidder.

I can’t think of any single aspect of our industry that undermines the long-term success of its participants than the focus on giving work to the lowest bidder. The industry’s inability to sell its true value to building owners and other buyers means that the decisions about hiring are usually made on price, not quality — or, at least, the price of the project is the differentiator between equally qualified companies. And the problem with competing on price is there is always — always — someone offering a lower price. They do it by cutting corners.

There is an old business axiom that customers have three choices when buying. They can have it fast, cheap or good, but they can only get two of those attributes. Fast and cheap, but not good. Fast and good, but not cheap. Cheap and good, but not fast. You don’t get all three.

In our industry, that axiom feels especially true. Sure, we’re getting a huge influx of investment over the next 10 years, but until we change the nature of our industry — until we move from price-oriented to quality-oriented — that money will only reinforce a system focused on the wrong value.

And the skilled labor shortage will endure despite that money. It would be a shame to lose this opportunity to solve one of our biggest problems, but just throwing money at it won’t do it.

An Industry Ready for Rapid Change

On By Paul DeffenbaughLeave a comment

When my wife and I were new parents, our go-to parenting guide was a book by pediatrician T. Berry Brazelton called, “Touchpoints.” The premise was that children go through rapid cognitive and development changes. They can, literally, grow over night. Brazelton calls these “touchpoints.” The idea that we grow and improve a little bit at a time in a steady progression is false. Our bodies and minds grow in leaps and bounds.

93% of parents of current high schoolers would support their child’s choice to pursue a career in the skilled trades. 57% would offer major financial support to pursue that option.

StrataTech Education Group Study

At a touchpoint, such as a when a child is learning to talk, they often forgot how to do things they had previously learned. In simplest terms, the new advancement requires so much energy and concentration that previous improvements are forgotten. A child learning to talk may struggle with walking. It feels like they take a step backward. Also, during these developmental leaps, children are fussier and don’t sleep as well. Then, boom! They start talking, remember how to walk and move on to build-up to the next touchpoint.

In evolutionary biology, this change process is called punctuated equilibrium, and I believe industries and businesses follow the same pattern. We change by leaps and bounds, in sudden bursts and not by incremental steps. And at the moment of change, things can get messy.

In the last few months, I’ve spoken with hundreds of people in the industry, ranging from residential and commercial contractors to architects to suppliers to building product manufacturers. I’ve also had the opportunity to talk with leading experts on the industry. If I can take away one thing from those conversations, it would be that people are optimistic about the future of the industry but recognized we are in a very uncertain period. A messy period.

The COVID pandemic turned our world upside down, upsetting supply chains, work requirements, demand for services, etc. That disruption has mostly abated , although it is not nearly as clearly identifiable what isn’t working well. There are not just a few big things going wrong; there are lots and lots of little things failing, and there is a malaise of uncertainty that is washing over the industry.

To me, that means we’re nearing a massive leap forward. Job-site technology, business software processes, and cultural influences are all changing rapidly and their effect on our industry will be massive. Consider that the number of parents actually encouraging their children to go into the trades is increasing. It’s unheard of in my lifetime. A survey in 2019 by StrataTech Education Group found that 93% of parents of current high schoolers would support their child’s choice to pursue a career in the skilled trades. 57% would offer major financial support to pursue that option.

That, ladies and gentlemen, is a huge change in cultural attitudes.

My conclusion? The construction industry is poised not for a small leap, but a significant change. Unlike with pediatric development, though, we don’t have any data or patterns that we can point to that would suggest what the developmental process might be.

What does the future of the industry look like? That crystal ball is clouded, but the only thing I’m 100% certain about is that how we will be working five to 10 years from now will look very little like how we work now.

Construction’s Productivity Decline

On By Paul DeffenbaughLeave a comment

Over the last decade there have been several studies on productivity in the construction industry. Almost without fail, the research has shown that the industry has grown less productive since the 1970s.

Now the issue has hit a broader audience. In a Feb. 5 column for the New York Times, Ezra Klein writes about a recent study by two economists from the University of Chicago Booth School of Business. Austen Goolsbee (who was recently appointed chair of the Chicago Federal Reserve) and Chad Syverson have produced a paper titled, “The Strange and Awful Path of Productivity in the U.S. Construction Sector.”

It’s a provocative title, and it attempts to address some of the concerns about previous studies, such as whether we are mismeasuring the labor or material inputs, and how much we build with them. In other words, are we correctly measuring the amount of steel that goes into a building, and are we correctly measuring how much building that steel constructs?

There are a lot of variables in this study, but the biggest issue I see (and I am not an economist, so please take my observations advisedly) is that they we use the wrong metric to measure productivity. For Goolsbee and Syverson, the measure boils down to square footage. Are we building more with less?

I see several problems with this metric:

  1. Quality improvements. Today’s buildings and homes are more sophisticated, giving each square foot greater value. Solar panels, ground-source heat pumps, high-efficiency HVAC, home-run water systems, improved insulation and vapor barriers are all an increased investment that pays off over time.
  2. Increased complication of construction. CADD and BIM programs give architects the ability to create incredibly sophisticated designs that couldn’t be built 50 years ago. Soaring interior spaces and complicated exterior façades don’t add to square footage but do add to the value of the building and are part of a worker’s productivity.
  3. Growth of the renovation market. Renovation of existing structures is more costly per square foot than construction of new structures. Last year, architectural billings for renovation exceeded new construction for the first time. As our building and housing stock ages, we are spending more to repurpose, repair and improve it instead of building new. That would drive productivity down.
  4. Value of reduced maintenance and repair. With improvement in building materials and construction techniques, contemporary structures need less maintenance and repair than older buildings. So, the productivity of a worker reduces the requirements for more work. Shouldn’t productivity be measured over the life of the building and not just its construction?
  5. Labor cost of increased safety. Improved safety protocols tend to slow workers. For example, fall arrest systems, while sophisticated, reduce productivity. They take time to set up and slow the pace of construction. But the number of workers injured or killed on the job site has plummeted over the years. Shouldn’t productivity measurements include the impact on society of workers going off line due to injury or death?
  6. Price-based competition. The construction industry has always been a bid-based business where the winner often offers the lowest price. That incentivizes companies to cut corners, which requires more oversight. There is a disincentive in the industry to be more productive. 
  7. Skilled labor shortage. For the last 30 years, there has been a shortage of skilled labor. Boomers aged out of the 18- to 32-year-old cohort that formed the backbone of the labor supply, and Gen-Xers were unable to fill those spots, which were then occupied by immigrant labor. Simultaneously, society decided every kid needed to go to college–even the ones who shouldn’t go to college. Most economists I know say recent industry growth was hampered by a lack of available labor. 
  8. Slow adoption of building technology. Even though building materials and techniques have improved over the last few decades, the industry is notoriously slow to adopt new building technologies. The reason is simple: the liability is too high. If an architect specifies a new product that then fails, the entire building needs to be retrofitted and the lawyers will line up in droves. It’s hard to improve efficiency without improved technology.

There is enough doubt on the measurement of productivity to give us pause about drawing conclusions. Still, there is a huge opportunity to improve productivity in the industry. Modular construction is one way, and increased job-site technology is another avenue.