Construction has historically been an industry that often lags behind what other industries and markets are seeing in terms of trends. However, our business is still constantly changing, and the pace of change has never been greater. In evaluating the construction industry, I have tried to forecast the trends that will impact labor in the next several years. Below are four trends I believe will have a major effect on the construction industry. Some are part of normal construction cycles, while others have the potential
to change the face of the industry.

1. Manpower will be an increasingly large challenge.

In TAUC’s 2017 Craft Labor Supply Survey, 78 percent of respondents forecast growth in the construction industry. This is further confirmed by engineering and construction consultant PWC’s Construction Forecast 2030, which predicts an average growth rate of construction of 3.9 percent annually all the way through 2030, outpacing GDP growth projections by more than 30 percent. This growth means more jobs.

When the great recession hit, the construction industry lost roughly 2.3 million workers between April 2006 and January 2011, according to the Wall Street Journal. Many of these workers retired or left for other industries because of the length of the downturn. As construction spending begins to pick up, the industry is faced with the challenge of a growing workforce demand despite a lower-than-average number of available workers.

Further, the most recent numbers from the government’s Bureau of Labor Statistics (BLS) show a 4.3 percent national unemployment rate and a 4.9 percent national unemployment rate for the construction industry. These areas are both near historically low levels and point to competition for talent in the economy. Couple this with an aging baby boomer generation that will soon retire —which comprises a substantial portion of the construction workforce — plus a difficulty in recruiting millennials into construction, and you have the recipe for a real problem. 

As we evaluate the challenges in growing manpower needs, we also need to understand that the skillsets required to fill those needs are changing. Some of the technology changes are addressed below, but the construction industry will face tough challenges because the needed skills for a craftworker entering the construction industry may be very different than they were for previous generations. Further, while union construction has historically done a great job of meeting demands through apprenticeship and organizing,
we must also address skill upgrades for our journeymen craft workers.

Things to consider: What does the future construction worker look like? How will we attract and train future craft workers? What can be done to minimize the negative impact of labor shortages? Can this shortage be a growth opportunity for union construction? How can a company leverage manpower delivery as a differentiator?

2. Modular construction continues to gain popularity. As construction owners look for ways to reduce costs and risk, one trend that seems to have gained momentum is the concept of modular construction. This is a means of taking portions of a project from the field to a manufacturing or fabrication-type environment for construction and assembly.

This approach reduces exposure to some of the challenges that are faced with onsite construction such as weather, congestion, and material storage concerns. Further, as manpower in the construction industry faces challenges, modular construction can limit the number of site personnel required to construct a project and better disperses the risk.

For construction employers to be successful in this environment, many companies will have to shift their focus to either offer fabrication-and-install options or team up with fabricators/manufacturers in order to deliver complete projects. One of the potential concerns with modular equipment is that in some sectors where we see the use of this approach, the OEM will require either their own employees or other certified installers to place and install the equipment. This approach has the potential to limit union construction utilization if the appropriate partnerships are not established.

Things to consider: What needs to change about our business model as the result of increased use of modular construction? How can union construction address concerns that warranty requirements may pose as a barrier to entry for union contractors? Is there an opportunity to organize more shops/fabricators to help maximize opportunities for union field construction? How can a company leverage modular construction as a growth opportunity?

3. Virtual Reality (VR) and The Internet of Things (IOT) will change construction.

Think of the IOT as a set of technology solutions for tracking and managing data to improve performance. In the construction industry, this will include things like wearable technology for tracking employees; using drones for survey data and project tracking; and remote equipment operation and tracking.

Virtual Reality (VR) and Augmented Reality (AR) are technologies that use a similar platform to simulate real-world experiences. VR offers a digital recreation of a real-life setting, while AR delivers virtual elements as an overlay to the real world. These technologies can allow companies to see physical construction sites remotely, overlay plans into an existing system, or immerse people in “real” experiences
of a design concept. Both VR and AR help identify potential conflicts, project challenges and safety issues in the design and planning phases to make onsite construction more seamless and safer.

As use of VR and AR tools spreads, it will be incumbent upon companies to have a plan in place to embrace and implement them – and keep up with rapid changes to the technology.

Things to consider: Do our current labor agreements address these technological changes? What possible technology will our craftsmen need training on? How do we prepare an industry that can be slow to embrace change for major technological shifts? Is there any part of this technology that can be leveraged to make union construction more efficient?

4. Construction is growing and costs are rising. In the construction industry there are many factors that drive up costs, but a few are of particular concern. First, manpower is going to be in demand. In construction, as demand for labor increases, costs tend to rise accordingly. According to the most recent data from the Construction Labor Research Council, wage costs for craft workers are on the rise and have been every year since 2011. 

Based on the information discussed above, as skilled manpower becomes more difficult to find, this increase in wage costs is likely to accelerate. According to CLRC data, in 2006 (during the construction boom of that time) the average increase in craft package was about 4.5 percent. In 2017,
that number is still only at 2.7 percent, so it is likely that we will see the annual percentage number continue to rise. 

Along with increasing labor costs, the cost of building materials and components is on the rise. The latest construction cost index published by ENR shows a 4.4 percent increase in material costs this year so far. If you look at the previous five years, the increases only range from 2.3 percent to 3.0 percent. So, costs are increasing at a higher rate than in previous years, and many predict that this trend will continue
for some time.

The last item I see continuing to be a factor in the trend for rising construction costs is the political and regulatory environment. The political environment is unpredictable, but at the very least it is safe to say that there will be more regulation before there is less. An example is the new OSHA Silica standard that went into effect this year, which will cost construction companies millions and millions of dollars to comply with. These three factors all point to increased cost for completing construction projects.

Things to consider: What is your company doing to limit risk on price escalation for projects with late start dates or long durations? Are there ways to reduce the impact of these costs for your company? Is there any way union contractors could take advantage of these trends? Examining the marketplace to understand the trends in the industry is crucial for contractors. By examining this trending data, you can help better position your company for the future – and your hard work will hopefully act as a platform for discussion with TAUC and its industry partners as we try to identify opportunities to grow the union segment of the construction industry.

(The writer is the The Association of Union Constructors Industrial Relations Committee Chairman and Director of Safety and Labor Relations for Enerfab Power & Industrial, Inc. From the Fall 2017 TAUC The Constructor).