D.ON HORTON, Founder of America’s largest home builder, never thought he would have to give up the Texas business. Until recently, he couldn’t build houses fast enough in the state. Now his company is restricting sales as the industry-wide shortage of manpower and building materials such as wood slows construction and drives costs up. The combination of these restrictions and the increasing demand for housing has resulted in an incredible surge in home prices. According to figures published on August 31, the national Case-Shiller house price index in June was 18.6% higher than a year earlier – the third record increase in as many months (see chart). But although the shortage of materials is expected to subside in the next year, it will be more difficult to find qualified workers.
When Covid-19 spread and countries were banned, construction workers suffered a major blow. In America, it shrank nearly 15% in 2020 and wiped out four years of job gains. But it has yet to fully recover, even if demand for housing has been fueled by low interest rates and enthusiasm for larger houses. Around 88% of American contractors say they have difficulty finding workers, leaving nearly 300,000 vacancies. After a slowdown in 2020, wage growth is now picking up. The UK has had the highest number of job vacancies in two decades, with two-thirds of construction companies struggling to hire bricklayers and carpenters. Half of all French construction companies say they have difficulties recruiting, making it the most affected sector in the country, and a fifth of German building construction companies say there is a shortage of skilled workers.
The industry’s hiring battles partly reflect the wider labor shortages affecting much of the rich world. As in other sectors, fear of the virus and the ability to access benefits and savings could explain why unemployed people are slow to return to work. Travel restrictions across national and provincial borders to contain the pandemic have hit the construction sector, which is heavily reliant on migrants, particularly hard. (This was strongest in China and India, where migrants make up four fifths and one third of construction workers, respectively.)
Long-term factors also contribute to the labor shortage in the construction industry. Since the 2007-09 global financial crisis, home builders have struggled to maintain a steady workforce. This reflects in part profound changes in immigration laws that have curbed what was once a steady stream of work. For example, the influx of foreign workers into America has declined since President Donald Trump introduced anti-immigration policies. A little more than 44,000 foreign-born workers came into the construction industry in 2017, a sharp decrease compared to almost 70,000 in the previous year. Similarly, the National Statistics Office estimates that the UK has lost 42% of its European construction workers since it voted to leave the European Union, ending the free movement of migrants from the EU EU in the country.
The shortage of skilled workers is also exacerbated by an aging workforce. About 41% of construction workers in America are expected to retire within the next decade. One in five UK workers is over 55 years old. Meanwhile, recruiters looking for talent are finding scarce prey. High school graduates of all income groups avoid construction jobs because they find them dirty, dangerous and difficult. Less than 1 in 10 young people in the UK would consider a career in construction and even avoid white-collar jobs in areas such as engineering, surveying and urban planning.
Automation could have been a way to avoid a labor shortage. But the industry has been slow to embrace it. About half of construction companies use robots, compared with 84% of automotive companies and 79% of manufacturing companies.
In the meantime, the bottlenecks only seem to intensify. Labor demand is set to continue to grow as governments promise to both build more homes and help prepare the stock for a changing climate. The UK will need 217,000 additional workers by 2025 to meet the government’s target of 300,000 new homes per year. Even more workers will be needed to convert 29 million existing homes to meet the net zero carbon targets by 2050. Government plans to invest in infrastructure in America and Europe could attract workers, leaving less to build houses. Job advertisements, construction delays, headaches for bosses – everything can go through the roof. ■
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An early version of this article was published online on September 1, 2021
This article appeared in the Finance & Economics section of the print edition under the heading “Help wanted”