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The global impact of labor shortages across the construction industry

By Julie Ragsdale and Adam Hall | September 26, 2023

It’s no surprise that many industries are experiencing severe labor and skills shortages on a global scale. This of course is a complex issue with multiple root causes.

There's been a lot of increases in construction-related work for economies that used infrastructure and housing investment as a way to sustain economic growth during COVID-19 and post COVID-19. In the U.S. and in Australia, those infrastructure investment spikes are continuing. We expect to see a very strong demand for labor in the construction industry to continue even in environments where the broader economy is starting to slow and that may over time impact new housing construction.

If we look at the Australian market, we're seeing record high numbers of employment growth in construction. In fact, we've had seven consecutive quarters of growth in construction demand since mid-2021. The Australian Bureau of Statistics show that the construction trades are the sector with the lowest fill rates for jobs. It is still extremely hard to find people for construction roles in the Australian market. And we understand that's certainly similarly the case in North America.

Additionally, when The World Economic Forum looked at the labor market, it reported that building and related trades were among the most highly experienced job shortages across the EU and that it's predicting some of the highest net growth from 2023 to 2027 in various jobs in the sector, including engineering, project management, building frame and trades, heavy vehicle drivers, looking for a growth of 1 to 2 million jobs in the sector.

Another significant factor contributing to this global issue is the generational shift and retiring baby boomers as well as the lack of replacement of younger workers coming into the industry. We also saw during the pandemic some talent shifted away from the construction industry. People chose alternative career paths and we saw this across a lot of industries. We are also seeing the influence of shifting immigration patterns, and immigration restrictions in some markets. This makes it much harder to get roles that were filled typically by immigrant workers, both in some specialist trades, but also in general labor roles. We've seen reports of that in the U.S. But also, it's prevalent in Australia where the skilled migration was shut down during COVID-19, and that has had a significant impact on the construction sector, as well as other sectors which relied on those labor flows.

Certainly, one of the big challenges in the Australian market, which we see, is a very high dropout rate of apprentices in the trades. And there's a whole range of reasons for that. But one of them is the pay is particularly poor in the Australian market relative to other things.

Overall, the impact of labor shortage is probably greater on smaller contractors. Typically, where we see these macro shifts or challenges in the market, larger contractors have more capacity to absorb costs that flow on from looking to pay higher wages, expand benefit opportunities, potentially even look at investment in things that they need to do to attract more workers.

Interestingly, in all markets we're seeing employees really value an emphasis on their wellbeing and the ability to create a more flexible working environment.”

Adam Hall | Senior Director, Employee Experience

Interestingly, in all markets we're seeing employees really value an emphasis on their wellbeing and the ability to create a more flexible working environment. We've seen interesting thinking and programs developed by some of the construction organizations actively trying to enhance flexibility for their workers as a way to make those roles more attractive.

Organizations are also looking for ways to expand the talent pool they can draw on:

  • Trying to retain older workers by staging retirements
  • Pairing older workers up with young workers to accelerate mentoring into those roles
  • Trying to reach out into high schools or markets where we might be able to draw people into the industry early on
  • Above all, it is also about doing a better job at retaining people in the organization through better culture, manager capability for supervision, making things a better experience, better wages, better benefits.

Having more diverse people in the industry and in your organization, coupled with an inclusive culture, means you get access to different ideas about the way to do things and how to grow your business. And we've seen evidence from some of our clients here in the mining sector that the most diverse and inclusive teams also have the best safety and production performance.

You can listen to the full Labor Shortages in the Construction industry episode of our Construction Blueprints podcast series for the full conversation.


Director, Construction and Real Estate, North America

Julie has over 25 years of insurance experience in underwriting and brokerage consulting. She serves as Director, Construction and Real Estate working with the Southeast Construction team in North America. Julie is responsible for client relationship management, coordination of marketing efforts for placement of coverage, and overseeing the day to day servicing.

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Senior Director, Employee Experience

Adam has more than 17 years experience in culture, engagement, reward and people strategy consulting. He is currently the leader of WTW’s International region Organisational Insights and Change Community, responsible for the development and implementation of employee insights, analytics and transformation solutions tailored to market needs across APAC, LATAM and CEEMEA.

In his consulting work Adam leads client projects in the areas of Culture, Employee Experience, Diversity, Equity and Inclusion, Wellbeing, Future of Work, Reward Strategy & Job Levelling and Merger and Acquisition integration. Adam is passionate about ongoing research and innovation and speaks regularly on topics including future of work, culture, psychology of reward, employee wellbeing and employee experience.

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