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How labor shortages are reshaping construction risk

August 14, 2026

The construction industry is continuing to struggle with an ongoing workforce crisis that is affecting project delivery, cost efficiency, and long-term growth. In North America, an estimated 500,000 additional workers are needed to meet current construction demand[1]. According to a recent survey conducted by the Associated General Contractors of America (AGC) and NCCER, 92% of contractors report difficulty filling open positions[2]. A combination of demographic attrition, pandemic-driven career shifts, and increasingly restrictive immigration policies is creating a persistent labor shortfall - one that is materially reshaping project economics while simultaneously tightening underwriting standards and insurance conditions. 

In North America, an estimated 500,000 additional workers are needed to meet current construction demand[1].

Construction project risks amplified by labor shortages

Labor shortages are now the leading cause of project delays, affecting nearly half 45% of all U.S. construction firms[3]. When critical path activities slip, milestone payments are missed, financing structures are strained, and the knock-on effects compound across subcontractors. Insurers are responding by making workforce plans a standard part of underwriting and how well a contractor answers those questions is increasingly reflected in the terms they receive.

When qualified workers are unavailable, contractors are compelled to rely on less experienced labor to maintain productivity. The consequences are predictable: higher defect rates, reduced adherence to safety protocols, and elevated workers' compensation and professional liability exposure. An under-resourced and under-experienced workforce is statistically more likely to be involved in incidents, and that risk does not stay on the job site. It flows into claims, renewals, and long-term insurability.

Construction wages are growing at 5% year-over-year, well ahead of the broader economy[4]. Overtime to compensate for staffing gaps added an estimated $22 billion to U.S. construction payroll in 2025 alone [5]. For contractors operating on fixed-price contracts, this is a direct and worsening margin problem, with smaller firms carrying a disproportionate share of the burden.

As detailed in our latest Insurance Marketplace Realities Spring Update, across general liability, auto, umbrella, and professional lines, rates are rising and workforce quality has become a central underwriting variable [6]. Carriers now demand greater transparency around hiring procedures, vetting practices, and labor gap strategies. Contractors who can demonstrate disciplined workforce management are accessing broader capacity and more competitive terms. Those who cannot are finding the market increasingly unforgiving.

The retirement of an entire generation of skilled tradespeople is accelerating, and the pipeline of younger workers entering the trades is not keeping pace. Unlike the other risks on this list, this one does not announce itself with a missed deadline or a claims notification; it builds quietly, over years, until the gap becomes too wide to bridge quickly. The numbers reflect this: the industry needs to attract 349,000 net new workers in 2026 just to keep supply and demand in equilibrium, rising to 456,000 in 2027 [7]. This is not a labor market fluctuation; it is a structural vulnerability that, left unaddressed, will compound every other risk on this list and constrain the industry's ability to deliver the infrastructure and housing demand ahead of it.

In conclusion, four priorities stand out

The foundation of the construction industry's future is its workforce.

Construction workers face a disproportionately high risk of mental health challenges and suicide compared to almost any other sector, a risk that labor shortages only compound.The foundation of the construction industry's future is its workforce.

In North America, our Construction team has built a strong partnership with SAVE to develop IBEAM, a suicide prevention and mental wellbeing program built specifically for the construction industry. IBEAM equips organizations at every level to recognize distress early and respond effectively supported by a broader suite of educational resources on burnout, stress management, and workforce wellbeing.

Addressing labor shortage in construction demands more than a headcount strategy. It requires organizations to build workplaces where people are recruited with intention, developed with purpose, and supported through the pressures that define this industry. That is the standard the most resilient construction businesses are setting, and the benchmark the rest of the market will need to meet. 

Footnotes

  1. Construction Workforce Shortages Are Leading Cause Of Project Delays As Immigration Enforcement Affects Nearly 1/3 Of Firms Return to article
  2. Construction Workforce Shortages Are Leading Cause of Project Delays as Immigration Enforcement Affects Nearly 1/3 Of Firms, AGC, August 2025 Return to article
  3. Construction Workforce Shortages Are Leading Cause of Project Delays as Immigration Enforcement Affects Nearly 1/3 Of Firms, AGC, August 2025 Return to article
  4. Construction employment increases in May; April job openings expand but hiring slips year-over-year, AGC, June 2026 Return to article
  5. Construction industry staffing costs 2026, Stealth Agents, May 2026 Return to article
  6. Insurance Marketplace Realities 2025 Spring Update – Construction, WTW, May 2025 Return to article
  7. Construction industry must attract 349000 workers in 2026 despite macroeconomic headwinds, ABC, March 2026 Return to article

Disclaimer

WTW hopes you found the general information provided here informative and helpful. The information contained herein is not intended to constitute legal or other professional advice and should not be relied upon in lieu of consultation with your own legal advisors. In the event you would like more information regarding your insurance coverage, please do not hesitate to reach out to us. In North America, WTW offers insurance products through licensed entities, including Willis Towers Watson Northeast, Inc. (in the United States) and Willis Canada Inc. (in Canada).

Construction Risk Contact

Jon Oppenheim, Regional Construction Leader, North America

Jonathan Oppenheim

Regional Construction Leader, North America

Email
Jon Oppenheim, Regional Construction Leader, North America

Jonathan Oppenheim

Regional Construction Leader, North America

Email

Industry

Construction

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