There’s a significant labor shortage in construction in the U.S. Though there’s been a steady flow of new hires on a monthly basis, there have been almost as many workers quitting in the same period, which has left a deficit in the industry; the incoming hires have merely been stemming the flow of workers leaving.
The labor shortage in construction isn’t a problem that’s unique to the U.S., however; it’s very much a global issue. Europe in particular has been struggling significantly in attracting skilled talent to roles in construction. According to a report by the EU’s European Labor Authority, the majority of the countries in the EU have been facing a severe shortage of labor in various roles in the construction industry.
Even markets like India, which have traditionally had a labor surplus, haven’t been immune. Last month we took a peek behind the curtain and spoke to four founders in construction tech to get a glimpse at what the future holds for the industry. While we didn’t specifically touch on the labor shortage for that story, the founders did allude to it when they spoke about how a lot of tasks like bricklaying may need to be performed by robots, with automation taking on a critical role in the industry.
Laborers without borders
To combat the declining labor force in construction, some are turning to bleeding-edge tech. “It is no surprise to anyone that the labor shortage in construction has been on a downward trend since the pandemic, so as an industry, we need to search for new and useful technologies to solve this problem while also addressing other concerns related to sustainability and efficiency,” Cemex Ventures CEO Gonzalo Galindo Gout told TechCrunch+. “And since the construction industry is expected to more than double in size this decade alone, we need solutions that accommodate project growth across all regions/geographies.”
Cross-regional labor transfer is one method that proved effective enough in the past. In fact, certain regions like the Middle East rely almost exclusively on a cross-regional labor force to bring their ambitious construction projects and megaprojects to fruition. But that stops being an option when the markets they look on to draw their labor forces from also suffer a shortage.
Some countries in the region, like Saudi Arabia, are managing to attract enough of the cross-regional labor force to the detriment of their neighbors. But for most markets, a cross-regional labor force will not ensure the health of the construction industry in the long-term.
“Cross-regional labor transfer is simply a quick fix, not a tenable long-term solution. To help solve the workforce shortage in a human capital-intensive industry like construction, we must rely on technology that improves our ability to do more with less,” Galindo said.
Ritwik Pavan, founder and CEO of Krava, said that turning to technology is the way forward for the construction industry. “I believe that the construction industry will have no option but to lean toward technology to close labor gaps given the unpredictable political climates that affect labor transfer and immigration,” he said.
“Relying on cross-regional labor transfer introduces various challenges related to visa regulations, cultural adaptation, and also potential wage disparities.”
James Swanston, CEO and founder of Voyage Control, disagrees. He said that cross-regional labor transfer still has a major role to play, as long as government regulation doesn’t become too big a hurdle. “Cross-regional labor transfer is absolutely going to continue for the foreseeable future, whether it’s a pull of giga-projects in the Middle East or the large infrastructure projects in places like Australia. Appropriate immigration policies will be critical to help meet the demand of projects, and some countries are particularly weak in this area.”
Swanston said that this particularly applies to the U.S. “Immigration reform in places like the U.S. is badly needed,” he said. “We’ve had clients that have had to send skilled workers home because they didn’t win the visa ‘lottery.’ Labor shortages exist through the industry and it will be interesting to see what the impact of nearshoring supply chains will have on material prices and pressure on the workforce.”
Constantin Kauffman, CEO and co-founder of Oculai is also of the opinion that we can’t ignore cross-regional labor transfer. “We cannot solve the labor shortage on site by technology [alone] and might become increasingly dependent on cross-regional labor transfer in the mid-term. I personally see a stronger potential in the prefabrication of components to reduce the labor demand in the long-term.”
But is technology the answer?
Leaving the labor shortage problem to grow unchecked would be calamitous. Several projects across the globe came to a halt during the pandemic, for example. Several of those never got back on track. Such delays and cancellations can be disastrous for the industry. With a dwindling labor force across the world, there have been several concerns that many projects currently on hold will stay in that limbo for longer than is feasible. The construction industry has often been reluctant to adopt new technology, but in this case, companies may not have a choice.
“The labor shortage is amplified because of the growing demand for not only new construction projects, but also renovations to existing infrastructure because of new building regulations and energy standards,” Galindo said. “Perhaps the most common consequences of the labor shortage are project delays and increased costs, which have forced contractors to be more open to new solutions in a traditionally slow to change industry.”
Automation and robotics are the obvious solutions to counter the dwindling labor force. “Automation technologies that increase efficiency are those with the most potential to alleviate the labor shortage in the construction market. These can include technologies or business models that automate different stages across the construction value chain such as procurement, inventory management, material handling, fleet management, and dispatching,” Galindo added. “However, they can also be innovative technologies that are disrupting traditional construction methods like 3D printing, robotics, and machine assisted applications.”
Even though tech could be the answer, the labor shortage can be addressed by taking a more human approach. But even still, any noticeable impact is still some time away. “Ultimately, tech can help to relieve a huge amount of labor shortages, but it isn’t a silver bullet,” Swanston said. “A client once said to me that he didn’t go to university to study engineering for five years to manage a spreadsheet. Tech companies have been looking to transform construction for the last 20 years, but the industry still lags significantly behind others, and there is perhaps another decade’s worth of effort to get to a point of being really productive at minimum.”
What lies ahead
The construction industry is too critical to see a total collapse, and it is likely there will be some give before things get that bad. Whether that give comes in the form of less restrictive immigration policies or in the adoption of automation and new tech is yet to be seen. It’s most likely, though, that the countries that pull ahead of the pack are the ones that implement a mix of both.
The next decade is certainly going to be very interesting for construction: The money is still there, and the demand for projects will continue to grow. Whether the industry can adapt in time to meet that demand is going to be the true test for the coming years.
It’s inevitable that companies will turn to automation, robotics and other rising technology to address the labor shortage. And once that’s in place, it’s clear that much needs to be done to ensure that efforts are made to keep the industry moving — and iterating — as quickly as possible.
“We need solutions that not only address current labor issues, but that are also proactive in anticipating future issues beyond today and 2030,” Galindo said. “The pace of technology adoption in the industry has accelerated exponentially in recent years . . . However, this change is not as rapid as other perhaps less risk-averse industries like tech and finance. Although we’ve seen unprecedented adoption of new technologies in the past three years, the pace at which it’s adopted and applied on a larger scale must accelerate substantially.”
Comment