For Want of a Sink the House Was Lost—Construction Labor Shortage Continues

For many years we have written about the labor shortage*. Some of the causes are the great recession housing crisis, and societal changes stressing white collar over blue collar work, which resulted in a reduced number of training programs for construction-related skills, Covid and other causes.

During the housing crisis many builders were forced to shut down their business and lay off their workers. Many of these skilled workers found employment in other industries and few returned to home construction after the industry started to expand again.

The trend for decades has been for parents and high schools to encourage students towards college versus going into the trades. Math, science and technology have been emphasized in recent years. Fewer schools teach trades such as electronics, carpentry, etc. Even as more training opportunities have emerged in recent years, the number of students has not kept up with the demand in the workforce.

The average age of current construction workers is above the average age for all workers. As these skilled workers retire, they are not being replaced at a fast enough pace by new workers. Even before the pandemic, which accelerated the pace of retirement, there weren’t enough skilled workers. During and afterward, while the demand for construction increased, the number of workers did not increase proportionately.

The construction worker shortage is only getting worse—here’s why” discusses these issues and many more.

In addition to the pace of retirement, demand for construction has increased due to rebuilding that is needed due to disasters and the housing shortage.

This has led to an increasing shortage of labor, which pushes up the cost of building. The labor shortage also lengthens the time to complete construction projects. “Time is money” so that increases the costs for a builder. In order to attract workers, keep workers and to incentivize subcontractors to schedule their work over other jobs, it is often necessary for builders to pay higher wages/prices.

Do you remember the old nursery rhyme For Want of a Nail The Shoe Was Lost? Here is our version about home builders: The average home sale price is $500,000. If a plumber charges $100.00 an hour and a sink installation takes two hours, the cost is $200.00.  Let’s say the profit on the home is 10% or $50,000. However, the builder must sell the home in order to receive the $50,000.  If the sink installation is all that is holding up the house sale and the builder offers the plumber $1,000.00 to get the sink installed, only $800.00 “extra” stands between the builder and $50,000. The hourly rate just became irrelevant.

While prices for construction materials have generally been stable for the last five months, they are considerably higher (almost 40%) than pre-pandemic. Construction materials prices unchanged, signaling ‘stable’ costs ahead provides an informative chart showing the cost changes to July 2023 compared to the previous month, year and since February 2020. This indicates that supply chain issues and inflation have eased. No one expects the costs of materials to decrease close to what they were pre-pandemic, but the easing of the supply chain issues means that many materials are more readily available. That will help ease some of the schedule issues where projects have been taking longer and longer to complete due to lack of available supplies.

e2Value keeps up with changes in costs to provide fast, cost-effective and accurate replacement cost valuations. e2Value’s estimators allow you to quickly and easily value homes of any size or age. You are able to value the smaller older homes and newer larger high value homes and everything in between, plus condos, co-ops, commercial properties, manufactured homes, log cabins, or farms and ranches. Our patented estimator can quickly calculate the cost of replacing a residential, commercial or farm structure. Contact us for more information about our estimator tools.

*Here are just a few of our articles on labor costs over the last few years.

2017: Labor shortages still a concern for builders

2019: Concerns, trends and opportunities in commercial construction for 2019 and Labor costs driving construction cost increases

2021: Lumber Costs Have Improved but Demand Is Still High

2022: Attracting Workers to Reduce the Labor Shortage