On the tailwinds of material delays that plagued the construction industry after COVID-19, another persistent challenge has taken center stage: the skilled labor shortage. A topic of rising interest and concern, this shortage has prompted extensive research to better understand its severity and implications for contractors and the overall financial outlook for the industry.
Our researchers at the Home Improvement Research Institute have been monitoring the implications of the skilled labor shortage since 2017. In the second quarter of 2023, HIRI conducted a comprehensive survey that involved more than 550 contractors. The survey results provide valuable insights into the relationship between labor availability, economic conditions and contractors’ responses to these challenges.
Here’s what we found:
A staggering 73% of survey respondents stated that there is a labor shortage within the construction industry. However, only 42% of these respondents actually stated a shortage of labor within their own companies. Dave King, HIRI’s Executive Director, noted that this reveals the industry’s widespread perception that labor shortages are affecting everybody, while the number of firms affected in reality may be much lower.
HIRI research also uncovered a correlation between the perceived labor shortage and firm size. Contractors at larger companies expressed heightened concerns about labor availability, reflecting the challenges they face in managing the right project load to remain profitable. Conversely, workers at smaller firms, with their tight-knit operations, tended to feel the impacts of the shortage less acutely because they have more options in their business to counteract perceived and real labor shortages.
Large or small, the ways contracting firms adapt to labor shortages paint a vivid picture of the industry’s resilience. When confronted with workforce limitations, various methods come to the forefront:
53% take fewer total projects, allowing them to allocate their limited labor resources more effectively.
43% turn to time-saving products that can help expedite project completion without compromising quality.
41% specialize in a narrower range of projects, focusing on areas where their expertise and workforce can be maximized.
40% selectively pursue higher-paying projects, balancing profitability with the available labor pool.
36% narrow their geographic focus to manage projects within a more concentrated area.
29% introduce training and apprenticeship programs to cultivate a skilled labor force.
This data reveals opportunities for retailers and manufacturers of home improvement products to enhance business relationships with contractors and provide valuable support amid labor shortage challenges.
Some strategies deployed include:
Promoting time-saving products
Developing specialized kits, materials and tools
Offering educational resources, workshops and training
By tailoring offerings to address contractors’ needs, retailers and manufacturers can improve collaboration with the pros and foster stronger brand loyalty.
The impact of labor shortages on contractors’ financial outlook varies considerably based on the size of their firms.
66% of these smaller firms anticipate a decline in revenue if inflation were to reach 10% in 2023 and beyond.
Only 25% reported a reduction in bid requests, highlighting the continuing demand for professional trade services.
Job sizes for these firms have remained steady overall.
Despite their size, 54% of these firms still anticipate a decline in revenue if inflation reaches 10% in the upcoming year.
50% of these firms saw an increase in bid opportunities over the past 12 months.
Job sizes are growing for 50% of these larger firms. Furthermore, 33% report job sizes have remained consistent with those in 2022.
Regardless of firm size, two significant concerns loom large among contractors.
1. Material availability and pricing concerns: Consistently since 2021, at least half of contractors have reported material availability and material pricing as their top concerns. Labor challenges have taken less share of mind for contractors in comparison to material challenges.
2. Economic uncertainty: As levels of consumer uncertainty fluctuate, Pros’ level of business certainty will follow.
While challenges persist, the strategies employed by contractors to adapt to labor shortages and other concerns reinforce the industry’s ability to innovate and persevere. Aligning your offerings with the concerns of Pro customers is a requirement to maintain your current market share and then gain market share from competitors that are slow to respond to Pros’ top challenges.
Want to learn more about the skilled labor shortage, about concerns among professionals and about financial outlooks for firms of varying sizes? Join HIRI as a member for full access to all of the reports (and the full data sets) referenced in this article.
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