The California Labor Shortage Explained

California is known as much for its rapid tech sector growth as the market demand created by swells of incoming residents. Even before Silicon Valley’s birth and expansion, the state’s sunny skies and quality of life drew flocks of newcomers. Now, the Bay Area and beyond is dealing with the unprecedented demands created by this population surge. The construction industry, in particular, is experiencing a labor shortage that feeds into increased building costs. Here, we’ll talk about the reasons why finding adequate labor is difficult, how it affects the housing and commercial markets, and what can be done to address this deficit.

What Does the Labor Shortage Look Like?

According to the Associated General Contractors of America and Autodesk, 78% of construction companies are having difficulty hiring construction workers. Bricklayers, drywall installers, pipelayers, carpenters, sheet metal workers, and plumbers are cited as the most difficult positions to fill, and companies have been bringing in workers from out-of-state to meet demand. The companies surveyed by AGC don’t expect the shortage to be resolved any time soon: 45% reported that they anticipate continuing difficulty in hiring craft and salaried workers.

This labor shortage has taken its toll on California’s already-serious housing crisis. In a 2017 recent report, the California Department of Housing and Community Development called for a 100% increase in annual housing stock production, advocating for 1.8 million new homes by 2025. If met, this goal would still barely alleviate the demand for housing in the Golden State. The market for commercial real estate is just as hot, with a shortage of undeveloped land and a complex entitlement process adding fuel to the fire.

How Did We Get Here?

The construction labor shortage isn’t entirely unique to California. The industry in America is expected to see an 11% increase in employment opportunities between 2016 and 2026 — a growth of 747,600 jobs. The call for skilled laborers is increasing across the board.

A lack of public education about — and exposure to — construction and trades is a major cause of the labor shortage. A 2017 Builder story found that only 3% of people aged 18-25 wanted to work in construction. In a piece for Dismal Science, AGC’s senior director of public affairs, Brian Turmail, was quoted saying that “we don’t have many people seeking careers in construction, largely because we don’t do much to signal as a public education system, or even as a culture, that high-paying careers in construction are careers people ought to be pursuing.”

Meanwhile, California construction workers bring in some of the highest salaries in the country, with an average hourly wage of $21.26. An increasing reliance on technology and sophisticated building methods means that companies can sometimes pick up the slack created by an inexperienced workforce, but people still make up the bulk of the skill on a jobsite. The lack of skilled laborers, coupled with the severe need for housing, means that California construction workers are guaranteed work.

Despite the job security, high pay, and potential for building skill sets, the labor shortage continues to affect the construction market. Silicon Valley’s expansion includes companies like Google and Facebook building out their campuses and hiring more employees. More jobs means that affordable housing is needed more than ever. But the rapid expansion, compounded with an already-suffering housing market, has created a catch-22: workers are struggling to find affordable housing near their workplaces. This means that the construction workers that the state so badly needs in order to catch up on its infrastructure projects could very well be dissuaded from taking on jobs due to a building shortage. As Christopher Thornberg, a founding partner with Beacon Economics explained to The Mercury News, “the tech sector will continue to thrive here and grow, but that could push out traditional sectors.”

Where Can We Go Next?

Many stakeholders have suggested solutions to the labor shortage. The construction workers union is working with the government in order to write new state legislation that provides minimum pay, benefits, and training to construction workers. Immigration reform that allows skilled workers to legally enter the U.S. and work could also provide a solution to the labor squeeze. For companies outside the union, a renewed investment in training and promoting construction as a career could lay the groundwork for securing future talent.

These negotiations are helping set the bar for construction workers — unionized or not — to receive higher wages. New private-public programs that train workers for the construction industry are also gaining traction. Perhaps the single most helpful factor in solving the labor shortage is technology’s evolving role in the construction industry. Technology can streamline a project’s workflow while giving managers and workers more information on all stages of a build. And companies that are already using technology to make their worksites safer and their projects more efficient stand a better chance of attracting a new crop of construction talent.

For the construction industry in Southern California, the pinch isn’t over. But by understanding the landscape, promoting construction as a viable career, and investing in training, contractors can work towards ensuring their projects run to time and budget.

Since 1978, South Bay Construction has been an industry leader in the Northern California area. We foster excellence through a dedication to the industry and supporting its growth through innovation and expertise. Contact us for a quote or to learn more about our vision and experience.

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