Impacts of COVID-19 on Construction in Texas

Construction and Covid-19

For specialty subcontractors and self-performing general contractors in the construction space, finding reliable and competent craft professionals has been a challenge ever since the 2007-8 financial crisis. During the crisis, the industry lost over two million construction workers (or over 18% of the labor force) and has yet to backfill those positions even as demand for new projects continues to rise.

Although construction has been classified as "essential business" and our stakeholders in the Texas construction market continue bidding on new projects, Coronavirus-related unemployment claims have spiked to 26.3 million as of April 18th since late March 2020.

There is still a likelihood that both regulatory measures and shifting demand for new projects could temporarily impact the rate of construction volume. If the industry does endure another shock similar to that caused by the Great Recession, what impact will this have on the commercial, industrial, and civil construction verticals?

Here are two predictions for what we believe may happen at the craft professional level, and how worker-facing technology could help accelerate with the industry's recovery:

The need to include younger generations in the construction labor force will increase

While boomers have been slowly transitioning out of the labor force over the past decade, we know anecdotally that boomers in construction have tended to hold onto their jobs for longer than their counterparts in other industries. This has had the positive effect of helping pass institutional knowledge down to the next generation of worker, but the negative consequence that it has put limited upward career mobility for younger generations of craft workers.

NCCER projects that 41% of the workforce will retire by 2031. This timeline may be pushed up if the industry endures another shock.

If construction projects do experience a decline due to a probable recession caused by the coronavirus, we expect that many boomers currently acting as superintendents, foreman, journeymen and technicians will decide it's time to hang up the cleats.

In order to successfully backfill a potential mass exodus of boomers from the labor force, the construction industry will have to adapt to the needs of a digitally native demographic - younger Millennials looking for a career change, the coming of age Generation Z, and the future Generation Alpha. Broadly, these generations are used to solving problems through their mobile device. Technology is a key vehicle by which they present themselves to the world. They will look for opportunities to tell their professional story digitally. This phenomenon has been proven out in more white collar industries through tools like LinkedIn. A construction specific digital resume like Buildforce will help this generation feel welcome and empowered in the construction space.

The shift to contingent labor will accelerate

The construction industry is one of the leading industries in its use of temporary workers. Although the exact proportion of temp vs. full-time workers is somewhat of a black box, a study in 2015 found that construction construction's use of temporary workers is well above the average across other industry verticals.

While baby boomers tend to value loyalty to and longevity with their employer, younger generations are more apt to pursue any opportunity that pays even marginally better than an existing opportunity. This actually dovetails nicely with the fact that, although maintaining a steady core workforce is critical for any successful subcontractor or self-performing GC, utilizing project-based contingent labor is also critically important for construction firms to run a nimble business that minimizes non-productive overhead. Properly making use of skilled contingent labor in effect allows firms to turn what would otherwise be a fixed cost into a variable cost.

Today staffing agencies, which notoriously don't always provide the best experience for firms or workers, are a staple for finding contingent labor. We believe construction workers and firms of the future will rely on digital platforms to manage contingent labor. These platforms will ensure the right worker is aware of jobs for which they're qualified and may be interested, and allows the worker to decide which opportunities they want to pursue. For firms, these platforms enable the firm to identify large audiences of both new workers and workers from their bench who may be perfect for the job.

Summary

The potential for a massive shake up and slow down in construction over the coming months due to regulation and shifting demand is a serious possibility. Based on lessons learned from the 2007-8 Great Recession, a mass exodus from the labor force should be expected if such a slowdown occurs. This exodus is likely to be primarily from the baby boomer generation. If the construction industry is to successfully recover, it will need to begin paving the way for younger, digitally native generations to enter the workforce. These demographics use technology to tell their personal story and manage their careers, and are opportunistic when it comes to job opportunities, which in turn means high job turnover will only increase in the future. Construction firms that rely on craft labor in the new era of construction will need have to leverage software platforms to successfully manage contingent workers (i.e. finding new workers and tracking previous workers) and meet the next generation of craft professional where they spend most of their time - in the digital world.