The US construction industry is facing a structural labor shortage at a time when demand for projects continues to grow. The Associated Builders and Contractors trade group has estimated that the industry will need to bring in 456,000 new workers in 2027, a 30.7% increase from the 349,000 required this year.1
While the need for new infrastructure, energy projects and commercial development continues to accelerate, the workforce required to deliver on that demand isn't keeping pace.
The challenge isn't cyclical. It reflects a deeper imbalance between labor supply and demand, driven by demographic shifts, evolving skill requirements and sustained investment across infrastructure, energy and commercial construction.
Labor pressures also vary by region. Rapid growth in the Southeast and Southwest, driven by infrastructure, data centers and renewable energy, has intensified competition for skilled labor, while the Midwest and Northeast face ongoing challenges tied to manufacturing demand and complex urban projects.
At the same time, the industry stands at an inflection point. With the right combination of workforce strategy, technology adoption and risk management, organizations have an opportunity to build a more resilient and future-ready labor model.
The key trends shaping the market for construction talent
With a large proportion of the skilled workforce set to retire in the coming years, the unique skills that the construction industry requires are becoming harder to find.2 At the same time, there's a concern about talent attraction, as fewer young workers are entering the industry, exacerbating the already prevalent skill shortages.
Closing the gap has become a big priority as construction projects are increasing in number and diversity. Many projects involve renovating old buildings that call upon traditional trades skills, such as masonry, plastering and carpentry. But there are also gaps in other areas. For example, suitably trained designers are in short supply, leading some contractors to turn down projects.
The construction industry is at a crossroads, facing workforce challenges and the emergence of new technologies. For contractors, this means channeling their focus into creating and maintaining a future-ready workforce that can thrive as new opportunities unfold.
Here are some key considerations for hiring managers.
Attracting the next generation of talent
Whether working on-site or off-site, blending manual with analytical skills, construction offers new generations many opportunities to be creative and work with state-of-the-art technology.
But for modern recruitment strategies to be successful, immersive social media campaigns will play a huge role in connecting with tech-savvy youth. These channels will help showcase digital transformation and career versatility within the industry.
"It's not hammer and nails anymore in construction. It's also about analyzing contractual documents, utilizing modern tools and embracing new technologies for design, which favors younger people in the industry," says Brian Cooper, senior managing director of Construction at Gallagher.
Even for those who aren't sure about construction as a long-term career option, there's an expanding number of specialized temp-to-hire tech-enabled roles and registered apprenticeships to appeal to Gen Z.
To bridge the talent demand-supply gap, construction firms are partnering with high schools and vocational colleges to guide students as they decide which career options to pursue. Labor unions are also investing in trade schools to train young people in construction skills.
Retaining talent for the long term
While attracting youth is the critical first step, the industry must also have other measures in place to ensure these individuals want to stay and develop their careers in construction. Retention is becoming increasingly critical as firms compete for limited talent. This is particularly important in an environment where workforce shortages are already contributing to delays and productivity challenges across projects.
Offering competitive wages, Employee Stock Ownership Plans (ESOPs) and learning and development opportunities for career advancement are important benefits to keep skilled workers engaged and motivated. However, retention strategies that prioritize employee wellbeing and flexibility will resonate more with Gen Z, who increasingly value work-life balance when choosing an employer.
Some labor unions are already promoting the benefits of starting a career in this sector. Take the example of an apprentice electrician who is in demand and can earn a good wage with added benefits. Contrast this to a college graduate burdened with significant debt, struggling to find a job.
Beyond this, upskilling existing workers for supervisory and leadership roles is equally essential to foster a strong safety culture. Passing on the experience and knowledge of workers nearing retirement not only helps train future generations but also addresses talent gaps before they arise.
Redressing the gender divide
Diversity in hiring will also be crucial to widening the talent pool. Construction firms that welcome veterans, people with disabilities and returning workers are more likely to succeed in the long term.
The physical nature, long hours and male-dominated culture historically meant that few women would consider a career in construction. But that's changing. In the past decade, the number of women in all levels of the construction industry has risen significantly, with many now holding C-suite leadership positions.
Leveraging technology for workforce resilience
Emerging technologies like 3D printing and building information modeling (BIM) are revolutionizing construction processes by boosting efficiency and productivity. Precision innovations such as autonomous layout robots and block-laying systems are helping alleviate labor shortages. AI is being used for predictive tasks like estimating, scheduling and labor planning.
Other examples include wearable tech, such as smart helmets that enhance the safety of the human workforce by monitoring vitals and alerting managers to risks. This improves safety, productivity and job satisfaction. But proper training is also essential to ensure workers can effectively adopt and utilize the tech advancements.
Flexible staffing: The rise of the 'hybrid' builder
Understanding the risks involved
Even with widespread adoption of AI, soft skills such as creativity, adaptability and problem-solving are vital to meet the challenges of the future. This requires ongoing support and investment in skills development.
On top of this, there are a number of risks and other areas to consider:
- Legal and compliance risks such as co-employment liability, wage violations and classification challenges.
- Occupational Safety and Health Administration (OSHA) compliance requires clearly defined safety responsibilities between staffing agencies and employers.
- Technology-related risks from emerging technologies, such as safety hazards, job displacement, data integrity concerns and psychosocial impacts.
- Mitigation strategies that emphasize training, safety protocols and the use of protective equipment and technology.
- Insurance cover, especially Employment Practices Liability Insurance (EPLI), that protects against claims like discrimination and wrongful termination.
- Workforce classification changes that may increase labor costs and compliance requirements.
- Heightened enforcement activity, particularly around employment eligibility and documentation.
- Co-employment and contingent workforce risks, including wage and hour compliance and benefit eligibility exposure.
In recent years, policy and enforcement changes have added further complexity. For example, immigration-related enforcement activity has impacted a meaningful portion of construction firms, contributing to workforce disruption and additional administrative burden.
Helping you build for the future
The construction labor shortage is a structural challenge that will require coordinated, long-term solutions rather than short-term fixes. From workforce strategies and technology adoption to risk management and certificates of insurance, Gallagher can provide you with expertise and resources to future-proof your business.
Partnership is important to us. We listen, consult and collaborate to deliver actionable insights and practical solutions that can help you effectively manage your claims and property portfolios to achieve long-term success.
If you'd like to know more, don't hesitate to contact one of our specialists.