construction workers

According to the Bureau of Labor Statistics, construction companies aren't only dealing with a labor shortage, but they're being forced to overpay under skilled workers. The result is dwindling profit margins, making it tougher for construction companies to improve productivity.

Data shows the average hourly rate for entry-level jobs rose more than 6% from 2021 to $32.19 an hour. In many cases, the workers do not have the skills necessary to increase, or even maintain the level of competent productivity.

Offering higher wages is a typical strategy to get people to take labor intensive jobs for which the construction industry has no shortage of.

As other industries also increase pay to attract workers, the construction sector is finding it harder to entice new skilled workers.

“Construction still has a considerable premium, as I call it, in what it pays the average worker, compared to other industries,” Ken Simonson, Chief Economist for the Associated General Contractors of America toldConstruction Dive.

“But that premium has shrunk.”

At the same time, construction employers get fewer skilled workers for the higher wages they pay,

Associated Builders and Contractors Chief Economist Anirban Basur says the need to fill jobs with anyone and everyone is problematic.

“Contractors are still hiring aggressively, but they’re often just throwing bodies at jobs, without those bodies being more productive.”

In the past, hiring more employees meant more profits, but that's not how contractors are feeling in this economy.

“While you see many contractors still staffing up, the expectations regarding profit margins are flipping,” Basu said. “They’re becoming more pessimistic.”