GRAND RAPIDS — The construction industry, both nationally and statewide, continues to express persistent concerns related to a labor shortage and escalating construction costs in the year ahead.
According to a nationwide survey of construction firms from the Associated General Contractors of America and Sage Construction & Real Estate, the number one concern for the next 12 months in the U.S. and in Michigan remains the worker shortage. The data, released Jan. 2, are based on a survey of more than 1,300 construction firms nationwide, including 42 from Michigan.
Among firms nationally, 42 percent said they expected difficulties in finding talent to continue in 2019, and 26 percent said it will become harder to hire. In Michigan, 45 percent said they expected difficulty in hiring hourly craft or salaried personnel in the next 12 months, while 21 percent expect the labor situation to become worse.
As a result, some firms are taking additional steps to address the shortage.
“Many firms are investing more in training programs for current workers, and plan to increase this in 2019,” said Ken Simonson, chief economist for AGC.
West Michigan has made progress on the local talent shortage, said Ben Wickstrom, president & CEO of Ada-based Erhardt Construction Co. The challenges of finding staff have forced the company to find ways to be more productive with fewer people, he added.
“Our industry is adapting and advancing, which makes it even more attractive to young people who want to get to work and have a good career,” Wickstrom said.
A majority of firms surveyed in the U.S. and in Michigan said they would invest more in training and development of workers in 2019. Staffing challenges pose several issues for firms, resulting in higher prices for bids and contracts, projects taking longer than anticipated and construction costs being higher than they anticipated, according to the data.
“Firms continue to raise pay and provide more benefits, incentives and bonuses,” Simonson said, discussing national responses that showed 59 percent of firms increased base pay in 2018 because difficulties in filling positions. In Michigan, 62 percent of firms said they planned to increase pay.
Wickstrom said Erhardt Construction is investing in training, “as it always does.”
“When you have a demand for talent, in a lot of cases, you’re hiring people with less experience, which makes training and development even more important,” he said.
Despite the challenges, most firms also said they expect to hire workers this year.
At the same time, contractors remain optimistic about the demand for work. The report tracked multiple sectors in which expectations for the volume for projects increased. Contractors answered that they expected to be competing most for construction projects in the public sector, highway construction and K-12 schools.
In Michigan, firms were slightly less optimistic and cited fewer market sectors in which they expect to compete for available projects. They expect the most projects in the hospital, water/sewer, power and highway sectors.
At Erhardt Construction, the firm is expecting a robust 2019 because it covers diverse market segments, Wickstrom said.
Both nationally and locally, respondents said they expected less of a focus on multifamily housing.
“This may indicate that multifamily construction has outpaced demand for now, in some locations,” Simonson said.
One in 10 firms predicted more opportunities will be available for federal construction projects. The large majority, 87 percent, expected them to remain the same. The survey was taken prior to the Dec. 22 U.S. government shutdown.
“(The shutdown) does not yet have a measurable impact on construction,” said Steve Sandherr, CEO of Associated General Contractors of America. “The longer is goes, obviously it does have a potential for impact.”