Labor crunch could ‘rob the US’ of critical infrastructure: McKinsey

Dive Brief:

  • The federal Infrastructure Investment and Jobs Act is expected to create hundreds of thousands of new job openings over its roughly five-year duration, but worker shortages in construction and related industries could stymie the effort, according to new analysis from management consulting firm McKinsey
  • McKinsey estimated the shortfall attributable to the infrastructure act by 2028 will be more than 160,000 workers in the contractor and subcontractor sector, 145,000 workers in the materials sector and 40,000 workers in the engineering and technical-services sector. 
  • Not addressing the issue soon threatens to waste the potential of the historic funding for U.S. infrastructure. “Failing to do so may rob the United States of tens of thousands of miles of roads, thousands of bridges, and miles of water and electrical infrastructure that could have been funded by this bipartisan investment and made our lives better for years to come,” the authors wrote. 

Dive Insight:

The construction industry already has a persisting labor shortage, and the $1.2 trillion IIJA is occurring alongside the $52 billion CHIPS Act and the $700 billion Inflation Reduction Act investments, which will also likely increase labor demand in the building and related industries.  

As funding from the infrastructure act starts to flow and work ramps up, so will job openings for construction workers. If left unchecked, labor demand challenges could also spur inflation, according to McKinsey

Because of the interconnected nature of the building industry, lack of capacity in one area can have cascading and far-reaching impacts in others. That said, labor shortages vary by state, sector and occupation, so solutions must be tailored accordingly, McKinsey said.

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Retrieved from McKinsey on October 20, 2022

 

The interconnected nature of supply chains and the labor force also means that companies may compete for the same workers and materials.

Graph showing jobs by sector created by the IIJA.

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Retrieved from McKinsey on October 20, 2022

 

For example, labor strain will likely be disproportionately concentrated in states that manufacture and export materials to other states. On the other hand, projects in states with limited manufacturing capacity may have increased risks associated with getting materials, which could further drive price increases.

Solutions to the labor crunch

While nuanced and locally adapted approaches are needed, McKinsey pointed to four strategies to mitigate the construction labor shortage:

  • Draw more workers into construction: Upskill and reskill the workforce to fill targeted roles, showcase the wide variety of jobs available and hire workers from nontraditional segments such as formerly incarcerated individuals and veterans. To attract young workers, start apprenticeships at lower ages, such as for high school students, and emphasize the non-financial value the industry can offer, such as flexible hours.
  • Improve productivity in design, manufacturing and distribution: Accelerate investment in digital tools, from digital twins to jobsite management tech.
  • Rethink delivery methods: Ditch lump-sum, fixed-price contracts. Rather, engage contractors up front in listening sessions, allow them to execute over a flexible time horizon and optimize resources and make room in the process to adapt to feedback from the market on elements that could affect the project. 
  • Coordinate more effectively: Coordinating infrastructure efforts at the regional or federal level can boost efficiency. A “dig once” strategy — bundling projects that require dirt work in the same area — has multiple benefits, like allowing builders to better manage supply chain challenges and worker shortages. 

This issue is longstanding, but it’s a challenge we must rise to, McKinsey said. 

“Thoroughly assessing the mismatch between worker demand and supply and implementing collaborative, creative approaches could help us embrace this generational opportunity to the fullest,” the authors wrote.

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