How to fix construction’s people problem

The acute labour shortages currently affecting construction are an artefact of the pandemic. We will get some relief from these pressures as demand and supply come back into balance. This is already well underway through a combination of immigration boosting supply and rate hikes tempering demand.

However, it would be a grave mistake to think this rebalancing will completely resolve our labour problems. We are not about to return to some labour market utopia. Let’s not forget that things weren’t all that rosy before the coronavirus arrived.

Well before the pandemic I was arguing that construction faces a structural labour problem. The economic distortions of the last few years only amplified this signal.

The central challenge we face is a permanent lift in the demand for built environment assets in Australia. Record population growth is one factor, but it goes well beyond that. The increasing density of our cities means more complex and expensive infrastructure. The renewables transition requires a colossal amount of investment. We also need to deliver an Olympics this decade. And geopolitical risks could see Defence spending increase from 2% to 3% of GDP.

We have the opposite trend on the supply-side. The ageing population means the size of the working age population is shrinking relative to the total. Simply, there are relatively fewer workers to support a growing population. This trend will affect construction more than most industries due to its reliance on young, mainly male, workers.

There are other factors that I won’t catalogue here. Suffice to say, delivering built environment outcomes at our current rate of production will become increasingly difficult as we roll through this century.

So, what is the scale of this challenge and how do we solve it?

The challenge

By my estimates we will need an additional 750,000 construction workers by 2040. Our normal channels of labour supply, at their current settings, will deliver only 250,000.

It’s important to note this graph is not fate – it represents what would happen in 2040 if we maintained our current system of labour supply. In other words, we will find ourselves short 500,000 workers if we do nothing.

Of course, it’s highly unlikely the labour market will stand still as the next two decades play out. There are basically three channels we can work through to close the labour supply gap.

Option 1 – absorb more of the working age male population into the construction workforce.

Around 14% of working age men work in construction. Lifting that absorption rate to 18% would eliminate the 500,000 shortfall altogether.

Option 2 – increase the number of women in construction.?

Women currently account for 13% of all construction workers. Increasing that representation to 33% would also eliminate the 500,000 shortfall.

Option 3 – increase productivity.

Rather than trying to increase the supply of labour, we can reduce the demand for labour. This doesn’t have to mean delivering fewer projects – we can find ways to deliver them with fewer workers. A 13% increase in labour productivity would be enough to eliminate the 500,000 shortfall.

Option X – do a bit of everything.

The only realistic solution lies in a combination of all three paths. But none of it will happen by itself.

Recruiting men to construction is getting harder not easier, so option 1 is no panacea. The share of women in construction is rising but, at this rate, will only reach 20% by 2040. Productivity growth has been precisely zero for the last 20 years, and I don’t see a step-change in the next 20.

So no single pathway is a feasible solution alone. But if we make some progress on all three sides of the ledger, we’ve a good chance of coming out in the black.

How should we go about it?

Construction is unique in how finely tuned it is to a particular type of person. Sociologists call this the homophily principle—literally, the ‘love of sameness.’ Homophily isn’t inherently bad. Life is easier when people think like we do. It has served the construction industry well for decades.

But in a world where our narrow pool of labour no longer yields enough workers, we have no choice but to cast a wider net.

A lot of people seem to think this simply means fixing construction’s image problem—to sing its virtues louder than its vices. As I see it, there’s no point pushing people into an industry that doesn’t suit them. That only creates a revolving door. Case in point: women leave the industry 49% faster than men.

We need to focus much more on the pull factors than the push factors.

We don’t talk as much about this side of the ledger because the conversation quickly ends up in some uncomfortable terrain. For a start, it requires accepting that the change we need can only come from within – not from the government, or the schools, or the parents.

The even stickier part is that the people with the power to make these changes—the incumbent workforce—are generally doing quite well out of the system just as it is, so aren’t exactly agitating for revolution.

But if we’re serious about plugging our labour shortages, we need to get serious about transforming the lived experience of construction.

The key levers here are flexibility and respect at work. A more flexible, less combative industry will obviously be more appealing to women, but it will also widen the industry’s appeal among men. It also ticks the productivity box because it will lead to more diversity in the industry – and it is now clear that more diverse workplaces are more innovative.

Construction has a lot going for it. The pay is good and there’s a job for every taste. If we can just crack the flexibility puzzle and ditch the agro, we’ll be overrun with candidates.