The construction industry is experiencing a labor crisis. A combination of retiring skilled workers, geopolitical forces, fewer young professionals entering the trades, and pandemic-related disruptions have led to a severe work-force shortage.

A skilled labor shortage is at the heart of the issue—a gap where the demand for qualified, experienced workers far exceeds supply. This shortage has far-reaching implications, not only for project timelines and budgets but also for the insurance risks faced by contractors.

Did You Know: Nearly 88% of construction firms are struggling to find employees with the right skills to hire.

Our partners at Central Insurance, explain how this shortage creates a domino effect of challenges. “The issue of not being able to find labor with the proper skillset inevitably leads to two things: hiring employees who lack the proper skillset or having existing labor attempt to do work outside their qualifications,”. These scenarios significantly increase the likelihood of claims.

Below, we examine how the labor shortage is reshaping risk management in construction and what contractors can do to adapt.

Why Is There a Labor Shortage in Construction?

Several key factors contribute to the ongoing labor shortage. The main drivers include a retiring workforce, increasing demand for skilled labor, and a shrinking pool of qualified workers entering the industry.

The construction industry is struggling to meet the demand for skilled labor, making it harder to address the nation’s 1.5 million home housing shortfall. According to the Home Builders Institute (HBI), the industry needs to hire 723,000 workers annually to bridge this gap.

While there are 8.3 million construction workers in the U.S., including 3.4 million in residential building, hiring rates aren’t keeping pace. Over the past six months, the average number of new residential construction workers was  5,667—far below what’s needed to match demand.

This growing labor shortage highlights the urgent need for solutions, including stronger recruitment efforts and training programs to develop the skilled workforce necessary to keep construction projects on track.

A Skilled Labor Shortage and Its Consequences

Companies often face difficult decisions when they cannot find workers with the appropriate expertise. In many cases, they must hire underqualified individuals or reassign existing employees to tasks outside their usual skill set. Both approaches increase operational risks and can have far-reaching effects on project outcomes and overall safety.

One critical consequence is the rise in construction defects. Work completed by underqualified laborers is more prone to errors, leading to structural issues, project delays, and costly claims. Defects impact a project’s bottom line and tarnish a contractor’s reputation.

For construction businesses, addressing these challenges requires rethinking recruitment, investing in robust training programs, and collaborating with your Trusted Choice Independent Insurance Agent, to manage heightened risks effectively.

Training: A Key to Reducing Risk

Proper training and oversight are essential to combating the risks undertrained workers pose. Safety and training are two areas where you can never cut corners.

By focusing on training, contractors can protect their workforce and bottom line. Investing in risk management and loss control programs is a proactive way to strengthen operations and maintain long-term success.

The Trusted Choice Independent Insurance Agents at Richey-Barrett can assist you in matching the proper insurance company to your specific needs and help you in reducing your risk. So, before you purchase or renew your policy feel free to contact us.