I’m never at a loss for words when describing the difficulties confronting my estimating contemporaries in their daily endeavors. It’s nothing less than astonishing the way we translate a disjointed collection of abstract scribblings into a coherent assembly of terms and values that make up a project proposal. The assumptions we must make and the projections we are called upon to derive from the vaguest of notions demand the insight and intuition of a modern day Nostradamus. Aside from developing formulaic costs, pricing a job really comes down to forecasting the big two: material and labor.
Once upon a time, B.C. (before COVID), material pricing was a breeze. In fact, it was pretty close to being a fixed cost. If we didn’t have a pre-arranged annual price agreement with an exclusive supplier, we solicited project-specific pricing from competing suppliers, and the resulting rates were usually locked in per the expected duration of the project. If an estimator calculated an accurate volume, he could be pretty confident with his material number. Yet today, with dizzying cost escalations, material pricing can be as slippery as a handful of toad eggs.
But as challenging as material pricing has become, its current cloudiness is dwarfed in comparison to the vagary generated by the most nebulous factor of them all: labor. In fact, the instability of the labor component cuts with a double-edged sword of variables: hourly rate and productivity—both factors being affected by availability and demand. Of course, this has been historically so, but never so keenly felt as now.
According to Associated Builders and Contractors, roughly 8 million people are currently employed in the construction sector. That sounds like a lot, but the ABC predicts that, given recent trends, the labor shortage in the building industry will exceed 500,000 bodies in 2024, even accounting for an expected slowdown in growth this year. Reasons behind this predicted shortage are several, with compensation (hourly rates), retirement expectation and sagging recruitment being key among them.
Poorer Pay. Regional average hourly rates for a journeyman carpenter (metal framer/drywaller) range between $27 and $36, with unskilled laborers receiving between $18 and $22. While this seems more than adequate relative to previous years, the run-away cost of living increases render these rates less than acceptable, especially when compared to wages currently offered in other industries that compete in the labor market. Given these conditions, it stands to reason that drywall firms will have to raise rates in order to put a dent in the expected shortfall of available help.
Consequently, estimators will have to project a premium over current wage pricing. I know some estimating departments that are already setting their hourly labor rates significantly higher than the current regional prevailing wage in anticipation of impending hikes. Clearly it’s a moving target, and the movement tends to be upward, which of course makes it more difficult to fatten the backlog.
Young Blood Deficiency. Another pointed reason for the shortfall of labor in the construction industry the lack of interest among young people in entering our industry. According to the Bureau of Labor Statistics, over 60% of recent high school graduates have enrolled in colleges or universities. In fact, while secondary education enrollments approach the 20 million mark, participants in construction apprenticeship programs numbered under 200,000 in 2021 (U.S. Department of Labor).
Certainly, one can safely assume that the wage issue described above has some influence on this trend, but a consensus view among young people that a trade-related career is somehow beneath their dignity seems to be playing a significant role as well. Status is attached to college, stigma is attached to trade school.
Yet studies by the Stanley Black and Decker corporation cite some misconceptions driving the undeserved stigma. They point to incorrect knowledge of skills required in the trades, lack of exposure to successful trades people and the perception of a male-dominated industry. And until these myths and misconceptions about careers in the trades can be dispelled, the trend toward rejection of the skilled trades among young people is certain to continue.
Accelerated Retirement. Perhaps one of the most ominous reasons behind the construction labor shortfall relates to the age demographic. One of every four trades persons has reached age 55 or over. It is expected that over 40% of the current construction workforce will retire over the next 10 years. To make matters worse, this outgoing demographic boasts the greatest skill and highest productivity level, so it’s not only bodies that our industry is losing, but an irreplaceable level of expertise as well.
Now that I’ve established some of the more critical reasons behind the labor shortage, I believe a detailed analysis of the factors detailing the effect on drywall estimators is in order—next month.
