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Where are all the Workers?

Tuesday, May 29, 2018   (0 Comments)
Posted by: Hilary Korabik
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Workforce Shortage – Where are all the Workers?
Laura Cataldo, Baker Tilly Virchow Krause, LLP

 

The economics of workforce development

Even the most astute human resources pro can find Korn Ferry’s latest “Future of Work” update a scary challenge. The update projects a global human talent shortage of more than 85 million people by 2030.  AGC’s 2017 Construction Hiring and Business Outlook1 stated that 73 percent of contractors reported having a hard time finding qualified workers and 76 percent predict that labor conditions will remain tight, or get worse, during the next 12 months. While there are many reasons the industry is facing a workforce shortage — a growing economy, declining population numbers, retiring baby boomers and limited diversity of our workforce — the reality is construction is not alone in the workforce crisis. We are in a war for talent with many other industries. 

Aligning workforce and economic development

Workforce and economic development programs have been in existence for a long time but historically had very different approaches. 

Workforce development: The workforce development system emerged from President Lyndon Johnson’s 1960’s Great Society model. The focus of workforce development was to define the federal and state governments’ role in providing human and social services to disadvantaged and displaced workers. The workforce programs were centered on creating employability and job placement for low-skill populations. 

Economic development: The economic development model has always focused on creating business, and subsequently, job opportunities. Instead of placing ownership on the federal and state government, most economic development efforts rely on both government and private industry to play a role in creating job growth for skilled and professional workers. Construction is a hybrid of these two populations, as some of our career paths are available to the no/low skill worker, but the majority of the construction workforce is termed skilled. 

The question that most states and employers grapple with today is how can we better link and support workforce and economic development activities and investments at the local level so that increasingly scarce public resources are deployed most effectively. In order to find the solution, it helps to understand the composition of the adult working population.

Chicago’s workforce reality

A major challenge for the construction industry is that we have not been effective in diversifying our workforce to match the changing population. Based on the July 2017 Cook County census numbers3, your workforce should be comprised of:

51% Females
42.4% Caucasian
25.3% Hispanic/Latino
24.2% Black/African American
21.1% Foreign-born
3.4% Veteran

Does your workforce match these numbers?

In addition to the diversity challenge, construction competes with many other industries for “skilled” workers. Because the Chicago metro market has a higher than average number of “professional” industries, there is an extra burden on the construction industry’s ability to recruit. Of the 22 major employment categories, construction ranks 16th for total employment numbers, but offers the fifth highest annual mean wage of $70,870 — the highest of the “skilled” (versus “professional”) industries. The chart below shows how the construction industry is offering much higher wages than the industries it is competing with for skilled workers. So, can we compete for these workers? (Source:  BLS May 2018 Metropolitan Area Occupational Employment & Wage Estimate) 2

Major Industry

Chicago Area Employment

Annual Mean Wage

Office & administration

564,190

$39,700

Sales

352,830

$44,700

Food prep & serving

306,880

$24,910

Transportation & material moving

$294,560

$39,010

Management

287,420

$119,240

Production

287,420

$37,020

Business & financial operations

224,220

$76,370

Education & training

221,270

$59,840

Healthcare

207,790

$82,770

Computer & math

123,580

$88,360

Installation, maintenance & repair

116,310

$51,700

Personal care & service

111,500

$27,840

Protective service

101,150

$53,280

Healthcare & support

99,310

$32,150

Building & grounds

98,470

$31,770

Construction & extraction

97,780

$70,870

 

Reaching your future workforce

The second major challenge is our ability to combat the “college-for-all” mentality that has prevailed in the K-12 education system for years. Yet, Harvard University predicts that 57 percent of the jobs in the future will require skilled training or certification, not a college degree4. While our industry needs college educated individuals, there is a higher percentage of construction careers that require advanced training through apprenticeship, technical training and certification programs. 

President Trump’s June 2017 Executive Order, Expanding Apprenticeships in America, stressed the need for pre-apprenticeships for high school students as a means to prepare workers for jobs of the future. Pre-apprenticeship is a partnership where at least one employer prepares an individual to enter and succeed in a future apprenticeship. Pre-apprenticeships expand the career pathway opportunity by coupling industry-based training with classroom instruction. The benefits include career exploration, preparing for apprenticeship, developing work-readiness skills and viable career path opportunities. 

The recently formed Task Force on Apprenticeship Expansion includes numerous prominent construction organizations (e.g., United Brotherhood of Carpenters and Joiners, North America’s Building Trades Union and International Association of Sheet Metal Workers) and will identify strategies and proposals to promote apprenticeships and leverage federal funds dedicated to addressing the nation’s skills gap.  

Some states have formal pre-apprenticeship or youth apprenticeship programs that allow students to begin preparation for apprenticeship in high school. Illinois’ Apprenticeship Plus Youth Program seeks to create and expand pre-apprenticeship, youth apprenticeship and industry certifications in targeted industries, including construction. Providing work experience through an internship or summer employment is a long-term investment in building the workforce. Contacting a local workforce board is the first step in connecting with these funding opportunities. Next month: What do we do about the workforce shortage?

About the author:

Laura Cataldo is a manager with Baker Tilly, specializing in work with construction companies. She has experience in evaluating business practices and assisting with management challenges in construction-related firms of all sizes. Laura can be reached at laura.cataldo@bakertilly.com.  



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