Labor Shortage is Hurting Contractors in High-Risk Industries

High-risk industry faces a multitude of challenges that threaten project delivery, safety standards, and profitability. Industry experts consistently identify five critical areas of concern for high-risk contractors: severe labor shortages, rising material costs and supply chain disruptions, increasing insurance premiums and coverage limitations, heightened safety and regulatory compliance requirements, and evolving cybersecurity and technology risks. Among these formidable challenges, workforce shortages have emerged as the most pressing and far-reaching issue, fundamentally reshaping how contractors approach project planning, resource allocation, and business strategy.

The Crisis Defined

• Hiring and retention risks remain the top concern for the US construction industry, with more than half of contractors intending to increase staffing levels despite workforce challenges.
• The Associated Builders and Contractors (ABC) predicted the industry needed 439,000 more workers in 2025 alone, while another NAHB study pointed to an even greater annual need: 723,000 per year.
• In any given month, there is a shortage of 200,000 to 400,000 construction workers, and home builders will need to add 2.2 million new workers over the next three years just to keep up with demand.

The demographic challenge facing the industry is particularly stark. The NCCER estimates that about 41% of the workforce will retire by 2031, while simultaneously, the industry struggles to attract younger workers. The physically demanding nature of many construction jobs, coupled with potentially hazardous working conditions and limited career advancement opportunities, may pose barriers to attracting younger workers. To combat these retention challenges, the industry responded by raising wages 4.3% in 2024, further straining operational budgets.

Canada Has Similar Pressures

• By 2034, Canada's construction industry will face a total hiring requirement of 380,500 workers, including an expected increase of 111,600 new workers to meet growing construction demands
• By 2032, overall hiring requirements in the industry are expected to exceed 299,000 due to the retirement of approximately 245,000 workers (20% of the 2022 labour force) and growth in worker demand of more than 54,000 According to BuildForce Canada, "the industry could face a recruiting gap of more than 85,000 workers by 2033"

Current Workforce Challenges:

• There are still over 93,000 open jobs that the industry is struggling to fill nationwide
• Recruiting skilled employees was expected to be an obstacle over the next three months for nearly two-fifths (36.9%) of all businesses, led by those in construction (49.5%)
• The ICBA 2025 Wage and Benefits Survey is revealing 72 per cent of B.C. contractors are facing a shortage of skilled tradespeople that is forcing them to turn down projects and absorb rising costs

Demographic Pressures:

• Canadian Home Builders' Association estimates that 22 percent of residential construction workers will retire over the next ten years
• Roughly 1 in 5 construction workers is set to retire in the next decade. In practical terms, that's tens of thousands of seasoned electricians, carpenters, heavy equipment operators, and other experts exiting the workforce

Housing Impact:

• The CHMC stated that approximately 5.8 million new houses need to be built by the year 2030 so as to recover affordability in the country
• RBC report estimated over 500,000 additional construction workers are needed by 2030 to meet housing and infrastructure needs More workers are building housing in Canada, but labour shortages remain - Statistics Canada

The Canadian data is remarkably similar to the U.S. situation in terms of:

• Severity of skilled worker shortages
• Aging workforce demographics
• Regional variations in impact
• Connection to housing affordability crisis
• Need for comprehensive recruitment and retention strategies

The Canadian data actually shows some potentially more severe challenges, particularly in terms of the percentage of contractors affected (72% in B.C. vs. roughly 80-90% struggling in the U.S.) and the scale of retirement projections relative to the smaller Canadian workforce.

Economic and Operational Impact

The workforce shortage creates a cascade of negative effects throughout the construction sector. The study estimates an aggregate economic impact of $10.806 billion per year due to longer construction times associated with the skilled labor shortage. The unweighted average increase in construction time due to the labor shortage is 1.98 months, with smaller builders experiencing an even greater delay.

66% of firms report project delays due to labor shortages, while 45% say they've been forced to turn down work due to skilled labor shortages. Labor shortages often require that contractors and project owners rely more heavily on less experienced or skilled labor which often results in poorer quality construction and reduced adherence to safety protocols.

Safety and Insurance Implications

The labor shortage significantly impacts workplace safety and insurance costs. An insurance study by Travelers Insurance found that over half of workers' compensation claims come from employees with less than one year of experience. 83% worry that the workforce shortage and resulting inexperienced skilled labor pool will challenge worker safety and health.

Training new workers takes time. Rushing their training to fill gaps in the workforce exposes them to more significant safety risks, creating a vicious cycle where the pressure to fill positions quickly compromises the very safety standards that protect workers and reduce long-term costs.

Practical Solutions and Strategic Actions

Organizations can implement several targeted strategies to mitigate employee churn and address workforce challenges:

Investment in Comprehensive Recruiting

• Enhanced Recruitment Resources: Allocate substantial budget and personnel to proactive talent acquisition, including partnerships with trade schools, community colleges, and vocational programs
• Competitive Compensation Packages: Develop comprehensive benefit packages that include health insurance, retirement plans, and educational opportunities to change perceptions about construction careers
• Modern Recruitment Technology: Implement user-friendly application processes and leverage digital platforms to reach younger demographics

Quality of Work Life Improvements

• Safety Culture Development: Create robust safety programs tailored to address risks from labor shortages, demonstrating commitment to worker protection and well-being
• Career Advancement Pathways: Establish clear promotion tracks and professional development opportunities to retain talent long-term
• Work-Life Balance: Where possible, offer flexible scheduling, improved working conditions, and recognition programs

Technology Integration and Training

• Embrace Modern Construction Technology: New construction technologies, tools and techniques can fuel recruitment among a new generation of workers who want to work for a tech-savvy company
• Comprehensive Training Programs: Invest in extensive onboarding and ongoing education programs, as statistics show about 70% of businesses lack strong onboarding programs
• Automation and Efficiency Tools: Implement technologies that reduce physical demands and improve job appeal while maintaining employment levels

Partnership and Pipeline Development

• Educational Partnerships: Collaborate with high schools, technical colleges, and universities to develop construction education programs and apprenticeships
• Community Engagement: Improve industry image through community outreach and media relations to inspire the next generation of construction workers
• Government Collaboration: Support legislative initiatives like the CONSTRUCTS Act that fund residential construction training programs

Retention and Culture Strategies

• Mentorship Programs: Pair experienced workers with newcomers to improve knowledge transfer and reduce turnover
• Performance Incentives: Implement retention bonuses, profit-sharing, and performance-based compensation
• Workplace Culture: Foster an inclusive, supportive work environment that values employee input and professional growth

The construction industry's labor shortage represents both an immediate crisis and a long-term strategic challenge. Organizations that proactively invest in recruiting, retention, safety, and technology adoption will be better positioned to navigate this challenging environment while building sustainable competitive advantages. The companies that treat workforce development as a core business strategy—rather than just an operational necessity—will emerge stronger and more resilient in the years ahead.

Sources / Additional Reading

• Resource Centre - BuildForce Canada
• How Will Lost Construction Jobs Impact Canada's Housing Affordability? | Altus Group Insights
• Fewer Workers Means Fewer Homes: Fixing the Construction Labour Shortage - Policy Magazine
• Canadian Construction Staffing Trends 2025: Navigating Staffing Shortages | Certn
• How Will Lost Construction Jobs Impact Canada's Housing Affordability? | Altus Group Insights
• The Labour Shortage in Canada’s Construction Industry: A Major Barrier to Housing Supply
• How Will Lost Construction Jobs Impact Canada's Housing Affordability? | Altus Group Insights