A national shortage of construction workers is driving high home prices. The industry is struggling to fill the gap.

A major shortage of construction workers is bad news for homebuyers and infrastructure projects.

• The construction industry is facing a labor shortage of about 500,000 workers this year.
• The worker shortage is pushing up housing costs amid a national housing shortage. 
• Industry experts say the US needs to invest in creating a pipeline from schools to construction sites.

When the pandemic hit the US in the spring of 2020, construction projects of all kinds froze and workers were laid off in huge numbers. But as remote work took hold and many sought larger homes, demand for new residential construction quickly picked up and workers were back on the job.

That momentum has kept up. Over the last four years, the industry has seen a surge in demand for labor amid a nationwide shortage of housing and a surge in new government funding for major infrastructure projects. This year, the construction industry is short about 500,000 workers — and that's "on top of the normal pace of hiring," according to a January 2024 news release from the trade group Associated Builders and Contractors. The worker shortage is now the biggest issue builders are facing, experts say.

"Contractors do tell me that finding workers is their number one problem," Ken Simonson, chief economist at the Associated General Contractors of America, told Business Insider.

While the rising cost of housing is in large part a result of restrictive zoning laws and building regulations, the construction worker shortage is also pushing up home costs. Fewer construction workers means less — and slower — residential construction, which in turn leads to higher home prices, according to a 2023 report from researchers at the University of Utah and the University of Wisconsin-Madison.

"It boils down to that age-old supply and demand in the sense of if there are fewer workers to work on the projects, that's going to elongate the project, the completion, that's going to increase the cost of the project itself," Kit Dickinson, an industry executive at ADP — a human capital management solutions provider — told Business Insider. "Conversely, that creates a great demand for these workers, which can command a higher wage."

Builders and infrastructure projects are in desperate need of all kinds of construction workers, but especially skilled tradespeople. Dickinson said there aren't enough plumbers, pipefitters, or people in other trades to meet growing demand.

Demand for workers is only expected to rise with the construction of major infrastructure and clean energy projects — in part funded by big federal packages, including the Infrastructure Investment and Jobs Act of 2021, the Inflation Reduction Act of 2022, and the CHIPS and Science Act of 2022. Ben Brubeck, vice president of regulatory, labor and state affairs at Associated Builders and Contractors, said the US will see an uptick in demand for skilled tradespeople for these "mega" projects, "not only in their initial construction but also in their operation and maintenance," he added.

Growing the workforce

Both short- and long-term solutions to the worker shortage are key.

"I think the construction industry has long been saying our workforce is rapidly retiring, and it needs to be replenished," Maja Rosenquist, senior vice president of builder and development company Mortenson, told Business Insider. "We need to be as inclusive as possible to make sure that we've got the right workforce in the future."

Simonson said that allowing more immigrants into the country to fill construction jobs is crucial. But the US also needs to create a stronger pipeline of young people interested in pursuing construction as a career, he said. This will require more funding from the federal government, he said, but also more local support.

"It really also comes down to state and local school district policies and individual guidance counselors, teachers and parents to get the message to kids that there are lucrative, rewarding — both financially and in satisfaction — careers in construction," Simonson said.

Brubeck said his organization is trying to promote the trades as a path into the middle class, and potentially to owning a business, as many tradespeople ultimately run their own operations. "We think it's sort of the best-kept secret, the fact that you can earn while you learn. You don't get in this college debt cycle," he said. "And you've got a job ready for you basically right away."

The increasing use of technology in construction could also be a draw for younger generations.

"There's a stronger technology element that people might not be initially aware of and come to understand that construction is a very high-tech industry," Dickinson said, noting the use of technology from the work site to the construction office.

That even includes usage of AI, "to help with planning and bidding on future projects, as well as executing projects," Dickinson said.

Highlighting the diverse work opportunities in construction could also be helpful for employers and builders looking to increase employment.

Rosenquist said it's an "amazing industry in terms of you can pretty much do anything you want to in this industry."

"But I think the general population when they think about, oh, my kids going into construction just has this vision of a hard hat and holding a sign," Rosenquist said.

President Joe Biden is relying on union support in his re-election campaign and is widely viewed as the most pro-union president since Franklin D. Roosevelt.

"These are relatively good jobs, especially if they're jobs with unions," Heather Boushey, a member of the president's Council of Economic Advisers and chief economist for Investing in America, told Business Insider in 2023 about construction jobs. "If they're represented by a union, people can know that their safety issues are being focused on by the union and the like."

Some experts say the federal government is overly concerned with prioritizing union labor, which makes up a small fraction of the broader construction workforce. By requiring union workers for most large federal government-funded projects, "the Biden administration is actually exacerbating the skilled labor shortage that we have because there just isn't enough union labor to do this work," Brubeck said.

Making the industry more appealing to women

Boushey pointed out that the share of women in the overall construction industry has climbed. Experts find attracting more women needs to be a priority in construction.

To do so, that would include more accommodations, which Dickinson said "whether it's nursing stations at the job site or daycare, to making the equipment more tailored to different genders and body types as opposed to a one-size-fits-all."

Rosenquist said that she's encouraged by the future of prefabricated construction, which could be more attractive to women.

"Maybe they're going to the same manufacturing facility every single day for five years versus being on a job site where they're changing locations every five months," Rosenquist said.

But the construction industry has lost some of its edge as compensation in other industries, including restaurants and hospitality, has risen, and remote and hybrid jobs offer cushier, more flexible alternatives, Simonson said. The construction industry is also at a disadvantage because most workers can't do manual labor until they retire.

"I worry that construction is going to keep losing out on workers or have to raise pay even more than the 5% increase that we've seen for the last three years," he said.

What is it like working a construction job or dealing with a construction worker shortage in the US? Reach out to these reporters to share at mhoff@businessinsider.com and erelman@businessinsider.com.