قالب وردپرس درنا توس
Home / Insurance / Lack of labor increases construction exposure

Lack of labor increases construction exposure



Acute labor shortages throughout the construction industry are affecting everything from quality control to occupational health and safety, keeping risk engineers and others involved in construction risk management busy.

The labor crisis can lead to work being done by less skilled or inadequately trained workers, causing mistakes that require costly rework, often at the expense of the contractor.

In other cases, there are concerns that the strain placed on the workforce leads to safety issues that can be reflected in higher wage costs for workers.

The biggest risk facing the industry, according to the 2022 Associated General Contractors of America Risk Survey and Report, is the limited supply of trades and crafts workers, cited by 86% of respondents, 69% of whom are general contractors. The report was based on data collected in December 2021

.

Activity in nearly all construction sectors, with the exception of Class A office space, is showing an upward trajectory, according to Danette Beck, director of industry verticals and leader of the national construction practice for broker USI Insurance Services Inc. in Valhalla, New York. “Every other sector is increasing in size from a growth standpoint, but we don’t have enough people to actually do the work,” she said.

Construction spending reached $1.811 trillion in September, up from $1.807 trillion in August, according to the US Census Bureau. The bulk of that, about $1.4 trillion, was private, the rest public, mostly infrastructure, according to Tobias Cushing, head of construction damage underwriting in Schaumburg, Ill., for Zurich North America.

Mr. Cushing added that unemployment in the construction sector is low, last estimated at around 4.6%. “When you’re under 5%, that’s a very low percentage, and it puts a lot of pressure on employers to find workers who are qualified,” he said.

Contractors have had to increase hiring to keep up with the work, while some will only bid on work they have crews on, according to Beck.

“The labor crisis is causing some of the better contractors to be more selective about the jobs they take. I think it’s good if the construction industry self-regulates growth and doesn’t provide unskilled labor,” Cushing said.

The struggle to hire and retain employees has led to an increase in wages, benefits and incentives for many construction workers, said Dallas-based Cheri Hanes, who leads the subcontractor standard insurance risk team at Axa XL, a unit of Axa SA. In some cases, there is evidence that older workers are delaying retirement or even returning to work to take advantage of rising wages.

Although they are highly skilled and thus quite valuable amid the labor crisis, there is evidence that older workers heal more slowly when injured, which can escalate workers’ compensation costs, Hanes said. Also in a broader sense, the rising wages and other costs associated with attracting and retaining employees have also increased contractor costs, increasing overall construction bids and costs.

Hanes said the construction industry lost about 600,000 workers during and after the 2008-2009 global financial crisis and now faces the retirement of the baby boomer generation, further thinning its ranks.

“Anytime you’ve lost your workforce or worse, a labor shortage, like we’re doing right now, the risks go up, and when you couple that with historically large backlogs of work that we’re seeing in businesses right now, it’s likely that that will lead to some frequency of worker claims, Ms. Hanes said, adding that quality issues are also a concern because of the labor crunch, especially in projects that are highly repetitive, such as multifamily construction.

“If a worker without sufficient experience or training misunderstands what needs to be done, an error can be repeated many, many times before it is detected and it leads to rework,” Hanes said, including demolition and recycling of materials, which can be significantly more difficult than in primarily.

Many times there is no construction risk insurance, first-party property coverage or general liability coverage for such remodeling, Mr. Cushing. “So, from a builder’s perspective, they then have to bear the cost of that rework,” he said, in addition to the rescheduling challenges.

The Infrastructure Investment and Jobs Act, signed into law by President Joe Biden a year ago, will provide roughly $550 billion in federal spending over five years, adding to the existing $400 billion in government spending. That, said Mr. Cushing’s, will “further exacerbate the crisis of childbirth.”


Source link