Construction firms fear labor availability could disrupt the pipeline of large projects

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AThe historic influx of government incentives and infrastructure funding combined with the state’s judicial press for large battery manufacturing plants is on a collision course with widespread labor shortages in the construction industry.

So say industry leaders, who welcome long-term efforts to strengthen the region’s talent pipeline through various workforce development programs, but recognize that these initiatives will do little to address near-term capacity constraints to handle upcoming major construction projects.

These projects range from large residential projects, a potential football stadium, and a 12,000-capacity amphitheater in downtown Grand Rapids LG Energy Solution Michigan Inc.‘s $1.7 billion battery plant expansion in Holland and a proposed $4 billion battery plant project in Big Rapids.

To top it off, local governments are preparing to spend or disburse hundreds of millions of federal dollars from the Infrastructure Investment and Jobs Act and the American Rescue Plan Act (ARPA).

“One of the things that keeps me up at night with so much growth and with ARPA, how are we going to be able to build and expand without the local people?” said Jennifer Owens, President of Lakeshore Advantage Corp., the economic development organization for Ottawa and Allegan counties. “It’s definitely a real issue, but it’s about educating our kids about those careers and the pay and educating them to choose and automating everything we can.”

Construction companies are increasingly investing resources to provide elementary and high school students with career opportunities in the industry while also strengthening people development programs like this West Michigan Construction Institute.

However, these long-term investments for the industry are not solving short-term needs, said Greg George, president and CEO of the Associated builders and contractors (ABC) West Michigan Chapter.

“Most of the ABC members that we have see a great pipeline of business through 2023 and 2024,” George said. “When you put that alongside larger projects like the amphitheater and football stadium, that’s great news for investment, but there will likely be time constraints. Projects get done, it can only take longer and be put into a different time frame.”

George estimates that most or all of the ABC members currently have vacancies and could hire and expand more staff if they became available.

According to a model developed by the national ABC organization earlier this year, the construction industry nationwide would need to hire nearly 650,000 additional workers on top of the normal hiring rate in 2022 to meet labor demand.

“Some[construction companies]are probably just getting more efficient with the technology they’re using and can make better use of their technology resources, leaving them with fewer changeovers and fewer on-site repairs,” George said. “My gut tells me they’re going to use the technology what they can, or start exploring those avenues more than they have in the past.”

The labor shortage is more pronounced in skilled trades because it takes more time and training to get the necessary certifications, George said. More than 40 percent of the construction labor force over the past decade has been made up of low-skilled construction workers, who make up just 19 percent of the workforce, according to ABC data.

“It’s a good time to be in the trade,” said Derek Hunderman, director of sales and operations at Feyen Zylstra LLC, a Walker-based electrical services and industrial technology company. “Hiring in this market in general is difficult and I don’t think we’re alone. Electricians have long been unicorns in the trade, so it just keeps going. Talent retention and people development will become the secret ingredient for those who will succeed.”

attract talent

Ongoing efforts to expand staff development programs and introduce students to construction trades to solve talent shortages need to be scaled up, Hunderman said.

“There are so many people who have been spreading this gospel for a long time,” he said. “We have worked with schools numerous times over the years and have worked with the West Michigan Construction Institute. I think the hope is that it will have a big impact, but we can’t do enough.”

Grand Rapids based Rockford Construction Co. Inc. has quadrupled the size of its internship program and is focused on recruiting college students earlier and offering interns jobs before they enter their senior year, said Shane Napper, president of the company’s construction division. Rockford is also focused on recruiting people from underrepresented communities in construction, Napper said.

“In the past, construction was a fallback position when you couldn’t get another job,” Napper said. “It can no longer be a backup position, it has to be a primary position.”

Many construction firms have started hiring jobs remotely or on a hybrid basis due to competitive pressures, ABC’s George said. The industry also had to adapt for work that had to be done on site in order to allow more flexible working hours.

“A lot of the industry is self-educating,” George said. “Companies invest a lot internally. You invest in a construction worker and at the same time find and compete with other industries. There are so many vacancies that we compete with.”

ARPA and advanced manufacturing

The school systems in Ottawa and Allegan counties have solid construction apprenticeship programs, but more needs to be done to expand the pipeline of skilled trades, Lakeshore Advantage’s Owens said, noting that the incoming pressure from federal ARPA funding is helping could further expand the project pipelines. For example, Kent and Ottawa counties have each issued calls for proposals from entities that could use portions of stimulus funding to advance transformative projects. These requests included large-scale housing developments.

In addition to the federal ARPA funds, state and local economic development officials have launched a full-throttle hunt for large advanced manufacturing companies. This effort included mapping sites across the region that could support such projects. But even if they do manage to secure those projects, like the Gotion major battery manufacturing plant announced in Big Rapids, it remains unclear whether the shortage of construction workers could disrupt the schedule.

“There are so many high-skilled trades that will be involved in[the battery factory projects]from multiple companies in Michigan,” George said. “I expect the market will simply adjust the schedule. I’m always amazed at how much gets done with the amount of workers we have. They are becoming more and more efficient with huge projects.”

In addition to labor shortages, the industry is also struggling with long lead times for critical materials for projects. The longest lead times lately have been securing electrical components for projects.

“We can handle that for the most part because the market is beginning to understand that you need to start a project with an electrician early on,” Hunderman said. “It’s about educating the market about the dynamics that are at play. It’s a reasonable assumption that it all comes down to timing. The big battery factory in Holland is not a job that happens in just a few months; it spreads over time.”

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