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Skilled construction worker shortage is now a top risk management concern

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As the construction industry rebounds from its prolonged slump, a shortage of skilled workers has become a top risk management concern.

In addition to implementing new risk management strategies to compensate for the skilled worker shortfall in the near term, the industry must work diligently to find long-term labor solutions, experts say.

In 2007, there were more than 890,000 construction companies in the United States, whereas today there are fewer than 750,000, according to the U.S. Bureau of Labor Statistics.

As the U.S. economy gains momentum and construction spending increases, builders are having a tough time finding enough skilled workers. Many displaced construction workers have already secured jobs elsewhere, such as the fast-growing energy sector, said Jack Probolus, Boston-based manager of construction wraps at Liberty Mutual Insurance Co.

“During the downturn, much of the workforce shifted to other industries, and they are not coming back.” Mr. Probolus said. “A lot of midsized contractors are having problems finding enough workers to meet their demands.”

Mike Kennedy, Washington-based general counsel of the Associated General Contractors of America said internal polling of the group's 32,818 members has found shortages in many key trades.

“Very near the top of our concerns is the quality and quantity of the construction craft workforce supply available today,” Mr. Kennedy said. “We just don't have the pipeline of skilled craft workers that the industry needs going forward, and that's a huge business risk for our companies.”

Likewise, Gary Kaplan, Chicago-based president of XL Group P.L.C.'s North American construction business, said the insurer also is concerned about the risks presented by inexperienced workers.

“If the construction market really starts to take off, it will worry me as an insurer because you will have people on worksites that are not as experienced as they should be,” Mr. Kaplan said. “Construction work is still very dangerous.”

Tim Cleary, Madison, Wisconsin-based partner, director of sales and practice group leader for insurance agency M3 Insurance Solutions Inc., said the problem has worsened in recent months.

“As the construction market continues to show signs of expansion, we are seeing a big problem with contractors being able to attract and hire the talent they need to perform the work,” Mr. Cleary said. “There are workers compensation and general liability ramifications to this.”

Rick Keegan, president of the construction business unit at Hartford, Connecticut-based property/ casualty insurer Travelers Cos. Inc., said the inexperienced workers some companies have been forced to hire are less familiar with common construction site hazards and thus much more likely to put themselves or others in positions of danger.

“The data is pretty compelling,” Mr. Keegan said. “Our statistics show that in certain industry classes, 40% of all construction worker injuries occur within the first six months of employment.”

To immediately address these concerns, Mr. Keegan said companies can use new risk management strategies such as improved onboarding and mentoring for new workers that create a safer work culture and reduce claims. “One of the things that we have seen be effective are mentorships programs which partners a new worker with an experienced worker,” he said. “It's a great way to transfer industry knowledge to inexperienced workers and also create a sense of ownership and responsibility with experienced workers.”

Another effective risk mitigation technique is to make inexperienced workers easier to identify on job sites whether through special badges or even different color hardhats, Mr. Keegan added.

While such techniques will pay dividends in the short run, there is widespread agreement the industry needs to take steps to convince a new generation of workers that their talents could be put to good use in the construction industry.

For example, Mr. Probolus noted that the skills many millennials have honed constructing virtual worlds in video games can be repurposed for the construction industry, he said.

“One of the industry's challenges is convincing young people the computer skills that they already possess have real-world applications on job sites,” Mr. Probolus said.