Localized Multivariate Statistical Assessment of United States Construction Labor Shortages

Abstract

Craft labor shortage is a persistent challenge facing the construction industry across various markets. The historically low geographic mobility of construction labor exacerbates and localizes labor shortages. Several research efforts relied on subjective evaluations to quantify the existence of labor shortages on a national level. As such, there is a lack of empirical quantification of labor shortages at different geospatial levels. This paper fills this knowledge gap. To this end, the authors adopted a methodology that encompassed: (1) conducting a literature review to identify and collect national-level and subnational indicators that explain the changes in labor supply and demand; (2) implementing an exploratory factor analysis (EFA) to extract the latent factors that capture the variability in the labor market conditions; (3) conducting a confirmatory factor analysis (CFA) to establish the hypothesis that labor shortages are manifested in observed variables; and (4) utilizing structural equation modeling (SEM) to retrieve empirical relationships between the collected indicators and labor shortages and to construct a single metric that captures the severity of shortages. This was applied to nine metropolitan statistical areas (MSAs) within the United States. Results of the CFA indicate that labor shortages can be manifested in the absolute and relative growth rates of the employment and earnings of construction craft labor. Path coefficients of the SEM reveal that national-level indicators of supply and demand indirectly affect MSA-level shortages, while the changes in the MSA-level unemployment rate have a direct effect on the labor market disequilibrium. Trends of the SEM-based labor shortage metric indicate exacerbated shortages in MSAs of the West and Northeast regions, localized shortages in the Midwest MSAs, and shortages comparable to the national condition in the South region MSAs. Dynamic measuring of the existence of labor shortages enables the construction stakeholders to prioritize mitigation strategies that alleviate the impacts of such shortages.