Dealing with peak retirements may be construction’s greatest challenge: BuildForce
Canadian contractors will collectively need to hire nearly 172,000 new workers over the next six years to replace retirees and keep up with demand.
BuildForce Canada released its 2022–2027 Construction and Maintenance Looking Forward forecast report for the national market on March 18. The document, which focuses on a six-year horizon as opposed to the 10 years traditionally examined, projects that demand for construction services will continue to grow on the strength of pandemic-related stimulus programs, and sustained activity in several key sectors.
Construction enjoyed a robust year in 2021 as Canada’s economy bounced back sharply from the effects of the COVID-19 pandemic. Total year-over-year construction investment increased by approximately 11 percent in 2021, as both the residential sector (+14 percent) and the non-residential sector (+8 percent) saw gains. BuildForce expects investment to remain at or near current high levels through 2023.
The rise in construction activity boosted overall sector employment to approximately 1.1 million workers. That figure is a 7-percent increase over 2020 levels and a 1-percent rise over pre-pandemic figures recorded in 2019. The surge in construction activity in both the residential and non-residential sectors is expected to boost employment to a peak in 2022, before diverging trends take hold thereafter. By 2027, employment is expected to expand by nearly 16,000 workers, or about 1 percent above 2021 levels.
“The good news story is that construction has rebounded well from the effects of the COVID-19 pandemic, thanks to a strong housing market and public-sector infrastructure investments,” says BuildForce Canada Executive Director Bill Ferreira. “The challenge before the industry, however, is how to manage its labour force. Retirements are expected to reach their highest levels over the next two years. About 156,000 workers, many of whom are from the baby-boom generation, are expected to exit the industry. This represents a significant loss of skills and experience – skills that take time to develop and that are not typically easily replaced by new workers entering the labour force.”
Residential, non-residential demands diverge
Residential construction activity recorded significant increases in 2021, with housing starts rising by 21 percent over 2020 levels.
BuildForce Canada expects demands in most provinces to recede from this peak in 2022 or 2023, in part due to rising interest rates. Any according declines in the residential workforce could be offset by rising demand for renovation work.
By the end of its forecast period, BuildForce projects that residential-sector employment is expected to have declined by 4 percent (-24,900 workers) from its 2021 starting point.
Non-residential demands, meanwhile, are expected to remain strong over the forecast period, driven by increases in spending across the public and private sectors. The largest gains are expected over the near term, peaking in 2024. Employment by 2027 is expected to be 5 percent higher than 2021 – an increase of 26,300 workers.
Provincial activity varies
Construction activity in all four Atlantic provinces is expected to peak between 2022 and 2024 before receding through the end of the forecast period. Nova Scotia is the only one of the four provinces in which employment is expected to increase through the forecast period, thanks in part to elevated levels of public-infrastructure investment in both civil and health care projects.
Quebec is expected to see strong short-term growth in all segments of construction. Residential demands will be mostly unchanged to 2024 and then ease in the latter half of the forecast period. Similarly, non-residential demands will rise to a peak during this period, but then retreat slightly as work on institutional projects winds down in the latter half of the forecast.
Ontario’s construction market is expected to see labour market challenges throughout the forecast period as sectoral unemployment returns to historically low levels. The pace of residential activity is expected to moderate, but a growing inventory of major infrastructure projects and a projected recovery in commercial building construction is expected to create growth across the forecast period and throughout the province’s discrete regions.
Manitoba’s construction market is set to continue its recovery in 2022, as new infrastructure investments help to offset the winding down of construction activity at Manitoba Hydro’s Keeyask dam project. Although construction demands are expected to moderate, they are expected to remain above 2021 levels by the end of the forecast period.
Saskatchewan appears poised for another extended period of construction expansion. Residential construction is expected to grow through 2022 with growth moderating afterwards, while public- and private-sector non-residential spending plans will be sustained through 2027.
The outlook for Alberta sees heavy-industrial maintenance work and public-sector spending driving employment growth in the near term, while projected increases in oil and gas investment should help to raise non-residential employment later in the forecast period. These should offset expected residential employment declines.
British Columbia’s residential and non-residential demands are poised to rise in 2022 and be largely sustained across the forecast period. The increases will be driven by strong demand in the public sector, as well as a recovery in new housing and renovation work, and commercial building construction.
“Normally, interprovincial mobility would be one solution the industry can deploy to compensate for peak periods of demand,” says Ferreira. “But given that peak demands will be seen across the country at almost exactly the same time, that option appears less viable in the short term. Employee-incurred costs when looking for work outside their home market also creates a strong disincentive to interregional mobility.”
Closing construction’s skills gap
One of the challenges before the industry is not only adding nearly 172,000 workers, but also closing any skills gaps lost to worker retirement. Replacing retiring workers typically requires several years of pre-planning to avoid such lost knowledge.
Based on historical trends, Canada’s construction industry is expected to draw an estimated 143,000 first-time entrants aged 30 and younger from the local population, leaving the industry with a possible retirement-recruitment gap of 13,000 workers. When coupled with demand growth, the industry may be short as many as 29,000 workers by 2027.
“An ongoing commitment to apprenticeship development in both compulsory and non-compulsory trades will be necessary to ensure there are sufficient numbers of qualified tradespeople to sustain a skilled labour force over the long term,” BuildForce says.
The pandemic has complicated the training and certification of new workers. The latest Registered Apprentice Information Systems data shows declines in new registrations of at least 20 percent in nearly every province. Such impacts are likely to reduce the near-term numbers of new certified workers.
“The pandemic undoubtedly caused challenges in the labour force, and its effects will be felt for years to come,” says Ferreira. “The good news, though, is that the number of workers aged 25 or younger in construction grew by 4.7 percent in 2021. This suggests that the industry’s targeted recruiting efforts are bearing fruit. It will be increasingly important for the industry to build on this success, particularly as the population ages.”
Increasing the labour-force participation rate of such underrepresented groups as women, Indigenous people, and new Canadians could help the construction industry address its future labour force needs.