In January of this year, the Associated Builders and Contractors (ABC) dropped a number that has reverberated across boardrooms and bid meetings alike: the U.S. construction industry must attract 439,000 net new craft professionals in 2025, nearly half a million in 2026, to meet the expected increase in construction demand, likely as a result of lowering interest rates. If the industry is unable to meet the demand, industry-wide labor cost escalation will accelerate, driving prices higher and potentially reducing general contractors’ ability to meet the demand. That headline is a risk multiplier that inflates schedules, erodes margins, and invites disputes when a contractor or specialty trade partner cannot find or afford the labor necessary to finish the work.
Across the country, backlogs remain healthy, but owners in growth hot-spots such as the semiconductor, data-center, renewables, and federally funded infrastructure sectors already report bids coming in high or late because labor is scarce. Contractors that treat the shortage purely as a recruiting issue will struggle. Those that embed labor-market volatility into procurement strategy, subcontract terms, and workforce-development planning will be far better insulated from claims and cost overruns.
THE SHORTAGE IS STRUCTURAL
Roughly one in five construction workers is age 55 or older, with retirements outrunning apprentice completions. High school counselors still funnel students toward college rather than union halls or trade-school programs, starving the trades of entry-level talent. Further, immigrants account for approximately 25 percent of the construction labor force. Stricter immigration enforcement could worsen the already critical construction worker shortage. Average hourly earnings for craft workers are outpacing those in other sectors, like manufacturing, but those also add to overall contract costs. Together, these factors mean shortages and cost spikes will only continue.
Forward-thinking contractors aren’t waiting for policy fixes; rather they are considering building their own bench. Part of that process is performing a formal skill-gap analysis. By use of project-specific labor forecasts to quantify head counts by craft and experience level well in advance of upcoming projects, contractors can see the path ahead more clearly. Those findings should be incorporated into written recruitment plans aligned with bid strategies to avoid over-promising in proposals. More creatively, contractors can align with technical colleges or high school career centers to create predictable apprentice pipelines, showing candidates the long-term career benefits of a job in the trades and helping them achieve it with scholarships or internships. Also, inclusive recruiting policies, which advertise in women-in-construction networks, veteran forums, and second-chance employment programs, allow contractors to expand their reach.
TURN CONTRACTS INTO SHOCK ABSORBERS
Even the best‑laid workforce plan can collapse overnight when a sudden semiconductor‑plant boom, hurricane rebuild, or multi‑state strike drains every hiring hall in sight. That is why your contracts, not just your recruiting team, must be engineered to flex with labor volatility. Start by sharpening the force‑majeure language. Define a “Regional Labor Shortage Event” as a period when the state‑reported, construction‑sector unemployment rate falls below 3 percent or an officially declared union strike lasts more than ten consecutive calendar days. The moment either condition appears, the contractor earns a day‑for‑day extension, provided it issues written notice within seven days and attaches third‑party market data. Time, though not money, is automatically protected, converting subjective pleas for relief into an objective entitlement that arbitrators can confirm in minutes.
Money protection arrives through a “Labor Escalation Rider” to the agreement. Peg wages to the Bureau of Labor Statistics Employment Cost Index for Specialty Trade Contractors and stipulate that if that index climbs more than 5 percent between bid day and the midpoint of construction, the direct‑labor component of the contract price adjusts for the overage. No markup, no delay, just verifiable payroll evidence. Owners often balk at open‑ended escalation mechanisms, but this rider’s trigger is transparent, published quarterly, and entirely outside of either party’s control, making it far easier to sell at negotiation.
Relief must also reach the tier below you. Amend anti‑assignment language to let vetted subs “borrow” craft workers from pre‑approved partner firms named in an exhibit. Require proof that every borrowed employee carries identical insurance, safety credentials, and immigration compliance. If the sub still slips 14 days behind its look‑ahead schedule for manpower reasons, reserve the right to self‑perform or import a replacement crew after a 72‑hour cure notice, charging premium costs back to the original sub. Those numbers, 14 days and 72 hours, give the clause the specificity courts demand while still offering breathing room.
Finally, include an orderly off‑ramp for crises that outpace everyone’s Plan B. If a documented labor shortage inflates the remaining direct cost of a subcontractor’s work by 15 percent or more, allow suspension or termination for convenience with an equitable adjustment based on verified cost‑to‑date. That language transforms looming breach battles into a managed close‑out conversation supported by invoices instead of affidavits.
Each of these provisions hinges on externally published indices, certified manpower reports, and hard deadlines, not vague talk of “labor issues.” They should flow all the way up to your prime agreement and all the way down to every sub‑tier contract, with notice requirements routed through your project‑management platform so nobody can claim they “never got the email.” When written this precisely, a contract stops being a brittle promise and becomes a true shock absorber, preserving your schedule integrity and profit margin when the next talent drought hits.
UNDERWRITING YOUR SUBS’ WORKFORCE
In an era when a single staffing failure can derail a project’s critical path, vetting the subcontractor’s labor strategy is as important as checking their bonding capacity. Consider adding requirements to your next RFP or master subcontract which provide the bona fides you need to comfortably rely on critical subs. Ask prospective subs to disclose voluntary-turnover rates, apprenticeship enrollments, and ratio of W-2 employees to 1099 labor brokers. Mandate a minimum percentage of OSHA 30-hour-trained field supervisors and maintain the right to audit training records. Require weekly look-ahead logs listing head counts by craft and shift, plus any anticipated shortages. Late or incomplete reports constitute a material default. Subs should be able to warrant compliance with state prevailing-wage laws and immigration verification. False representations trigger indemnity for back wages, penalties, and attorney fees. These provisions do more than push paper; they create contemporaneous evidence that can neutralize a delay-claim assertion that “nobody saw the shortage coming.”
BUILDING FLEXIBILITY
Labor scarcity is no longer a black-swan event; it is a baseline condition. If you forecast demand with precision, then invest in pipelines that widen and diversify the talent pool, you deftly side-step the problem and strengthen your position in the industry. By translating market volatility into contract language using objective metrics, clear notice procedures, and calibrated remedies, you protect yourself and minimize financial risk.
about the author
William Thomas is a principal at Gausnell, O’Keefe & Thomas, LLC in St. Louis, where he focuses his practice on construction claims and loss prevention. He is a member of the International Association of Defense Counsel (IADC) and chair of the IADC’s Construction Law Committee, an AAA Panel Arbitrator, Fellow with the Construction Lawyers Society of America, and a member of the ABA Forum on Construction, AIA, and ASCE. He can be reached at wthomas@gotlawstl.com.