The HVACR industry has been experiencing a labor shortage for decades, and the latest trends aren’t looking great. According to the Bureau of Labor Statistics (BLS), the labor force participation rate in August rose slightly to 62.4%, which is still below the pre-pandemic level of 63.4% in February 2020. This means the labor force is missing about three million workers, and economists don’t seem to know where they went.

Some point to a wave of retirements, as many baby boomers took the pandemic as an opportunity to retire early. Others say many workers could not secure reliable child care amid daycare and school closures and chose to stay home with their kids. Immigrants heading home during the pandemic could be another reason for the missing workers, but other workers — particularly prime-age men (ages 25-54) — remain firmly on the sidelines, which is puzzling.

In a recent Wall Street Journal article, Peter Berezin, chief global strategist at BCA Research, noted that “the big mystery is not around old versus young, men versus women. It’s around skilled and unskilled workers.” He added that by education level, participation rates remain the most depressed among those with a high-school diploma but no college.

“Unskilled workers have been much more reluctant to enter the labor force than you would have expected, given that wage gains for unskilled or less-skilled positions have been stronger than for everyone else,” he said.

The article goes on to say that it could have something to do with how COVID-19 changed the nature of work and affected mental health. Customer interactions have become more challenging — or downright unpleasant — so many people are choosing to not engage in those customer-facing occupations. Many people are also looking for a better work-life balance, so they may forego working at all.

Still others want the ability to work remotely, which is likely affecting the construction industry, said Anirban Basu, chief economist at Associated Builders and Contractors (ABC), in a recent webinar.

“Construction, despite being deemed in most communities as an essential industry has only added 46,000 jobs since February 2020, so you've been looking for workers, and you can't find them,” he said. “If you had been able to, construction would have added hundreds of thousands of jobs.”

Meanwhile the category of professional business services (e.g., office workers) is up 880,000 jobs, because many of those employers are able to offer people the opportunity to work remotely, said Basu.

“That's what a lot of our labor force wants: They want to work remotely. They don't want to commute, they don't want to go to a job site. They don't want to be with their colleagues. They don't like their colleagues. A survey finds that 57% of Americans think their colleagues are annoying. Annoying because they overshare, they get too personal, they take credit for one other's work. So there's a preference for remote work. That doesn't help construction.”

Another problem is that the size of the U.S. working age population is shrinking. According to Basu, from 1950 to 2015, the U.S. working age population grew by roughly five million people every five years, but from 2016 to 2020, the U.S. added only two million people to the working age population. The pace of growth and working age population have been slowing ever since.

That’s expected to continue, because while the Millennials are a big group, they are already part of the workforce. Generation Z, which is now entering the workforce, is not a huge generation, and lots of baby boomers are still planning to retire. So then it comes down to labor force, and how do we get more workers?

“You can give birth to more people, but you gotta wait for them to enter the workforce,” said Basu. “But another way to give birth to 30-year-olds is through legal immigration. Allow more people in from different countries, and it's like giving birth to a beautiful, bouncing, baby 30-year-old. If they have the right set of skills, knowledge, and abilities, they can work right now, but immigration in this country has slowed since 2017, and the last two administrations have not seen fit to really expand the pace of legal immigration.”

The bottom line is that the labor shortage is not going to get any easier in the coming years, so contractors need to adapt to this reality. This means offering attractive salaries and benefits in order to keep existing employees, as well as stepping up recruitment efforts. This should include a robust social media presence, which is often the way to attract young people these days, as well as attending career fairs at high schools and community colleges. And, of course, be a great employer, so people actually want to work for your company. These days, people can be picky about where they work, and they want to work for companies that treat them well.