The Law of Scarcity and the Construction Labor Shortage

Economists define scarcity as the gap between what people want and what is available to satisfy those wants. Land, labor, and capital all come in limited supply, so every business and household has to choose where to spend them. When a resource gets scarcer, its price goes up and people change how they behave. That is a plain description of the construction labor market right now, and it explains most of what contractors are doing about it.

What the law of scarcity says

Scarcity is a principle, not a prediction about one bad year. Three consequences follow from it:

• Trade-offs. Not every need can be met at once, so something gets delayed or dropped.
• Higher prices. The scarcer resource gets more expensive until demand falls or supply grows.
• Substitution. People look for another resource, another method, or another source of supply.

In construction, labor is the resource in short supply, and you can see all three consequences on current jobs.

A historical example

The 1973 oil embargo shows how this plays out. According to the State Department's Office of the Historian, Arab members of OPEC imposed an embargo against the United States during the 1973 Arab-Israeli War, and the price of oil per barrel first doubled, then quadrupled. Drivers waited in long lines at gas stations. The embargo was lifted in March 1974, but the shock changed how the country thought about fuel, and the effects lasted well beyond that month.

The embargo was a sudden cut to supply. The construction labor shortage is slower and has several causes, but the result is similar: a resource gets scarce, costs rise, and users start finding other ways to get the job done.

Where construction labor stands now

The numbers from this year are consistent.

• Hiring difficulty. In AGC and NCCER's 2026 workforce survey, 1,830 people responded. Among firms with craft openings, 88% said those positions were as hard or harder to fill than a year ago, and 50% said harder. For salaried positions, 87% said as hard or harder.
• Delays. 42% said shortages of their own or their subcontractors' workers had delayed projects, the most commonly cited cause. 74% reported at least one significant delay in the past year.
• Unemployment. AGC reported a construction unemployment rate of 3.1% in August 2026, the lowest for any month in a data series that goes back 26 years. Total construction employment was 8,359,000.
• Open positions. BLS JOLTS data, as summarized by NAHB, showed 251,000 construction openings in August 2026, compared with 213,000 a year earlier.
• Projected need. ABC's model says the industry must attract 349,000 net new workers in 2026 and 456,000 in 2027. ABC's chief economist, Anirban Basu, attributes most of the 2026 need to retirements and not to new building demand.

The soft spots in the market, such as parts of residential building, don't remove the shortage. Openings fell from July to August, and AGC's survey title still describes shortages as acute. Data centers are a clear example of uneven demand. Among AGC respondents who worked on a data-center project in the past year, 58% said those projects increased competition for skilled workers and 49% reported more wage pressure.

Why the supply is short

No single cause explains it. The ones that come up most:

Aging. The average age of construction workers rose from 41.6 in 2011 to 42.1 in 2023, according to CPWR's analysis. ABC notes that about one-fifth of electricians are over 55. The Bureau of Labor Statistics says most of the roughly 49,700 annual openings for construction managers come from people transferring to other occupations or leaving the labor force.

Qualification gaps. Half of AGC's 2026 respondents said applicants lack the skills, certificates, or licenses they need. In the 2025 survey, 48% of firms said new hires fail to show up or quit shortly after starting. Many people are available. Fewer are ready to do the work on day one.

Immigration enforcement. About 29% of AGC respondents reported at least one direct or indirect impact from immigration enforcement in the past six months, with the share ranging from 17% in the Midwest to 42% in the South.

Competing demand. Data centers, energy projects, and infrastructure work all draw from the same pool of electricians, operators, and supervisors.

What the scarcity looks like on a job

Higher cost is the obvious consequence. More than 8 in 10 AGC respondents raised base pay for craft and salaried workers at least as much as the prior year. Wages are visible in the government data too: AGC reports average hourly earnings for production and nonsupervisory construction workers of $39.36 in August 2026, about 21% above the average for all private-sector production workers.

Pay isn't the only change. Firms that can't staff a job in time turn down work, bring in a joint-venture partner, or push the schedule. Those are the trade-offs scarcity predicts. AGC's own CEO said that contractors are paying more, but "higher wages alone cannot solve the industry's workforce challenges."

How firms are adjusting

The substitution step is where companies differ.

• Training. 36% of AGC's 2026 respondents started or increased spending on training and professional development.
• Recruiting younger people. 48% increased engagement with career programs at high schools, colleges, and technical schools. 49% added or increased online recruiting through social media and targeted advertising.
• Technology and prefab. Firms use scheduling software, prefabrication, and modular components to do more with fewer people on site. These shift some of the work off the jobsite, but they don't remove the need for experienced field leaders.
• Retention. When 48% of firms say new hires fail to show up or quit soon after starting, keeping the people you have is cheaper than replacing them. Mentoring and clear promotion paths come up often; see our post on how mentorship narrows the skills gap.

Why more money doesn't end it

Scarcity in economics resolves when price pulls in new supply. That works for oil, where a higher price makes new wells worth drilling within a few years. It works more slowly for skilled labor, because a person can't be produced quickly. A superintendent is the result of 15 or 20 years of field work, and a journeyman electrician is the result of a multi-year apprenticeship. Raising the hourly rate this quarter moves people between employers. It does not add people to the industry.

That is why the wage data and the shortage data show up together. Pay rose 5.0% over the past year, according to AGC's read of the August 2026 jobs report, and firms still report that positions are as hard to fill as before. When wages mostly shift workers from one contractor to the next, the firm that pays more wins that round and the firm that lost the person goes looking again. The industry as a whole has to train and retain more people, and that takes years.

The practical result for any single employer is that the cheapest way to deal with scarcity is usually to keep the people you have. Replacing a lost superintendent costs the search, the ramp-up, and the schedule risk during the gap.

What it means for hiring executives

Scarcity at the craft level moves up the org chart. When superintendents, project managers, and estimators are hard to replace, companies can't afford long searches or weak onboarding. We see a few patterns:

• Employers that move quickly on a strong candidate usually win. A three-week interview process loses people to the next offer.
• Compensation expectations have shifted. If your pay bands are two years old, candidates will tell you.
• Passive candidates are most of the pool. The person you want is likely employed and not applying anywhere.

Our post on the shortage of talent in construction goes into hiring tactics, construction hiring trends for 2026 shows where demand is concentrated, and our employers page explains how we run searches for firms in this market.

If you're deciding how to staff a leadership role, contact S.R. Clarke.