5 Emerging Trends Asset-Intensive Companies Can Expect from Their Contractor Engagements – Part one

Why should you care about blue-collar contractor trends?

As we are well on our way into 2024 there are now several dozen articles on the major employment trends that are likely to impact the market this year. 

Many of the articles available examine the trends for direct labor (i.e. full or part time hires to a company), contingent labor (i.e. staff augmentation), and/or service workers (i.e. white-collar workers) under a statement of work.

While knowing these trends can provide major benefits to companies as they are workforce planning, there is a gap in trends coverage for blue-collar contractors that support asset-intensive companies. 

Given that blue-collar contractors can represent upwards of 80% of an asset-intensive company’s labor engagements, it is important to be aware of the trends impacting this labor group if you are workforce planning for an asset-intensive company. Knowing what to expect can save asset-intensive companies time and money as they prepare for changes taking place in the contractor industries. This article aims to provide just that: explore the 5 major emerging trends for blue-collar contractors supporting asset-intensive companies so that asset-intensive companies are equipped to better engage their contractors.

Trend #1

Global contractor shortages are driving up costs and reducing quality in deliverables in 2024. Over the past decade there has been a creeping rise in job vacancies, especially in the industries that support asset-intensive operations – namely, the trades.

At the end of 2023 an emerging trend labeled as the “paper ceiling” by Gartner started to crumble. The trend of younger generations opting to gain a university degree and go into business professional positions is starting to cool down, with 71% of millennial workers reporting that the pandemic led them to “rethink the place that work should have in their lives”. (Source). New ways of looking at work and work-life balance have interestingly led to a decrease in undergraduate graduation rates and a current increase in non-traditional career paths – including an increase in younger workers pursuing certifications and trade skills.

In a global survey of 40,077 companies from 41 countries conducted by ManpowerGroup, 75% of companies reported difficulty in filling positions. (Source)

Engineering, Manufacturing & Production, Operations, and Logistics positions – all of which support asset-intensive core operations – are highlighted in the top 5 sectors impacted by the shortages. These shortages have put significant strain on project delivery as contract companies are struggling to staff their teams with quality workers.

In a 2023 survey conducted in the USA by the AGC of 1,063 engineering and construction companies, 68% reported difficulty in filling their open positions to support their projects due to a lack of qualified laborers who have craftsman skills. 85% of all surveyed firms experienced labor gaps with difficulty filling positions (Source). This trend is not unique to the USA as countries around the globe are reporting similar challenges.

The two primary drivers behind this trend can likely be contributed to the aging workforce within these sectors retiring at higher rates. Combined with a period of several decades in which younger generations were favoring university degrees over trade-craft training, the exodus of older skilled laborers is not being offset by the younger generations. Add to this the declining birth rates around the globe and it is likely we can expect this trend is here to stay, even if the younger generations are increasingly pursuing non-traditional modes of work.

According to Reuters, “fertility in 75 countries was already well below the 2.1 so-called “replacement rate” and would be less than 2 globally by the end of the century,” (Source) showing that we can expect the rate of open positions will continue to increase if all other factors remain largely unchanged.

Another major outcome of the global contractor shortage is the increase in lower-quality work deliverables at a higher price premium. In a 2024 report shared by energy consultants from AON, insurance agencies are starting to factor in the costs of contractor shortages and lack of skills on project job sites, which is driving up the costs to insure projects. (Source)

Limited availability of skilled contractors is also likely to lead to an increase in costs from competitive pricing between asset-intensive companies to bring these limited contractor resources to their project sites over another company’s. And even if the asset-intensive company wins the labor and services from the contractor company, delays in project delivery are likely due to staffing challenges felt by every major trade across the globe, which further drives up costs.

Defining a contractor management strategy and having the right software solution in place to mitigate some of these challenges are actions that can help asset-intensive companies better manage and offset some of these added costs over the long-term.

Trend #2

The elimination of degree requirements by companies outside the asset-intensive space acting as an indirect competitor for workers considering a career in the trades.

At the end of 2023 an emerging trend labeled as the “paper ceiling” by Gartner started to crumble. The trend of younger generations opting to gain a university degree and go into business professional positions is starting to cool down, with 71% of millennial workers reporting that the pandemic led them to “rethink the place that work should have in their lives”. (Source)

New ways of looking at work and work-life balance have interestingly led to a decrease in undergraduate graduation rates and a current increase in non-traditional career paths – including an increase in younger workers pursuing certifications and trade skills.

While this initially looks promising for the trades as they see an influx of younger workers pursuing the skills-based training, a trend by non-asset-intensive companies dropping their educational requirements is likely to act as an indirect competitor for younger workers.

The Harvard Business review reports that “companies, including Google, Delta Airlines, Accenture, and Zoho, have already removed many of their degree requirements from job postings to attract qualified talent without arbitrarily limiting themselves,” with “state and local governments around the globe embracing this approach” (Source). This leaves the younger generations with a new choice – do they choose business professional employment in which their employers will provide training and advanced education, or do they enter the trades and undergo apprenticeships for skills mastery?

With major companies dropping their education requirements and providing their own in-house universities (Source), the long-time pull of needing education to enter the workforce is all but crumbling. Time will tell if this trend continues to keep larger portions of the younger generations out of the trades as the costs and time for university education are removed for business professional positions, but we are likely to see wage increases from both sides as they compete for the workers to choose their industry.

Closing Thoughts 

As with any emerging trend, only time will tell how things will actually shake out in the market. In spite of some anticipated challenges in the form of rising costs, skilled contractor shortages, and increased project complications, we are ultimately optimistic about the future of contractor management.

Stay tuned for part 2 of this series in which we will talk about 3 additional emerging trends asset-intensive companies can expect from their contractor engagements.