It’s no secret. Homebuilders and the broader construction industry have struggled – and continue to do so – with a shortage of skilled labor. This problem has persisted and worsened since the Global Financial Crisis.

In June, the Home Builders Institute and the National Association of Home Builders released a study detailing the economic impact of $6.3 billion annually in lost residential construction.

The skilled labor shortage affects multiple industries, leading to intense competition for homebuilders in a limited pool of workers.

Construction companies are turning down projects because they can’t find skilled labor, according to Fraser Patterson, CEO of Skillit, an AI-powered startup platform for the construction industry to find qualified workers.

The trades shortage erupted during the 2008–2009 financial crisis and housing industry bust. Many tradespeople left the industry to seek more stable employment opportunities, and the workforce was aging without a robust training pipeline.

Training programs began to emerge, encouraging young people to enter the trades. In Alabama, for example, the state legislature passed the Go Build Alabama initiative in 2009 to create programs for high school students. Georgia followed in 2012 and Tennessee in 2015.

Hispanic migrants, many undocumented, filled part of the gap. The Trump administration’s crackdown has since reduced that labor supply.

Skillit was founded in 2021. Vivek Ranadive, owner of the NBA’s Sacramento Kings, is among the investors. Patterson started as a framing carpenter in Scotland, then became a general contractor in homebuilding and remodeling.

Patterson says that only 5% of the construction workers needed to meet demand are missing. He argues the problem is that few workers have a professional digital profile, which makes them harder for construction companies to find. That’s the business model: make it easier for workers to get noticed by employers, specifically in the construction industry.

In a conversation with contributing writer Richard Lawson, Patterson breaks down the broader challenges, how skilled craft workers are changing, why construction companies are choosing to employ them full-time, and why robots won’t be the replacement.

Richard Lawson

From your perspective, what’s the impact of the labor shortage on homebuilding?"

Fraser Patterson

Our research revealed that these costs approximately $11 billion in annual delays and extended construction timelines. That's a sizable chunk of money. A significant portion of the cost is attributed to single-family homes, which take an average of two months longer to complete than they did just a few years ago. There are higher carrying costs, and the labor shortage also contributes to this, as it adds a premium to the wages builders pay.

Richard Lawson

The immigration raids certainly haven’t helped."

Fraser Patterson

If they're doing the work, and that work is producing critical infrastructure for the American economy, such as housing, do we have a strategy to replace those workers, rather than extricate them from the workforce? I can't speak to what the answer to that is.

There has definitely been a sudden awareness of the need to have fully eligible, I-9 compliant workers, not just as your direct employees, but also your subcontractors and their subcontractors. It's a supply chain."

That's been hard to solve. That's impacting our ability to deliver housing in non-immigration-intensive parts of the U.S. However, I still believe the biggest problem is the demographic headwinds, training bottlenecks, and labor shortages. And then there's the actual access to the workers that seems to be the biggest blocker."

Richard Lawson

How did you determine that companies are declining projects because of labor?"

Fraser Patterson

We've had customers who would otherwise bid and take on large-scale projects, and they have passed on them as a result of not having a pipeline security around where to source the workforce from. We learn that on the entry of us becoming their craft and field professional labor solution."

With this hiring infrastructure we've built, we asked what the pain is that they experience. What is it causing? What's it currently doing to their business? We've heard this a few times— 'we can't grow outside of the markets we're in;' 'we turn away work that we don't have pipeline security on.' If you don't know genuinely where the pipeline comes from, you cannot, in good conscience, take on work."

Richard Lawson

Uncertainty of a labor pipeline poses a risk, then?"

Fraser Patterson

That's the most significant strategic risk to these businesses. What’s interesting is that years ago, construction used to be very gig worky. Everyone tried to create Uber for construction. Because there's a labor shortage, all the companies are now shifting towards becoming self-performers. Therefore, they will hire construction labor directly as full-time employees, paying them competitive wages, benefits, and other perks. What we found is that 92% of the workers on Skillit want full-time work. They don't want gig work."

Richard Lawson

When the housing bubble burst in 2008-2009, many skilled tradespeople left the construction industry entirely, never to return. They no longer wanted to be in a cyclical industry. What’s changing?"

Fraser Patterson

They moved toward certainty as the economy became more uncertain. It's the confluence of a few things. The flight to safety and the companies that are doing all the work. They recognize that if they can become world-class employers of this labor pool, they will be able to take on the work that they currently may not be able to do due to pipeline security reasons. Then they're going to end up moving ahead."

It's a competitive advantage, and more excellently delivered construction work with high margins and low, good safety records. That’s the strategy of many of America's most prominent builders."

Richard Lawson

What’s the training pipeline look like? That has been one of the most challenging pieces to solve because of the drive for years to go to college as a way to earn a living."

Fraser Patterson

What we've seen is a really fascinating trend that we're starting to understand the implications of. Over the last few months, we've found that 20% —and growing—of all of the craft workers on Skillit have a four-year college degree."

The hypothesis, as we delve into this, is that they have previously attended college. They’re Gen-Z/Millennial, so they skew younger. They've done a four-year college degree, and they've come out and been punched in the mouth by reality. In the U.S., the trend was very much that we massively overenrolled kids into [science, technology, engineering, and math] and the humanities. I attribute this to the Sputnik moment, where we went to cultural and technological war with Russia."

Essentially, what has happened is that many of these kids took on vast amounts of debt, graduated from college, and the market didn't adjust to absorb those graduates. The labor market is just not there. This resurgence that we're seeing is twofold. One, no debt, working straight away, and it's a good middle-class living. Another thing is that it's future-proof. We are nowhere near having robots building houses. AI might tear through knowledge work, but it's not touching craft or skilled trades."

Richard Lawson

Why don’t robots stand a chance?"

Fraser Patterson

It's naive. It fails to acknowledge a few things. One is the bipedal humanoid form that we have, with our muscles, bones, and ligaments, which have evolved over eons and adapted to highly dexterous, random environments. The idea that you can extend what we are to a robot and put it into a situation where the environment is not regularized, such as not on a flat surface or a road, is far-fetched. Take cars, for example. Roads are the most regularized terrain we have. We're pushing 25 years of the autonomous vehicle revolution, and that is still nowhere to be found.

Take that and then take the humanoid—the dexterous, the determinism—you're probably looking more like 100 years. And within that timeframe, a significant amount of public trust will be lost. There could be a Hindenburg moment where one robot goes on site, does something untoward, and then there's this, ‘Oh, we're scaling the wrong technology.’

 If labor continues to move into this arena—a trend we are already seeing and will continue to see—it's future proof and valuable. I don't see us taking the robot path."