Extending Working Lives The demographic challenge facing the construction sector

Freda Line, July 2011

Capita Business Services Limited 2011

The Construction Sector

Contents

EXECUTIVE SUMMARY................................ ................................ ................................ ....... 3

1.1 1.2 1.3 1.4 1.5 Background ................................ ................................ ................................ ........................ 3 Focus of the research ................................ ................................ ................................ .......... 3 Key findings ................................ ................................ ................................ ....................... 3 Potential issues for employers ................................ ................................ ............................. 3 Implications of failing to address these issues................................ ................................ ...... 4

2 3

INTRODUCTION ................................ ................................ ................................ .................... 5

2.1 3.1 3.2 3.3 3.4 3.5 Background and rationale................................ ................................ ................................ .... 5 Introduction ................................ ................................ ................................ ........................ 6 Methodology ................................ ................................ ................................ ...................... 6 UK population projections to 2021................................ ................................ ...................... 7 Potential impact of projected demographic change on construction sector ......................... 10 How the current construction workforce might age over next 5-10 years ........................... 13

THE CONSTRUCTION SECTOR WORKFORCE ................................ ............................... 6

CONCLUSIONS AND IMPLICATIONS FOR THE SECTOR ................................ ........... 15

APPENDIX ONE KEY SOURCES ................................ ................................ ............................... 16 APPENDIX TWO DEMOGRAPHIC ANALYSIS DATA TABLES ................................ ........... 17

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it B i

Servi es Li ited 2011

The Construction Sector

1
1.1

EXECUTIVE SUMMARY Background

Extending Working Lives (EWL) is a programme commissioned by the Department of Work and Pensions (DWP) designed to encourage employers to recruit and retain older workers. Some interest has been shown in the statistics and charts developed by EWL recently, but it is clear that sector trade bodies would be further engaged if it were possible to produce more specific and less generic information. 1.2 Focus of the research

To this end a desk-based review of publicly available web sources and reports was undertaken recently. This research aims to demonstrate clearly the impact of current age cohorts on the sector by translating UK population data projections onto the construction workforce of the next 5-10 years. It is hoped to show what it will look like for differ ent age groups, and hi ghlight what the impact of these changes may be on the sector in future. With this additional information it is hoped to further persuade s ector trade bodies of the relevance of EWL messages. 1.3 Key findings

The results are more startling that antici pated and should provide a wake-up call to the sector.    1.4 A significant decline in younger workers Large rises in the number of 50 -60+ year olds Potential issues for employers The need to confirm the implications of this knowledge in the light of recent research from the CIOB which shows that there a re currently significant skill shortages within the sector1 The need to introduce or improve performance management / appraisal processes in order to more effectively manage the ageing workforce especially in the light of the removal of the default retir ement age A review on how to enhance the attractiveness of the sector to both younger and middle aged workers The need for the sector to embrace new ways of working in particular encouraging greater use of a variety of flexible working options including flexible retirement The sector will need to be more proactive in the development of mentoring and knowledge sharing A higher level of investment in retraining and up -skilling of workers - particularly those cohorts who in the past may not have always bee n the focus of training i ll 5 % 6 , w 5, l A large fall in the number of workers aged 35 -44 by 2019

The implications of the changes to the construction workforce are considerable and include: 

   

http://www.ciob.org.uk/sites/ciob.org.uk/files/CIOB%20Skills%20in%20the%20Construction%20Industr y%202011_0.pdf

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The Construction Sector

      1.5    

A recognition from the sector that there is a need for investment in apprentices who may not be eligible for government funding as other sectors have done Consideration of how roles and tasks may need to be redesigned (adjusted) t o reflect the possible decline in physical capacity of large cohorts of older workers Greater investment in employee well -being and healthy living to support longer working life Activity to combat and overcome assumptions and prejudice regarding the capab ilities of older workers Forward planning from the sector on populating management cohorts in the future Support for the development of age profiling techniques so that individual employers can be prepared using ideas from this research on their own work age profile Implications of failing to address these issues Over the next few years employers within this sector will find it increasingly difficult to meet demand especially as the economic recovery develops The number of SMEs in the sector will shrink substantially as smaller (family run) businesses fail to attract and retain sufficient workers A shortage of management talent and experience could mean some businesses struggle to compete Failure to adapt new ways of working and up -to-date people managem ent techniques could result in the sector continuing to lose out compared with others in attracting and retaining talent Poor knowledge transfer could leave employers struggling to deliver Labour and skill shortages will put pressure on employer cost Foreign suppliers and contractors may be able to compete more effectively Prices will rise for consumers both on large and small scale projects Increased risk of discrimination claims and associated costs

    

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The Construction Sector

2
2.1

INTRODUCTION Background and rationale

A business case for EWL is currently being developed based on the generic case for action on older workers / age and using existing information, research findings and business intelligence. In essence it is based on the following:   The average age is much higher than that of other sectors The construction workforce is ageing rapidly and there could be a potentially high negative impact of lost experience and knowledge if these older workers are not retained Younger workers have not been attracted to the sec tor because of negative perceptions about pay and working conditions Despite the recession there are still significant skill shortages within the sector The sector does not have a history of investment in training though this is being addressed There are some significant construction projects in the short to medium term which will require high levels of skill and experience New regulations on migrant workers may limit potential labour pools The economic recovery in Europe may be more advanced than in the UK and therefore employers may not be able to rely on European labour The need to comply with legislation (removal of the DRA) provides a significant opportunity to encourage the sector to improve its people management performance particularly appraisal and performance management processes The potential extension of the right to request flexible working to all, could also impact the sector where there is no cultural legacy of flexible working Activity by employers on older workers will support and compl ement efforts on other diversity issues.

      

 

Sector trade bodies understand these issues and are aware of their strategic impact. They recognise that the UK population is ageing and that construction faces some real challenges. They are aware that action needs to be taken sooner rather than later to avoid the skill and labour shortages that were experienced in previous economic up -turns. However, current pressures on the sector mean that business survival is the main driver and focus of attention for sector trade bodies and employers alike.

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The Construction Sector

3
3.1

THE CONSTRUCTION SEC TOR WORKFORCE Introduction

This section aims to demonstrate clearly the impact of demographic changes on the construction sector workforce over the next five to ten years. The purpose of this document is to stimulate debate in the sector about these issues and to raise awareness about the effects of forthcoming demographic changes on the construction sector. 3.2 Methodology

This section is based on an analysis of publicly available data from the Office of National Statistics. Two datasets have been used: the 2008 UK Population projections and the 2009 Labour Force Survey. There were three steps to the analysis.  First, the demographic data for the whole workforce (taken as ages 15-69 years) was analysed using 2011 as the base year and then at five and ten year intervals, i.e. in 2016 and 2021. The charts and data show the actual numbers and the percentage change over this peri od. The second step involved translating the UK population data projections onto the construction workforce of the next 5 -10 years (using the Four Quarter Average 2008 2009 Labour Force data for the construction sector), broken down by age groups to show the potential impact on different age groups to assess the effect of the demographic changes on the sector. This analysis is indicative only but highlights where the problems may lie for employers ahead. Further analysis of the LF data between 2003 and 20 09 was conducted to determine any apparent longer term trends among the age profile of the construction sector. The third part of the analysis for this section also started with the 2009 construction workforce data and used 2009 as the base year. The aim of this analysis was to try to arrive at a more accurate projection of the demographic changes which will take place to the construction sector workforce over the next five to ten years. E ach age group was aged by five years (to 2014) and again (cumulative ly) by ten years (to 2019) to show the effect of the change over time on the age profile of the workforce.

Appendix Two contains data tables on which the figures in this section are based (if they are not included in the body of this section) .

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3.3 j ti l

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The Construction Sector

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Page 8 of 19 July 2011

The Construction Sector

4,800 4,600
4,400 4,200 4,000

3,800 3,600

3,400 3,200 3,000

2011 2016 2021

The figure below demonstrates the scale of the anticipated pop ulation change for different cohorts by 2021 in percentage terms. So for instance the largest changes by 2021 are going to be in the 55-59 age band which is going to increase by almost one quarter. The 30 -34 year old group will also increase substantially by 22% but there is a smaller increase of 34 -39 year olds which will rise by 12%. The biggest decline in the period will be seen among those in their forties. The 40 -44 and 4549 age bands will both decrease by 13% by 2021. This projected decline in the n umber of 40-49 year olds may present a major problem for employers and workforce planners as they are the group the sector tends to rely on as the managers or senior managers of the future. More effort will be needed to bring on the less experienced 30 -39 year old age group earlier; and to hold on to the 50 -59 cohort. The decline in the numbers entering the workforce at 15 -19 will drop by 6% by 2021. The next group up 20 -24 year olds will fall even further by 10%. This will present employers with a major issue to address and may require finding ways to hold onto older workers.
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Page 9 of 19 July 2011

5- 9 3,832 3,5 1 3,585

- 4 4,359 4,182 3,918

5- 9 4,399 4, 38 4,554

3 -34 3,986 4,519 4,852

35-39 4,0 0 4,018 4,546

4 -44 4,589 4,064 4,010

45-49 4,61 4,538 4,018

5 -54 4,088 4,556 4,482

55-59 3,583 3,985 4,451

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w x es t h q w w

The Construction Sector

The figure below illustrates this projected percentage change for the different population age groups from the 2011 base year in 2016 and then cumulatively in 2021.
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60-64

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15-19 -20% -10% 0% 10% 20% 30%

3.4

Potential impact of projected demographic change on construction sector

This sub-section examines what these percentage changes in the different population age groups might mean if we apply them to current construction sector data. However they are only indicative but in some important respects will be of concern to managers a nd leaders in the construction sector. On this basis, the chart and associated table below show that by 2016 there will be 9, 50 fewer 20-24 year olds; and by 2021 there will be 24,3 fewer than in 2009. An overall decline of 10% in this age group is ver y significant, given that by 2016 the construction sector should theoretically be at peak activity and this age group is traditionally relied upon to avoid further skills shortages and gaps . The very large predicted decline in numbers of 40 year ol ds is also highly significant for the construction sector. This group tends to contain the managers and the senior team for future years. If the sector is going to manage without this cohort they will need to retain (train and invest in) 50+ year olds and bring on thirty+ year olds faster. However, as there is only a small increase in the 35 -39 cohort, and some 30-34 year olds may have insufficient relevant experience, there may be a potential future shortage of leaders and managers in the construction sector.

Page 10 of 19 July 2011

Figure 8 Potential estimated age breakdo n of employment in the construction sector UK ge group

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The Construction Sector

This is mirrored in the rest of the workforce where t here are currently 1.3 million people working beyond state pension age, 500,000 more than t here were 10 years ago 3. Most of these work part-time.
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Page 12 of 19 July 2011

The Construction Sector

A 16-19 20-24 25-29 30-34 35-39 40-44 45-49 50-54 55-59 60+

3-

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3.5

How the current construction workforce might age over next 5-10 years

The data and chart below look at the 2009 workforce data (from the LF survey) as the base year. Each age group is then aged by five years (to 2014) and again (cumulatively) by ten years (to 2019) to show the effect of the change over time on the age profil e of the workforce. Clearly, this is an estimate only as it assumes no other environmental changes taking place. Note that the 16-19 age group needs to be treated with extreme caution and is indicative only. It is based on the ONS Population Projections and takes the percentage change in the age group between 2009 and 2014 and then 2019 and imposes this onto the construction sector workforce as the 16-19 cohort in 2009 becomes the 20 -24 group by 2014 and the 25-29 group by 2014. The analysis confirms the projected decline in 40 -49 year olds overall and increase in 50 -59 year olds.

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Page 13 of 19 July 2011

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The Construction Sector

16-19 20-24 25-29 30-34 35-39 40-44 45-49 50-54 55-59 60+

88,997 240,792 258,755 246,482 303, 08 31 ,161

-6,230 -151,795 -17,963 12,2 3 -5 ,226 -13,453 28,295 36,883 5 ,863 -6,9 1

-10,679 -158,025 -169,758 -5,689 -44,953 - 0,680 14,841 65,1 8 94, 46 50,892

288,86

251,984 194,121 201,091

Page 14 of 19 July 2011

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The Construction Sector

CONCLUSIONS AND IMPLICATIONS FOR THE SEC TOR

The construction sector already has a significant proportion of older workers and has various well documented labour and skills problems. The Centre for Research into the Older Workforce (CROW) suggests that a greater or more flexible use of older workers could help the sector to remedy this. 4 Research by CROW also found variable attitudes to older workers in the sector: ...construction firms are generally more willing than other employers to allow employees to stay in work past retirement age, which may help overcome labour shortages, but t hey are less likely to recruit staff over 50, perhaps reflecting the time needed to train and become competent for new entrants . In addition to this, the pool for available future workers among young people is declining due to demographic trends, and also according to Construction Skills, because of working conditions, hours and comparatively low levels of pay. A major issue arising from the analysis is that the number of new entrants to the construction sector at 16 -19 has been declining over time and is projected to drop substantially further by 2021. The 20 -24 age group is also projected to decline markedly in the same period. Also, the construction sector is likely to find in ten years time that there will be a dip in the number of 40-49 year olds, the age cohort which usually produces managers and senior managers. The construction sector will have to consider its options in addressing these problems. They are compounded by a declining immigrant workforce and other environmental factors, including a slow return to growth, impacting on the construction sector. Moreover, Construction Skills is already highlighting a range of current and predicted skills gaps. Naturally the sector will want to find ways to attract and retain young entrants but as construction and other industries compete to draw from this diminishing age group other approaches will be essential. In light of these findings and the analysis presented in detail in this section, it may be necessary therefore for the construction sector to cons ider: Bringing new entrants into the sector from older age groups and training them (e.g. 30 39 year olds and even 40+ year olds ) to help address skills shortages Ways of encouraging older people to stay in the workforce longer. This is already happening as shown by the 61% increase in the 60+ age group between 2003 and 2009. This is set to increase significantly by 2016 and again by 2021. It may be necessary to retrain older workers.

 

Centre for Research into the Older Workforce for the DWP (2006). Managing an ageing workforce in construction. Available at: http://research.dwp.gov.uk/asd/asd5/rports2005-2006/agepos1.pdf.

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The Construction Sector

APPENDIX ONE KEY SOURCES The main sources drawn on for this paper included the following:           Department for Work and Pensions Office for National Statistics Confederation of British Industry Construction Skills Summit Skills Chartered Institute of Building Constructing for Better Health Constructing Excellence Construction Industry Council Chartered Institute of Personnel and Development

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The Construction Sector

APPENDIX TWO DEMOGRAPHIC ANALYSIS DATA TABLES This appendix provides the data tables on which the charts in Section 3 are based.
Tabl Total o pulation trend or all ages between
2012 63,0 4

and

2011 62,649

2013 63,498

2014 63,921

2015 64,344

2016 64,

201

65,208

Source: Population Projections by the Office for National Statistics

65-69

3,038

Ages 15-19 Change - year on year % change % change after 5 and 10 years from 2011 20-24 Change - year on year % change % change after 5 and 10 years from 2011 25-29 Change - year on year % change

2011 3,832

Years 2016 3,5 1 (62) -2% (262) - %

2021 3,585 69 2% (24 ) -6% 3,918 (61) -1.54% (441) -10.12% 4,554 ( 3) -2%

4,359

4,182 ( 3) -1. 2% (1 6) -4.05%

4,399

4, 38 33 1%

Page 1 of 19 July 2011

Table 3 Percentage change in population projections of age bands 5 through to 69 (millions)

55-59 60-64

3,583 3, 46

40-44 45-49 50-54

4,589 4,61 4,088

4,064 4,538 4,556 3,985 3,442 3,533

20-24 25-29 30-34 35-39

4,359 4,399 3,986 4,0 0

4,182 4, 38 4,519 4,018

Age bands 15-19

2011 3,832

Year 2016 3,5 1

Table

Population projections of 5 -69 ear olds

(millions) 2021 3,585 3,918 4,554 4,852 4,546 4,010 4,018 4,482 4,451 3,840 3,260

All ages in each year TOTALS (persons thousands

2018 65,645

2019 66,084

2020 66,522

2021 66,958

The Construction Sector

Ages % change after 5 and 10 years from 2011 30-34 Change - year on year % change % change after 5 and 10 years from 2011 35-39 Change - year on year % change % change after 5 and 10 years from 2011 40-44 Change - year on year % change % change after 5 and 10 years from 2011 45-49 Change - year on year % change % change after 5 and 10 years from 2011 50-54 Change - year on year % change Change after 5 and 10 years from 2011 55-59 Change - year on year % change % change after 5 and 10 years from 2011 60-64 Change - year on year % change % change after 5 and 10 years from 2011 65-69

2011

Years 2016 339 8%

2021 155 4% 4,852 33 1% 866 22% 4,546 98 2% 4 6 12% 4,010 91 2% (5 9) -13% 4,018 (136) -3% (599) -13% 4,482 (41) -1% 395 10% 4,451 61 1% 868 24% 3,840 10 3% 93 2% 3,260

3,986

4,519 98 2% 533 13%

4,0 0

4,018 91 2% (52) -1%

4,589

4,064 (138) -3% (526) -11%

-2% 4,088 4,556 61 1% 469 11% 3,583 3,985 109 3% 402 11% 3, 46

3,442 19 1% (304) -8%

3,038

3,533

4,61

4,538 (42) -1% ( 9)

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The Construction Sector

Ages Change - year on year % change % change after 5 and 10 years from 2011 0- 4 Change - year on year % change % change after 5 and 10 years from 2011

2011

Years 2016 4 0% 495 14%

2021 20 1% 222 %

2,463

2,810 116 4% 34

3,291 6 0% 828 34%

14%

Construction Industry (SIC 45) Age band All manual & non -manual occupations 16-19 20-24 25-29 30-34 35-39 40-44 45-49 50-54 55-59 60+ Total

UK 9 88,99 240, 92 258, 55 246,482 303, 08 31 ,161 288,86 251,984 194,121 201,091 ,39 ,95

66,9

6 ,

,45 , 6

,454, 3

Page 19 of 19 July 2011

-5, 31 -24,3 9,129 53,550 6,662 -40,023 -3 ,488 24,32 4 ,011 29,112

83,26 216,415 26 ,884 300,031 310,3 0 2 ,138 251,3 9 2 6,310 241,132 230,204

6 -6,0 6 -9, 50 19,950 32,941 ,02 -36,344 -4,928 28,894 21, 84 13,413

6 82,921 231,043 2 8, 05 2 9,422 310, 34 280,81 283,939 280,8 215,905 214,504

6 - % -4% 8% 13% 2% -11% -2% 11% 11% % 3%

-6% -10% 4% 22% 2% -13% -13% 10% 24% 14%

Four quarter average, Summer

to Spring

9 inclusive % change % change

Table 4 Four Quarter A erage

9 abour Force data for the construction sector

Change

totals

3%