The Business Case for DEI

As construction lags behind in diversity, the conversation must shift

July 06, 2023 Photo

The U.S. construction industry is trailing other industries in implementing Diversity, Equity, and Inclusion (DEI) practices and cultures, and is also losing the battle to a growing labor shortage. It is very likely that these are not unrelated issues.

While construction sites have not traditionally been viewed as vocational opportunities for women and minorities, let us consider what could be gained if we made DEI more appealing to construction and how we might go about doing that.

Where the Industry Stands

In 2022, the U.S. Bureau of Labor Statistics reported that women make up only 10.9% of the jobs in construction. According to the National Association of Women in Construction, in 2018, 61.3% of the women who worked in construction held sales and office positions; 44% worked in professional and management roles; 21.1% worked in service occupations; 5.9% were in production, transportation, and material moving positions; and only 1% were in natural resources, construction, and maintenance positions. 

The construction industry is equally behind when it comes to diversity with respect to race and sexual orientation. A 2022 study performed by the U.S. Bureau of Labor Statistics found that people who identified as Non-Hispanic Blacks held only 6.7% of construction jobs compared to their 12.6% share of total employment in that year. Similarly, people that identified as Asian made up only 2.1% of the share of construction employment compared with 6.7% of total employment in 2022. Moreover, a Zippia career study found that only 2% of all construction workers are LGBTQ compared to a 2022 Gallup poll that found that 7.1% of the U.S. population identifies as LGBTQ. This data shows that, while the construction industry has diversified over the last 30 years, white and Hispanic males still make up a greater portion of the industry than their share of the workforce.  

Wage disparity is faring no better. In 2020, wages for women in architecture and engineering occupations were 85% of men’s wages, and women’s wages in construction trade supervision and other construction related salary occupations were 87.5% of men’s wages.

Construction claims and law experience unfavorable trends as well. The demographics and pay gaps in claims and litigation are getting worse, and are especially notable in the construction sector. Even though women have been graduating from law schools in greater numbers than men for the last seven years, they are still woefully behind when it comes to fair pay. Women in-counsel were paid 14% lower than the average salary for men in the same role. In 2020, among associates, women were paid on average 91% of what their male counterparts earned. Among equity partners, the average compensation for women was only 85% of male lawyers’ average compensation.

Women lawyers of color face an even tougher battle. Recently, media outlets covered a lawsuit in New York where it was found that a female lawyer was earning $40,000 per year less than a nearly identical male counterpart. The gap widens for mothers, who make just 74 cents on the dollar, which means they stand to lose $17,000 annually.

The salary numbers are not much better for women in insurance, even as the industry scores higher overall with respect to diversity. Insurance joins legal among the industries with the widest gender pay gap, most recently approaching 40%.
Progress has stalled for the last 15 years, and especially over the last few. According to the American Association of University Women, at this rate, women will not achieve equal pay until 2111.

Adjacent Industries Outpacing Construction

An April 23 Forbes analysis, “America’s Best Employers for Diversity,” found that 17 of the top 50 companies for diversity were in the banking or insurance industries. Only one of the top 50 companies was in construction. According to the U.S. Bureau of Labor Statistics, the finance and insurance industries increased their Black employees by 2.6%, from 9.0% in 2010 to 11.6% in 2022. The same study shows that the finance and insurance industries increased their Asian employees, from 5.4% in 2010 to 9.2% of employees in 2022.

On the other hand, the construction industry shows a much slower increase for employees in these racial groups. Specifically, Black employees in the construction industry only increased by 1.3% between 2010 and 2022 and Asian employees only increased by 0.4% during the same time period.

Changing the Language Around DEI

Certainly, there are many reasons why construction is trailing other industries in pursuing DEI efforts. This is a difficult and a multi-faceted problem that cannot be distilled down to a single cause. Reversing the trend relies in part on conveying the message that DEI makes good business sense. While we may disagree about the best ways to achieve, manage, and value DEI, we must first agree that DEI and good business practices are not at odds. DEI is not a counter-business altruistic endeavor. DEI is good business.

The many reasons why the DEI fight is fought include equality, law, justice, morality, and altruism. None needs to be in this discussion. The discussion instead can center around best business sense, better retention practices, better recruitment practices, and stronger businesses. DEI does not come at the expense of the strength of the business, but rather it prevents a growing weakness.

Contractors and subcontractors are in an industrywide scramble for qualified workers. Construction law and claims are facing similar difficulties in recruiting and retaining talent. DEI demonstrably increases the representation of underrepresented groups, which, in turn, can provide solutions to worker shortages and provide more innovative solutions to other looming industry challenges.

The failure to prioritize and implement DEI measures is coming at a cost of failing to recruit and retain a significant section of the talent pool. 

DEI’s Overlap With Good Business Evolution

When we look at the impact of technology on construction and construction-related industries, especially with law and claims, there is ripe opportunity to include DEI efforts. For example, the cultural rigidity of in-person work needs to be assessed as a general business practice as well as an effort related to DEI. There are opportunities in construction and in claims roles to embrace hybrid and work-from-home models. This relates to DEI when we examine the drastic increase in women pushed out of the workforce over the past few years to deal with family and house management due to COVID-19 shutdowns. A comprehensive assessment of what roles can be converted from in-person to more forgiving models will also usher in DEI policies and values. 

Talent recruitment and retention is another area where good business evolution dovetails with DEI initiatives. For construction and claims roles, traditional recruitment and retainment methods have become counterproductive to appealing to new talent. Companies should adjust their methods in order to appeal to a new talent pool comprised of diverse professionals.

Promoting internship opportunities at more diverse schools and keeping diversity in mind when hiring interns can lead to a diverse generation of hires. To retain these new hires and make them feel welcome in the industry, companies must be more thoughtful about team building activities and corporate outreach. Focusing on family picnics, team lunches, and similar activities allows for a broader participation group than an activity such as golf.

Finally, to maintain a culture that values the recruitment and retention of this new talent pool, it is important to value the efforts that promote diversity within the workplace. One of the most common criticisms from those who are asked to lead DEI efforts is that their time spent on DEI is not valued. Including a DEI component of annual review metrics is one way to help capture employee time that is spent on these efforts and to show employees how important DEI is to the company. 

Building a diverse team in the workplace reflects the values and culture of the organization and results in the attraction of talent from a more diverse spectrum of candidates. This is increasingly important for younger professionals. In addition, millennials and younger generations consider the inclusive nature of a company as a factor in deciding where to work. It can be a critical component for recruitment, retention, and overall employee morale.

About The Authors
Multiple Contributors
Anoush Holaday

Anoush C. Holaday is a partner and director of associate success at Wood Smith Henning & Berman

Carla Braunstein

Carla Braunstein is a partner at Wood Smith Henning & Berman LLP.

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