Construction Labor Costs and How They’ve Changed

In 1913, skilled labor accounted for 38% of the total cost of construction. But today, at least 65% of building costs go towards paying workers’ wages. Compared to the cost changes for steel, cement, and lumber, this is a huge shift in distribution. So why does labor cost so much more than it used to 100 years ago?

Increased Wages

All across the country, the cost of healthcare is rising and pension funds are dwindling. To compensate, the wages of skilled workers have seen modest improvements. According to the Construction Labor Research Council, union labor has seen trends towards slightly larger paychecks in recent years. The Council reported that nationwide union labor was up 2.2%, or an average of $1.10. Of course, some regions of the country pay their workers better than others. Laborers in the North Central region of the U.S. have seen the greatest increases, and those in the Northwest seen the least.

Unemployment

Although the past decade in America has been marked by surging unemployment rates, most industry experts surprisingly don’t believe that unemployment has had much of an effect upon labor costs. The Principal of Rider Levett Bucknall, Julian Anderson, commented, “The recovery and falling employment rates are not having much of an effect on labor costs. There is no doubt that unemployment rates are coming down, but I’m not so sure employment rates are going up as quickly.”

Greater Demand

Now as the economy has begun to rebound a bit, we are seeing a greater demand for construction projects. As developers devise new rebuilding strategies, the demand of skilled labor increases. This means more job security for laborers and the potential for more new laborers to enter the field of construction and take advantage of the job market.

The Shale Gas Boom

The construction information service, IHS, reported in November 2013 that construction costs rose for the 22^nd consecutive month, with labor costs at the forefront. In the U.S., the shale gas boom has played a pivotal role in driving up labor-related construction costs. “Labor concerns have been reported in the U.S. Gulf Coast, where demand from new downstream energy projects is expected to increase,” said Laura Hodges, director of the pricing and purchasing service at IHS. “Some in the industry are even suggesting shortages of skilled laborers such as welders and pipefitters in 2014 because of increasing investment in such projects.”

For a variety of reasons, labor costs are affecting the progress of ongoing construction projects, and there are serious concerns about the availability of skilled workers. Materials fees used to consume the bulk of construction costs, especially when building in China consumed many materials. Now China’s growth has slowed, and labor is the big concern in the U.S.

While construction companies prepare for skilled worker shortages, they’re relying upon technology to pick up the slack. However, management software and online collaboration only go so far in getting buildings built. Despite the challenges, one thing is for certain: these factors will make for an interesting next century in the world of construction.

*Photo credit: W. Garnier (ALMA); Imre Solt via WikiMedia Commons