Cost of labour in the construction industry

1 Introduction

A significant factor influencing construction costs is the wages of construction labour, including additional expenses such as travel costs, insurance, pensions and other benefits of employment.

This year’s international construction market survey highlights the extreme level of variation in the cost of labour between regions. The markets with the lowest construction wages are in Africa and India where hourly wages can range from USD1-3. No longer having the cheapest labour, Chinese construction workers now average USD5 per hour.

At the other extreme, workers in New York and Zurich are edging closer to USD100 per hour, compared to an average labour rate of USD28 per hour across all regions.

Typically regions with the lowest paid construction workers tend to have manually intensive methods of construction, whereas regions with more expensive labour look for labour-saving methods of automation to improve their productivity and limit the numbers of staff they have to employ.

56 %
number of global markets suffering from a skills shortage

2 The cost of labour

Average hourly wage (USD) by region. North America has the highest labour costs of all of the regions analysed in this year’s survey.
Average hourly wage (USD) by city. Zurich remains the city with the highest labour costs with an average hourly page of USD98.5. Source: ICMS, 2017

3 Skills shortages in construction

Last year we described the construction market as overstretched and over-reliant: overstretched in the sense that skills shortages are a growing problem; and over-reliant because many markets were dependent on commodity export earnings.

Now, in 2017, commodity earnings are recovering but the market remains overstretched as it is clear from this year’s survey that the skills shortage problem remains. Overall, 24 of the 43 markets analysed in this survey are suffering from a skills shortage, up from 20 last year.

Skills shortage are a common theme in this edition of our survey with 24 of the 43 markets analysed suffering from a skills shortage. Source: ICMS, 2017.

4 The hunt for efficiency

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How technology is helping with efficiency

Leading firms are adopting advances in on-site factory and off-site manufacturing and assembly, 3D printing, automation and robotics to improve efficiencies.

Significant advancements in data management are starting to play a major role in unlocking productivity. Effective management of the data asset alongside the physical asset is improving the efficient planning, delivery and operation of built assets.

Developments such as integrated design and asset management (design, asset, cost and schedule all linked and visualised) are helping better understand the asset, both during construction and handover into operation.

In the near future, the application of blockchain technologies will streamline contractual processes and exciting progress in machine learning will help predict issues in construction and optimise maintenance and operations.

Poor productivity has been a perennial problem for the global economy. The complexities of the construction market, with its highly cyclical nature and relatively low margins, mean the productivity puzzle has been hard for the industry to solve.

The prevailing skills shortage in many markets and continued price inflation are forcing the industry to address the fundamental problems that have existed for decades.

Meanwhile, the improving global economic landscape and increased commitment to invest in major programmes in real estate and infrastructure are also providing the long-term stability needed to commit to innovation.

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