Labour cost and availability

1 Trade labour wages

A significant factor influencing overall construction costs is the wages of labour, including additional expenses such as travel costs, national/health insurance, pensions, and other benefits of employment. This year’s survey once again highlights the extreme level of variation in the cost of labour between regions. The markets with the lowest construction wages are Bangalore, Ho Chi Minh City and Kigali, where wages were all below USD3 an hour. The cheapest is Bangalore where average hourly wages are at USD1.1. This compares with more than USD104 in Zurich and USD98 in New York City.

Across the 46 markets, the average labour costs is USD29.9, with Seoul representing the median average hourly wage at USD22.

The significant drop to USD14.4 per hour for Asia we see this year compared with the USD18.1 seen last year is statistical not actual, as the number of markets covered has increased with the introduction of Ho Chi Minh City, Jakarta and Shanghai, all with relatively low labour rates.

Again, a note of caution when comparing labour rates. The supplied labour wages do not take into consideration labour productivity, which is affected by training, and the use of automated equipment and machinery in construction. In cheap labour countries there is likely to be less automation because labour is cheap and plentiful. Where labour is very expensive or scarce we would expect to see fewer workers on site and many tasks are carried out using labour-saving machinery. To gain a clearer picture of the cost of labour on a project, consideration should be given to productivity and how this affects the size of the project’s workforce and duration on site.

Average hourly wage (USD) by region
North America 71.4
Australasia 58.6
Europe 38.2
Asia 14.6
South America 7.5
Middle East 6.9
Africa 4.7

2 Labour Shortages

Labour shortages appear to be an increasingly common feature of global construction in recent years. Last year’s report noted a rise from 20 to 24 markets registering skills shortage. This year the number has risen to 27, one of which (Jakarta) is a new addition this year.

As workloads in most markets look set to expand, skill shortages are likely to persist into 2018 and potentially intensify in places as hot spots appear in the generally warming global construction market.

The problem is easily understood in markets such as New York City, where there has been a prolonged spell of activity at historically high levels, similarly in London and other buoyant markets. But the problem is not just confined to one type of region or economy. Regions with low labour costs, such as Bangalore, Johannesburg and Kigali, are also suffering from skilled and semi-skilled labour shortages.

Only three of the markets analysed are Preliminaries and margins experiencing labour surplus: Houston, Muscat and São Paulo. Oman (Muscat) and Brazil (São Paulo) both suffered economically from the fall in commodity prices and while prices are recovering it will take time to carry through to the construction sector. There are signs in São Paulo that the market is warming, which may bring the supply and demand in the construction labour market closer into balance.

3 Availability of labour

Skills Shortage  In balance  Surplus
-58.7% +/- 34.8 +6.5

Amsterdam 
Bangalore
Beijing
Bogotá
Dublin
Hong Kong
Jakarta
Johannesburg
Kampala
Kigali
Kuala Lumpur
London
Melbourne
Munich
New York City
Northern Ireland
San Francisco
Seattle Seoul
Singapore
Sydney
Tokyo
Toronto
UK Central
UK North
UK South
Zurich

Brisbane
Buenos Aires
Dar es Salaam
Doha
Ho Chi Minh City
Istanbul
Madrid
Moscow
Nairobi
Paris
Perth
Santiago
Scotland
Shanghai
UAE
Warsaw

Houston
Muscat
São Paulo

4 Labour challenges

Every year we ask our experts around the world to tell us about the growth sectors in construction and the challenges in their markets. This year, one issue reverberates – skills shortages. It is a global problem.

Growth Sectors

One common thread around the world is that governments are investing heavily in projects to promote easier movement of people and reduce congestion. Road and rail sit at the top of the list for growth sectors globally.

This upswing in investment comes after years of urging from major international organisations. As a recent World Bank note stated: “Infrastructure development lies at the nexus of economic growth, productive investment, job creation, and poverty reduction.” (5)

When it comes to transport, developing nations need to greatly expand their infrastructure to accommodate economic growth and spread wealth and wellbeing, while developed nations need to revitalise theirs to sustain prosperity.

Global construction challenges

High-tech and manufacturing are also in the top five growth sectors. Interestingly, the scores indicate that while growth here is widespread across the regions, the increase is more marginal than strong.

Urban development and commercial development, which cover the construction of apartments and commercial offices and hotels, take the remaining top five spots for growth, reflecting the intensity of urbanisation and rising global economic growth.

Beyond the five, it is interesting to note, the mining and oil and gas sectors remain relatively in the doldrums, but as the sectors rebound there are signs of expansion in 2018.

Challenges

Looking at the challenges that local contractors face in profitably delivering projects on time and on budget, skills shortages remain firmly at the top of the list.

The spread of greater opportunity, higher education and loftier aspirations is making recruitment into construction harder. Meanwhile, an increasing proportion of the workforce is retiring or nearing retirement. There isn’t a simple answer, but investing in more technology, technical skills and training and more advanced construction techniques are essential.

Directly linked to the skills shortage are two further key challenges, rising costs and stagnating productivity. This emphasises the imperative to attract and retain top talent. Those firms that do invest in technology and talent are likely to be the strongest survivors when growth in the global economy softens again, as inevitably it will. Our subject matter experts have provided first hand on-the-ground insight into why these challenges exist and what can be done to mitigate them.

67% of all respondents said skilled labour shortages had a major or large impact on the delivery of construction projects 33% of all respondents said a lack of confidence in the market had a medium impact on the delivery of construction projects 63% of all respondents said labour disputes and industrial action only had a fair or little impact on the delivery of construction projects
Major/large impact Medium impact Fair/little impact
1. Skilled labour shortages 5. High insurances, taxes, duties, government charges and other ancillary costs 9. Difficult contractual and legal conditions
2. Government red tape, bureaucracy, delayed approvals 6. Lack of confidence in the market to invest in new projects 10. The market is oversupplied, e.g. too many vacancy apartments and office space
3. Rising costs of construction 7. Too many contractors chasing too few projects 11. Contractors are having difficulty finding sufficient credit
4. Low workplace productivity, inefficient and outdated work practices 8. Political instability 12. Labour disputes and industrial action

 

Learn more about the labour opportunities and challenges across the world:

United States

Argentina

United Kingdom

France

Kenya

India

UAE

Hong Kong

Australia

 

This content is part of the International construction market survey 2018

Go back to the main ICMS 2018 page

 


5. Institut national de la statistique et des études économiques https://www.insee.fr/en/statistiques/3326107