Understanding the (relative) fall and rise of construction wages



3. Construction share of total employment


percent of wage and salaried workers, seasonally adjusted

7.3 --------------------------------------------------------

6.8

6.3

5.8

5.3..........................................

1960 ’64    ’68    ’72    ’76    ’80    ’84    ’88    ’92    ’96    ’00


Note: Monthly data. Shaded areas indicate recessions as defined
by the National Bureau of Ecomomic Research.

Source U.S. Department of Labor, Bureau of Labor Statistics,
Current Population Survey.


over the last the three decades, as
more women, minorities, and immi-
grants have entered the work force.
Because they receive lower wages
on average, these new entrants have
dampened wage growth in general.
But they have had an especially large
impact in construction where a high
proportion of jobs require low skill
levels. Women accounted for 9.9%
of construction workers in 1999, up
from 5.6% in 1972.3 Since for the
construction trades, women’s median
weekly earnings were $423 in 1999,
whereas men’s median weekly earn-
ings were $571, the increasing share
of women in construction has re-
strained average wage growth.4 In-
creasing shares of minorities and
immigrants in construction have had
similar implications for average con-
struction wages. Immigrants are be-
lieved to have played an especially
large role in helping to ease the labor
crunch in construction.

Another important labor market fac-
tor has been the increase in the wage
premium associated with higher levels
of education.5 Because construction
workers tend not to have high levels
of formal education, such increases
in the returns to education have the
effect of lowering their relative wage
rates. The influx of less skilled immi-
grant workers may be one factor con-
tributing to lower relative wages for
less educated workers. For instance,
some researchers contend that “almost
half of the 10.9 percentage point

decline in the relative
wage of high school
dropouts observed be-
tween 1980 and 1995
can be attributed to
immigration.”6

Impact of industry
changes

The substitution of
less-skilled workers has
been facilitated by ad-
vances in construction
process and method.
Cost-saving technolog-
ical changes in the con-
struction industry have
shifted the skill sets
needed for projects.

De-skilling in construction, especially
off-site work like pre-fabrication, has
lessened the need for high-wage skilled
workers, allowing firms instead to hire
laborers at lower wages. Builders talk
of being able to “... manufacture a
house in nine hours, erect it in 12
hours, and finish it in 48 hours—all
using unskilled workers.”7 Technologi-
cal progress has led to new construc-
tion materials and techniques, many
of which reduce the need to hire more
skilled workers. The seasonal cycles
of the construction sector are having
less impact due to new equipment
and better knowledge of how to over-
come Mother Nature. For instance,
heaters and insulated work areas alle-
viate the effects of cold weather on
construction workers. New drying
techniques let builders use concrete
all year round. Thus, workers are less
able to demand a wage premium to
compensate for a lack of hours during
slow seasons.

Moreover, increased safety, at least
partially attributable to better safety
programs and new techniques, has
lessened the wage premium related
to the riskier nature of construction.
From a peak in 1979 to a low in 1998,
the incidence rate of nonfatal occupa-
tional injuries and illnesses declined
in the U.S. In the construction indus-
try, these rates declined from 16.2 to
8.8 per 100 full-time workers. This
decline was steeper than the overall
drop for private industry from 9.5 to
6.7 per 100 full-time workers. Interest-
ingly, the manufacturing industry now
has a higher incidence of occupational
injuries and illnesses, even though the
construction industry was less safe pri-
or to 1994. However, in 1998 there
were more occupational fatalities in
construction (1,171 with 33% in falls)
than in manufacturing (694).8

Effects on unionization

As the industry shifts toward using
fewer skilled workers, the wage-boost-
ing power of labor unions is eroding
and labor markets are becoming more
competitive. This shift especially fol-
lows from the many day laborers now
hired in the informal sector of the
economy. Faced with less market
power on the side of labor, firms
have been able to offer lower wages
and still fill positions, at least until
the current boom. Also, the tradi-
tional edge in productivity enjoyed
by union workers has significantly
lessened. “The reduced productivity
gap gave owners and contractors tre-
mendous incentives to switch from
union to nonunion labor.”9 Union
influence has diminished in the con-
struction industry over the past three
decades. As more nonunion employ-
ees were hired at a lower wage rate,
the average hourly earnings in con-
struction declined. Union construc-
tion workers earn over 50% more
than nonunion workers.10 The gap
in benefits appears to be even greater,
as unionized workers have much better
benefits than nonunion workers.11

Lower representation is a primary
reason for the loss of wage power by
unions. The building trades were over
40% unionized in 1972.12 In 1999,
only 19.1% of construction workers
were union members, though this
was a higher percentage than the
membership low of 17.7% in 1995.
Besides a national decrease in union
representation, higher growth in
states that have legislated the “right
to work” of non-union employees,
especially in the South, contributed
to this decline.

Weakened prevailing wage laws, which
essentially mandate union wages for
workers on public works projects,



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