Posted by: Josh Lehner | June 20, 2018

Construction Wages (Graph of the Week)

Even as housing affordability is set to improve in the coming years, it certainly remains worse today than 5 or 10 years. It continues to be a strain on many household budgets in the region. The key question is why haven’t we seen the supply response one would expect given the high prices and low vacancies? A little over a year ago our office dug into some of the commonly cited reasons for the lack of supply. That post continues to be a great reference and something we regularly direct inquiries to along these lines. As such I recently updated a few of those charts to account for new data and also posted them to Twitter.

One of those commonly cited supply constraints is the lack of workers. Something along the lines that the economy could build more housing units if firms could find the workers. Our office’s position is that yes, it is harder to find workers today than in the recent past, however from a high vantage point it does not appear to be particularly bad in construction relative to the overall economy. For example, the share of prime working-age Oregonians with a job is back to where it was prior to the Great Recession, if not a little above that. It’s harder for all businesses to find and attract workers in a relatively tight labor market. As an aside, that is one reason why we’ve also dug into some potential labor supply sources.

The point being that if there were a true labor shortage you would expect to see it show up in the wage data. In this case, wages paid to construction workers would be rising significantly faster than wages in other industries. And that is just not the case. Wages are rising across the board in Oregon, and faster than in the typical state. However construction wages are largely increasing at the same rate. An interesting question that arose on Twitter was whether or not we could break down the construction wages into different segments, say residential vs nonresidental workers and the like. Scott Littlehale from the Northern California Carpenters Regional Council does lots of good and informative work on construction costs and wages online. He was kind enough to pass along how he separates the construction data into residential workers and nonresidential.

So without further ado, this edition of the Graph of the Week shows relative wage trends for the different segments of the construction labor market here in Oregon. There has been an increase in residential worker wages, but that increase just makes up for the lost ground in the aftermath of the housing bubble. Given the available data, it does not appear to our office, again from this high level look, that the labor issues in the construction industry are dissimilar to those experienced in all other industries. Wages are rising as the labor market tightens, but wages paid to construction workers are not rising particularly fast. To the extent that labor costs for projects are rising, then they are more likely flowing into firm profits and not worker paychecks (see that previous post for a bit more on this).

Finally, it is quite clear that the skilled tradespeople earn the high wages. The construction wage premium is not about residential workers but about the nonresidential work. For more see our previous work on Labor and the Trades, but also a broader look at Occupations, Wages, and Educational Attainment.


Responses

  1. […] Source: Construction Wages (Graph of the Week) | Oregon Office of Economic Analysis […]


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