It’s a common complaint among developers: high wages for construction workers in New York City are driving up development costs and making projects unfeasible. Now a new report by the industry trade group New York Building Congress (NYBC) puts that claim in doubt.
Average wages earned by construction workers in the city grew by less than one percent in the first nine months of 2014 and have hardly increased since 2012, the report found. Workers earned on average $52,300 through September 2014, up from $52,000 in the first nine months of 2013 and $51,200 in the same period in 2012. Wages for workers involved in building construction are slightly lower on average than they were in 2011.
The most puzzling aspect of this de-facto wage stagnation is that it is taking place despite a noticeable uptick in total employment, up 10 percent since 2012 to a New York City average of 127,600 in 2014. Typically, growing demand for workers pushes up wages.
“It certainly seems as though the increased use of nonunion labor is playing a role here,” said NYBC president Richard Anderson. “Consider that annual wages have increased by 19 percent between 2008 and 2013 for heavy and civil engineering workers, who remain highly unionized, but just 2 percent for building workers and 6 percent for specialty trades workers, where nonunion labor has made significant inroads in recent years.”
The unusual confluence of rising employment and flat wages is a phenomenon across the U.S. economy, and one that has confounded economists.
While high wages for unionized workers may be an issue for certain projects, the data seems to show that wages have a minor role at best in pushing up average construction costs across the city. According to an NYBC analysis from January, construction costs in New York City increased by five percent annually in 2013 and 2014. During the same period, wage growth averaged around one percent.
Wages in New York City’s building industry have generally been slow to recover from the 2008 crash, according to The Real Deal’s review of data from the Bureau of Labor Statistics. Annual wage growth averaged 5.1 percent between 2006 and 2008, but fell to an average of 0.8 percent between 2009 and 2011.
“Wage settlements over the last three years have averaged two to three percent at best,” Louis Coletti, president of the trade group Building Trades Employers Association, wrote in an email several weeks ago. “One of the main factors that is driving the cost of construction up is land costs. I had several developers tell me they saw bids for very small properties that were going for $1,000 per square foot.”