Real Compensation in the Construction Sector

Dean Baker reads Stephen P. Gennett – president of the Carolinas chapter of the Associated General Contractors of America – arguing for more immigration on the grounds that there is a labor shortage in the commercial building sector. Dean reviews the data from the Bureau of Labor Statistics and writes:

inflation adjusted wages for construction workers have actually fallen about 5 percent since 1980, a period in which productivity has increased by more than 70 percent. So, we have wages falling in spite of a labor shortage – not where I learned my economics.

Now you might be thinking – what about total compensation which includes fringe benefits? Or – what has happened in the last couple of years. Checking the Employer Cost for Employee Compensation data for the construction sector, we see that nominal wages were $18.47 per hour two years ago and are $191.19 per hour now – a 3.9% increase. Fringe benefits rose from $8.57 per hour to $9.37 per hour over the same period – a 9.3% increase. Total compensation therefore rose from $27.05 per hour to $28.65 per hour – a 5.9% increase in nominal compensation. The consumer price index over the past two years has increased by 6.6%. Even when we include fringe benefits, real compensation in this sector has declined over the past two years. This does not sound like a shortage to me.

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