Labour Market Adjustment in the Construction Industry 2001-2006

Abstract

The construction industry experienced heightened activity from 2001 to 2006 concurrent with low interest rates, high population growth, strong wage and job growth, and property investments from overseas. Following this heightened demand, there was a 41.4 percent increase in employment in the construction industry over the six-year period. This compared with a 15.5 percent increase across all other industries excluding construction. This study, uses the Linked Employer-Employee Data (LEED) to investigate how the market adjusted to the higher level of employment.

Across the construction industry from 2001 to 2006, relative average wage growth was subdued. However, a change in the composition o f labour hired was evident. The majority of inflows into the construction industry came from alternative industries, with every six in ten workers previously engaged in an alternative industry in the past year. The construction industry continued to source its workers from the same industries. However, the composition o f workers flowing from these industries into construction shifted towards younger and hence less experienced workers. This shift suggests that there were concessions on quality in adjusting to the higher level of employment.

The increased inflow of younger and less experienced individuals, together with the relatively higher inflow of self- employed individuals into the construction industry, explains the comparatively subdued growth in average wages across the construction industry at a time of strong employment growth.