City’s Construction Workforce First in Wages and Benefits Among Major US Cities
After a brief respite in 2009, construction costs in New York City are back on the rise, according to a New York Building Congress review of multiple cost indices. The Building Congress review of cost data also indicates that New York City construction workers earn considerably more than their counterparts in other U.S. cities.
Recent Cost Surveys
The Building Congress reviewed a series of surveys in its analysis. Each survey estimates the percentage change in overall construction costs. The percentage increase or decrease represents the change from the start of each year or quarter to the next.
According to Engineering News-Record’s (ENR) Building Cost Index (BCI), construction costs in New York City are projected to rise 2.86 percent in the first quarter of 2011. This is in addition to a 2.68 percent increase in 2010, which came after a 0.9 percent decline in 2009. ENR uses local prices for Portland cement and lumber, the national price for structural steel, as well as local union wages, plus fringes, for carpenters, bricklayers and iron workers, to derive BCI.
A separate survey of the New York metropolitan region by Rider Levett Bucknall (RLB) finds that construction costs in the area will increase by 0.76 percent in the first quarter of 2011. According to the RLB survey – which examines much the same data as ENR but also includes estimates of bid price changes, including overhead and profit – construction costs increased 0.54 percent for all of 2010 after falling by 3.4 percent in 2009.
The rate of increase in local construction costs from 2010 through the first quarter of 2011 is roughly equivalent to the national average.
“After years of relentless cost escalation, New York City experienced a bit of a respite in 2009 as a result of the economic downturn,” said Building Congress President Richard T. Anderson. “Unfortunately, these data confirm what we suspected in our September cost report: New York has given back most of those cost declines.”
NYC Labor Costs Greater than US Competitors
In its review of labor costs for 14 different construction trades, the Building Congress found that New York City’s construction workforce earn considerably higher wage and benefit packages than their counterparts in other major U.S. cities.
Electricians, for example, earn $83.81 in wages and fringe benefits per hour in New York City, compared to $73.08 in Philadelphia, which is the second highest in terms of compensation for electricians, $67.50 in Boston, and $67.15 in Chicago, all of which are considered union towns. Houston ranks at the bottom of the cities analyzed at $22.93 per hour.
Similarly, plumbers in New York City cost $84.37 per hour in wages and benefits, followed by Boston at $68.20 and Philadelphia at $67.29. Cities that use non-union labor to a much greater extent, such as Houston ($38.29), Dallas ($14.43) and Atlanta ($41.66), all compensate their plumbing workforce at less than half the New York City rate.
Of the 14 trades analyzed, only one group in one city (Chicago painters) has a wage and benefits package that exceeds their New York counterparts.
“As any business leader can testify, New York City is an expensive place to conduct business, and the higher cost of living certainly has an impact on compensation for workers across the board,” added Mr. Anderson, “Having said that, however, the higher construction cost structure in New York City is bordering on unsustainable. While we must look carefully at all aspects of construction costs, it is hard to ignore the wide disparity in labor rates, which account for 50 to 60 percent of building expenses.”
New York City vs. Select International Cities
New York City fares well in overall construction costs when compared to London, its chief international rival. As of January, Class A office space construction reached $290 per square foot in New York, compared to $423 psf for comparable buildings in London. Similarly, the cost of multi-tenant residential construction reached $210 per square foot in the City vs. $255 per square foot in London. New York City’s costs also are lower, overall, than Tokyo and Sydney, though higher than most major Asian cities, including Beijing, Seoul and Hong Kong.
Anderson concluded, “To secure and continue New York’s position as an important economic engine locally, nationally and globally, and help jumpstart stalled projects in all five boroughs, measures to control and reduce overall costs are needed.”
Charts and Diagrams
Source: Rider Levett Bucknall, Engineering News-Record Building Cost Index and Construction Cost Index
Source: Rider Levett Bucknall, Turner Building Cost Index, U.S. Bureau of Labor Statistics, Engineering News-Record Building Cost Index and Construction Cost Index
Source: Rider Levett Bucknall, International Report, January 2011
