Beyond Belief: Construction Labour and the Cost of Housing in Australia

by Jim Stanford

Remember when Prime Minister Turnbull and Immigration Minister Dutton blamed unionized construction workers for the high cost of housing in Australia? The idea that workers (not property speculators or bankers) are to blame for the property bubble is pretty far-fetched — in fact, it sparked a viral storm on social media, using the #blameunions hashtag.

We’ve looked in detail at the empirical data regarding the relationship (or lack thereof) between unions, construction wages, and housing prices.  The results are surprising…

A new research paper from the Centre for Future Work has found that:

  • Average earnings in the construction industry have grown more slowly than the Australian average over the last five years.
  • Real wage increases in construction have been slower than real productivity growth, with the effect that real unit labour costs in construction have declined.
  • Construction labour accounts for only 17-22 percent of the total costs of new building.
  • Construction costs, in turn, account for less than half the market value of residential property.
  • Construction labour costs correspond to less than 10 percent of housing prices (and even less than that in Australia’s biggest cities).
  • Construction workers receive far less income from the housing sector than land-owners, property investors, and banks.
  • Construction labour accounts for about the same proportion of a house purchase as real estate commissions and stamp duty.
  • Homes in Australia are becoming unaffordable even for the workers who build them: on average, a construction worker would need to spend 9.2 years of their pre-tax earnings to purchase a median home (25 percent more than just four years ago).

The paper recommends that if government genuinely wants to make housing more affordable, it should turn its attention to the real causes of soaring housing prices: by cooling off property speculation, more carefully regulating the banking sector, and reforming property-related taxes.

Full report