Why the price of building a home is going up: It’s not just materials
As construction wages rise, new research finds that unskilled laborers are driving industry-wide cost increases, further straining housing affordability.
The cost of building homes in the United States is rising sharply, and a key contributor is the growing wages of construction workers—especially those in unskilled roles. According to a new study by researchers at the Missouri University of Science and Technology, unskilled construction laborers have seen the largest wage increases over the past two decades, a trend now affecting the entire housing market.
The study, conducted by Bahaa Chammout and Islam H. El-adaway, analyzed wage trends in more than 20 construction occupations between 1999 and 2023. It found that wages for lower-paid workers—who typically perform physically demanding tasks such as trench digging and site preparation—rose at a rate of 2.75% to 3.5% annually. In contrast, most skilled trades saw increases of less than 2.5%.
“Unskilled construction laborers emerged as the leading drivers of wage trends across the industry,” the researchers noted, pointing out that these early-stage laborers play an outsized role in influencing wages across other trades. Using econometric modeling, the study revealed that when wages rise among unskilled workers, increases often follow in related trades—especially those later in construction timelines.
This shift comes as the industry faces a major labor shortfall. According to the study, US construction firms report a shortage of more than 500,000 workers each year. The problem is especially acute among unskilled laborers, with the number of workers in helper roles falling by 50% since 1999.
Ripple effects of rising wages
The ripple effect of these labor dynamics is already being felt in housing prices. In 1978, the median home cost $44,300—less than three times the median household income. Today, it exceeds $419,000, more than five times the average income. While materials, interest rates, and land availability all contribute to these increases, labor costs are a critical, yet often overlooked, factor.
The study urges contractors to closely monitor wage changes in early-phase occupations to better predict overall project costs. “When wages start rising among early-trade or unskilled workers, that is often a signal that broader labor costs are about to rise too,” the researchers wrote.
The findings come amid continued industry disruption from global events such as the COVID-19 pandemic, the Russia-Ukraine war, and trade policy changes. To address these pressures, the researchers are working with the Missouri Consortium for Construction Innovation to develop tools for forecasting labor trends and managing risks.
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