Flexible Wages in the Construction Industry

The construction industry is generally thought of as a sector which is sheltered from foreign competition. In a comparison with the manufacturing sector, a typical open sector, wages in the construction industry nonetheless turn out to be highly flexible. During the last 15 years increases in basic wages, as negotiated by the unions, have been about as high as in manufacturing. Negotiated wage increases, however, only refer to minimum wages which in boom years have been greatly exceeded by actual earnings. The rise in unemployment during the last decade as well as the inflow of foreign workers have intensified competition in the labour market for construction workers and earnings of construction workers lagged behind. It was only during the construction boom of 1991 and 1992 that earnings in the construction industry rose faster than in manufacturing.