Living Economics

Underground Homes
Influx of illegal immigrant workers to the U.S. homebuilding industry has made new homes more affordable but kept the home construction business labor intensive.

Home building is a labor intensive onsite economic activity with few offsite prefabrications. It is more like a personal service industry than an assembly-line manufacturing process. With such low labor productivity, the labor component of even a production home is quite high. To contain labor cost, the temptation to hire lower-cost illegal immigrant labor is very strong. Without these immigrant workers, the cost of new homes could increase 30% to 40% and the time to build a home could double or triple (Fortune).

The percentage of new homes built wholly or partly by illegal workers could go as high as 80% in some south border states. Usually, the home builders do not hire the illegal workers directly. Instead, illegal workers are hired indirectly through subcontractors to provide a layer of protection against legal liability.

The projected demand for 18 million new homes for the next decade is estimated to generate one million new jobs. But a recent survey of high-school seniors ranked construction as next to last out of 232 career options (MATT). This career aversion may be partly due to the hard physical labor involved. But despite labor shortage, the average annual wages for construction workers is well below $40,000 (housingeconomics.com). Without competition from immigrant workers, these wages might well have been higher. But the much higher resulting cost of new homes would also have tamped down the demand for new homes (housingeconomics.com).

The influx of immigrant workers mainly from Mexico may be a mixed blessing. Without them, the home construction industry would have been forced to adopt offsite laborsaving prefabrication as the dominant method of new home construction. Such much higher labor productivity would have offered better pay and better working conditions for domestic workers.

References:
  • Fortune. 6/12/2006. "Shaking the foundation."
  • Atlanta Journal-Constitution. 3/12/2006. "Illegals change the homebuilding industry."
  • Mexicans and Americans Thinking Together [Internet]: "Who will build U.S. homes?" [Cited 2/8/2007].
  • Housingeconomics.com [Internet]: "Immigrant workers in construction." [Updated 12/2/2005; cited 2/8/2007].
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