Why American construction costs are so high (2019)

In France unions wouldn't attempt to get their people $200/hour that the sandhogs in NYC get. We should bring the high priced unions to a realistic wage. However most union wages are not that far out of line.

Also in France the union is more relaxed about letting go of jobs that are automated away. There is no reason a TBM needs twice as many people to operate it in NYC as in France. There is no reason for any trains to have a conductor anymore, and train drivers are something that should be all but dead as well (though France is way behind the automation curve here as well)

That said, union labor is only a small part of the problem. Even if all of the most anti-union propaganda is taken as 100% true, union labor is still only a small fraction of the total cost of any build in the US. As such we need to look hard at what is going on in the other parts of construction.

There’s a lot of on-the-clock non-work built into the work rules. My relatives in the industry described the typical day as involving on-the-clock time built in for cleanup&changing into/out of work clothes, briefing on tasks for the day, safety briefing (AM and again after lunch for legal reasons), smoke/coffee breaks, etc. The longest stretch of uninterrupted construction is about a 2 hour sprint into the end of the day.

On the staffing front, the only lever a project manager has is to give the 2-3 hardworking guys out of 12 a boatload of overtime hours to get the actual work done. This is one reason that on most every job site around the city you see some pretty sick cars. Those 2-3 guys are getting 50% of the work done out of the 12, and getting paid Google engineering money for it.

NYT article years back talked about 2nd avenue subway covered examples of work rules. Tunnel boring machine in NY requires 3-4x the staffing of Paris, because thats the contract negotiated in the 70s when it was seen to be reducing jobs.. and no one has revisited it. This is no small figure as we have a handful of these digging tunnels the last few years, at the rate of 50ft/day... for months. Similarly there is a mandatory on-site oiler who basically sits in the break room all day because the machines do not need constant oiling anymore the way they did when the rule was written half a century ago.

One example from my relative - on a large NYC project he worked, they couldn’t take deliveries from suppliers on Saturday because it required the job site to be opened. Per union rules this would have required some inane number of staff to be on-site getting overtime rather than just say the guy to open the gate & staff (if any) required to empty the truck.

A lot of this is because public sector unions are treated as a voting constituent rather than a vendor by the government, and no politician ever wants to cross them.

This is why owners of Class A real estate usually mandate union labor, at least for MEP trades.

I bid and run work at a union shop, it’s sometimes difficult to compete on prevailing wage/public jobs here since only the cash wage portion is counted and not the benefits portion. So, a non-union shop can pay the $45/hr prevailing wage and cheap out on fringe benefits, maybe an additional 12-15/hr, where the union labor gets the prevailing wage and negotiated fringe benefits package that is roughly 2x the base wage (total comp). Right now we pay union journeyman electricians $87/hr in IBEW 292, which will go to $90/hr next Monday.

The good thing is, there’s plenty of work for union shops since as I mentioned, lots of Class A real estate and giant companies stick to union labor for construction, as the quality or perceived quality is higher (in general).

You’re also correct about the extra savings going to the developer, if you hire non-union labor and are bidding against a union shop and it’s a lump sum bid, you only need to beat the union guy by 1-2%, the rest is profit to keep.

It’s refreshing to see someone with actual experience commenting about construction on HN, nice post!

It is more complicated than that.

The way that supply and demand works, is that if costs go up, then there is less reason to create new supply.

And a lower supply of an item, means that prices, for the overall market, will go up.

That is how supply and demand works, and housing is no different.

> You the buyer will not receive a better deal ever. The market determines the price.

The market is determined by supply and demand. This is standard, 101 economic theory. If costs go up, supply go down (or supply increases a smaller amount), and price goes up.

Yes, construction contracts and rates are fueled by corruption. That said, I would only be OK with the feds going after the corruption. Not taking over construction. Do investigations. Trap people in stings. Do all the good old FBI tricks. I encourage that, but governmental takeover of all contracting is going too far.

Ha! When I read that line I completely missed the last letter in the word "organized", and it made perfect sense. I thought it was an historical quote from Guiliani's last job application.

Nobody cares if cars are “built to last” 30+ years, because we can just make new cars. There’s a persistent mythology in construction about “they don’t make ‘em like they used too” and “back in the day they were true craftsmen”.

It’s mostly BS, old houses are incredibly shitty compared to modern standards. But this type of attitude slows down progress. Any sort of innovation or productivity improvement gets looked down upon as just being a way to cut corners.

Buildings need to be solid (actually, they are often built to jiggle around). Friends who were in Tokyo when they had that horrible Sendai earthquake, said looking out the window from the 20th floor was scary as hell, but the buildings were fine, afterwards.

That's all I've heard about.

In Chinese/Soviet/1920s America equilibrium, with an insatiable demand for construction work, the profit maximizing behavior is to be done quickly in decent quality, then hop on to another project.

In the modern western equilibrium, where projects are few and far between, the profit maximizing behavior is to extract as much revenue as possible from any single project, employ lawyers, ask for extensions, attempt regulatory capture, create an opaque chain of subcontractors, etc. - as it's not clear whether there will be any new opportunity to do so in the future.

- NYC is old. We still have steam pipes in active use, and it predates the subway. Also, asbestos. Nor is every city at the same scale.

- How do you quantify the amount of tax money that comes in, because the subway enables business? Home taxes are very low in NYC, because of the amount of money generated from business.

Rent is high near any station, unless it’s a completely run down neighborhood.

It also enables immigrants and students in a way that car-heavy cities can’t match. I know because I was this immigrant and student.

We don’t have the problem SF does, as less desirabke neighborhoods are affordable by teachers and nurses. - You know what vents attract? Trash. If not cleaned out it becomes a fire hazard.

- Abuse: Absolutely. DC and Boston trains are pristine by comparison, and I’ve ridden trains and railways in Japan.

New York is by far the worst, for many reasons.

It was even worse in the 70s and 80s, and the mindset never wentvaway.

Building subway tunnels in such conditions is an equivalent of Olympic Games for engineers.

Honestly it's a miracle that skyscraper collapses are so rare.

Ironically I think the city may shrink in the coming years, thanks to Covid and the upcoming fiscal crisis.

Speaking a somebody who lived in the area both before and after the demolition (not a property owner), the whole place is just so much more beautiful. Some commuters may have lost a view, but what they lost pedestrians all over the area gained. Even outside of the waterfront itself, the view from the street level in the adjoining neighborhoods is gorgeous now.

So more than double?

Foundation work is not going anywhere on any construction method except for smallest homes.

Framework work is probably easiest to eliminate, but you will still have to count one most basic.

Even if you have 4 fold work hours reduction, and 2-3 fold in materials you save $300k on a $1m home, and end up with a very basic house.

Apartments are better than trying to improve upon a single family home.

The reliance on external "consultants" seems like a cabal, much like the ones you find in the Pakistani army. How rampant is corruption in the states?

But having done work in the past to do detailed analysis for the WMATA (they run the DC metro system) on various understaffing issues, the unions do contribute to issues with operations and maintenance. I will not and cannot comment on their issues with construction of the Silver Line.

But as far as maintenance, the unions (they do the same for BART by the way) constrain hiring the proper number of maintenance techs, so that the employed techs get large quantities of overtime pay. A single person working 12 hours a day ends up costing the same as two people working 8 hour days, but is definitely not going to be able to keep up with repairs, resulting in the constant broken escalators and elevators and out of commission tracks that have plagued WMATA increasingly since the late 2000's.

Reducing the quantity of workers when negotiating with an entrenched union is very, very difficult to do. They tend to want to keep the same quantity, or very slowly increase the quantity. This is very well documented behavior that is covered extensively in the book "The Machine That Changed the World", which was the first book documenting Toyota's journey with LEAN manufacturing, and then talking about the challenges GM faced with their unions when trying to implement these same practices.

All that being said, you were correct to poke holes in my statement and you added to the conversation significantly, so thank you for that.

The NYTimes did a detailed article on this a couple years ago, with a focus on the NY subway expansion: https://www.nytimes.com/2017/12/28/nyregion/new-york-subway-.... There's no escaping that the overstaffing was a political boon to a union.

_Why_ NY construction unions are so much worse than Scandinavian unions is a whole different question. But it's not really deniable that the public-union interaction in big cities here is incredibly extractive and antagonistic, and that drives up costs.

This is something I don’t really understand about American business. In my experience it’s pretty common in America to have “superfluous” jobs - the Walmart greeter for example, valet parking attendants etc. etc.

Now on the one hand you can say these roles aren’t superfluous at all, they’re required, maybe some people find a valet convenient (does not compute for me), maybe some customers spend more in your store after a cheery hello at the entrance.

On the other hand, society works just fine without these roles and at lower overall cost.

Is it a workaround for capitalism’s failings? Like “hey of course there’s a job for everyone who wants one” kind of thing and we’ll just quietly eat the cost because the flaking out on society payments (taxes to cover rule of law etc.) is cheaper overall than having a couple of extra minimum wages on the balance sheet?

Hold on, commuter and metro rail in the US have dedicated conductors? As in one per train, rather than someone spot-checking tickets on one in a hundred trains?

That's a nice resiliency and I give roads credit where they are due for it. But cars are terrible and we simple cannot continue to do the easy status quo thing.