Question

Labor costs are among the most dynamic factor which constitutes an estimate's cost. Discuss about the factors that can cause labor costs to differ dramatically in a standard job scenario. Give examples and explain how this may affect construction project performance.To support your opinion, refer to any verified sources such as articles, journals, books and newspapers. Citation and quote the authors too if possible. Thank you

Answer 1

Labor cost depends on labor supply and demand.

Demand for labor depend on number of projects. If number of projects are high, then the demand for labor will be high as well, increasing labor costs. Otherwise, if number of projects are low, then demand for labor will be low, decreasing labor costs. Number of projects depends upon the state of economy. If economy is in boom phase, number of projects will be high. Also, if economy is in recession, number of projects will be low.

Economy	Projects	Demand for labor	Labor costs
Boom	High	High	High
Recession	Low	Low	Low

Now, supply of labor depend upon wages. If wages are high more number of people will be encouraged to work and supply increases. If wages are low, less number of people will be willing to work, decreasing the supply. More the supply, downward wage pressure will exist. Less the supply, upward wage pressure will exist.

Now, say economy is in boom phase, so more number of projects will be there,

so labor costs will be high, also supply of labor will be high, as more labors will be willing to work at higher wage.

High labor costs will not be good for project's performance, so more projects will not be taken.

This will reduce the number of undertaken projects and will put the economy into recession decreasing labor costs.

Now, say economy is in recession, so less number of projects will be there,

so labor costs will be low, also supply of labor will be low, as less labors will be willing to work at lower wage.

Low labor costs will be good for project performance, so more projects will be undertaken now.

This will increase the number of undertaken projects and will put economy into boom phase increasing labor costs.