Women in Construction

Someone needs to help out us dumb economists on this one.

In a presentation before the Standing Committee on the Status of Women, the union that represents a large number of construction workers argued that the government needed to impose minimum quotas on the number of women hired on government financed projects. (See the article)

Getting more women to work in the construction industry may or may not be a good thing - we'll leave that to the philosophers and sociologists. Our concern is with the logic used by the president of the Communications, Energy and Paperworkers Union, Dave Coles, when justifying the proposed implementation of a quota. Mr. Coles is quoted as saying "Not only would this address the chronic worker shortage ..."

When we checked our vast library of Economic Principles textbooks, we found that a shortage occurs when the price is below the equilibrium price. In the labour market, when that occurs the number of people willing to work is less than the number of jobs available. Mr. Coles recommendation is to reduce the number of people available to work by restricting the number of male construction workers. If there is a shortage of workers and you further restrict the number of workers available, how does this make the shortage disappear? Our thinking is it makes the shortage worse.

The story does bring up a couple of interesting questions though. First, why is the wage rate below the equilibrium? Shouldn't a shortage cause wage rates to rise? Perhaps the cyclical nature of the construction industry increases the economic risk of working in this industry and the supply of labour is very inelastic. Changes in demand increase the equilibrium wage, but a union contract at a fixed wage may prevent wages from rising ... the union contract causes the shortage when demand rises. (We may or may not believe this argument). A second possibility is that workers require a wage premium due to the risk of layoff, a wage rate higher than their marginal product. Profit maximizing developers are not concerned with what happens to resources after their project is completed and thus are willing to hire up to the point where marginal labour costs equal the value of the marginal product. There may be an asymmetry in the construction labour market. A third possibility is that construction labour is, for some reason, immobile. That would explain a shortage of construction workers in BC when there is a surplus in New Brunswick.

A second question is why women are not drawn to construction in the first place. If wages in the construction industry are higher than those in the service industry, why don't women gravitate to construction? We could tell you that women are, on average, weaker than men and thus are not suited to construction work. Except that we don't actually believe that. Any doubts? Watch those women that ran the Boston Marathon on Monday. An alternate explanation. Perhaps women are more risk averse than men. In that case the wage rate would have to be higher to compensate for the risk of layoffs. Or perhaps women are just smarter than men and understand what happens when a construction project is completed.