* Any views expressed in this opinion piece are those of the author and not of Thomson Reuters Foundation.
New report shows that investment in homebuilding creates jobs and tackles affordable housing shortages, particularly in poorer countries
By Jonathan Reckford, CEO of Habitat for Humanity International
Rajasekar, who builds homes in Kancheepuram, India, left school in the 10th grade so he could earn income for his family. He started as a mason’s helper and worked his way up. By 2019, after 15 years as an experienced mason, Rajasekar was building on average 30 homes and small buildings per year in the flatlands stretching from the banks of the Palar River, employing a team of 15 masons and 45 assistants.
Rajasekar embodies the incredible, often-overlooked job-creating potential of the construction industry in emerging economies, especially for lower-educated portions of the workforce. Mounting evidence indicates that investment in residential construction, in particular, brings multiple benefits to low- to middle-income countries, by creating jobs, filling massive voids in affordable housing and, as a result, helping drive progress towards a more equitable COVID-19 recovery.
The construction sector, led by homebuilding, employs 6-8% of the labor market, according to a new nine-country report by economists at the University of Pennsylvania, the University of Southern California and the University of Washington. A closer look at the numbers reveals construction’s solid return on investment in emerging market economies.
The report, commissioned by Habitat for Humanity’s Terwilliger Center for Innovation in Shelter and released to mark World Habitat Day, found that on average 97 jobs are created for every $1 million in construction output – the value of construction activity related to new and improved homes and buildings. This is substantially larger than high-income countries, like Australia where $1 million in residential construction investment generates 15 jobs, and the US, where the same investment generates 22 jobs (though it must be noted that these jobs are better paying).
In India, the figures are particularly striking, with the construction sector creating 182 jobs per $1 million. Unfortunately, the COVID-19 pandemic hit workers and tradespeople like Rajasekar hard. Sudden and sweeping lockdowns in March 2020 kept all households indoors for three weeks, prompting a massive migration of laborers out of cities and sending the construction sector to a grinding halt. Subsequent COVID-19 outbreaks that swept across the country earlier this year profoundly devastated families and vulnerable communities.
We know that low-income populations around the world have suffered the worst outcomes of the pandemic. If we maintain our current trajectory, an uneven pandemic will give way to an asymmetric recovery, further harming people and communities in greatest need. We can reverse that trend. Investments in residential construction – and experienced masons like Rajasekar – have a significant role to play in building a strong, equitable recovery in emerging markets.
But the investment strategies of national governments and development finance institutions must be tailored for emerging markets, where most construction workers are employed in the informal economy, outside registered corporations and largely without regulation or worker protections. In India, Indonesia and Uganda, as much as 92% of the construction workforce is estimated to be employed informally.
Despite this standard practice in the sector, jobs in construction and masonry can be well-respected and aspirational, especially for experienced workers. Young masons, who generally come from poor backgrounds with limited formal education, have the potential to gain social and economic status by training with experienced workers and mastering a profitable skill. Households in Kancheepuram – Rajasekar’s hometown – told Habitat for Humanity’s staff that masons are appreciated in society and commended for their contributions to the community, as well as their ability to secure a meaningful wage.
For these workers, the residential construction sector is an important first step on the employment ladder to economic stability. Policies that incentivize housing construction can generate valuable employment opportunities and a more equitable recovery, particularly if they also are paired with measures that advance occupational safety and training in new resilient materials and technologies.
A public health crisis at its core, the COVID-19 pandemic has also driven economic crises around the world, exacerbating longstanding inequities including the global housing deficit. We, as a global community, have a unique opportunity to build and sustain a consequential pathway forward. It is more critical than ever that national governments and development finance institutions take prompt action to strengthen the residential construction sector, reinforce norms around decent work and worker protections, and expand healthy, housed communities.
Many other ambitious, skilled workers like Rajasekar are eager to build their businesses while building homes and communities. Let’s clear the way for them to play a key role in supporting stronger, more equitable pandemic recoveries in those places that have been hit hardest.
