Maximizing economic benefits of construction

The construction sector as a whole is as effective in generating employment as manufacturing or any other so-called "productive" sector work. House construction is more effective in development than construction in general as it tends to be relatively simple and does not need heavy equipment and complex engineering procedures. Low-cost construction is effective in redistributing income to poorer household, it is also very effective in increasing benefits to the local economy.

Most houses are built by small-scale enterprises operating on a local scale. They employ mostly semi-skilled or unskilled worker who do not demand a high wage. They tend to employ local people so the wages go directly into the local area. Low-income workers tend to spend their earnings on locally produced food and other goods rather than saving it, paying taxes or buying imported items. Thus the money circulates in the local economy very effectively (with an income multiplier of at least two). The multipliers from backward linkages (activities which supply the construction site with materials, transport and services) are also particularly high for lower cost housing and for housing constructed in depressed economies. Forward linkage can also be important. They include the range of maintenance activities and production of the fittings and furnishings which people buy to turn their dwelling into a home.

Lower-cost housing creates more employment than high-cost housing. Labour-intensive conventionally-built housing can create twice as many jobs per unit of expenditure as luxury housing. Even self-help housing creates many construction jobs. Extremely labour-intensive methods, such as traditional and modified earth construction, can be particularly helpful for job creation locally and for unskilled people. The manufacture of bricks in an automated, capital intensive factory can generate about 8 person-years work per ten million bricks. The small-scale plant can make the bricks more cheaply – for one-third of the cost – and 95 percent of the costs are raised locally compared to only 25 percent for the large automated plant.

The link between housing and employment, through construction and linkages to other parts of the economy is well established. It is important that governments understand this so that housing is not treated as simply a welfare service for which investment is foregone in hard times. Instead it should be recognized as a potential engine of the economy.