India Grapples With Crippling Labor Shortage
The phrase “human-resource deficit” is seldom associated with India, a nation of more than 1.2 billion people. But this deficit is exactly what’s happening there in the construction industry today, when the growth of the service sector and the movement away from jobs in the industry has led to a deficiency of talented and reliable people.
According to a 2011 report by Ernst & Young and the Federation of Indian Chambers of Commerce and Industry, the construction industry in India is grappling with a 30% labor shortage. With construction booming at unprecedented levels, the demand for a skilled workforce is huge and unfed. According to the report “Indian Construction Sector: The Great Leap Forward,” released earlier this year by Synergy Property Development Services, the country’s labor shortage is “pegged to go up by 65% by the next decade, with more workforce moving from traditional brick-and-mortar industries, [such as] the construction and real estate sectors, to services industries.”
“Indian construction sites tend to be very laborious, so they’re very people-intensive,” says Anurag Mathur, chief executive of project and development services and head of emerging businesses at Jones Lang LaSalle India. “As the construction industry has done well over the last few years and the construction volume gone up, that’s created a lot of pressure on the labor workforce.”
There is also pressure on wages. “The cost has definitely escalated," says Shrinivas Rao, CEO of Asia Pacific at Vestian Global Workplace Services. "Construction costs are spiraling every six months.What we used to pay, let’s say, five years ago at Rs 100 [$1.60] per day, is now about Rs 260 to 270 [$4.16 to $4.32]. Skilled labor, in terms of carpenters or more professionals—what we used to pay, Rs 100 [$1.60], is now probably at Rs 1,000 [$16] today.”
Skilled laborers' pay rates have escalated sharply in recent years. "Carpenters who were making Rs 15,000 [$240] a month, with a little bit of training, are today demanding as much as Rs 80,000 [$1,279] a month," says Sachin Sandhir, managing director, South Asia, at the Royal Institution of Chartered Surveyors (RICS).
In addition, the uncertainty of the unavailability of workers means the companies’ schedules go out the window. “If it slows down, it’s a problem but you can deal with it: accept that what used to take six months now takes nine, budget for it and move on. But the uncertainty—that’s a killer,” he says. “You don’t know whether it’s going to take eight months or 10 months because you’re so deeply dependent on availability of labor. That causes a huge stress on project schedules and then, of course, on quality of construction and so on. When there is a shortage of high-quality labor, the compromise starts to set in, in terms of quality issues and stuff like that.”
Behind the Shortfall
Construction labor in India draws from the migrant population, so it’s very seasonal, explains Mathur. Most people in urban areas for construction work come from rural areas in states such as Andhra Pradesh and West Bengal. “We are so dependent on the skilled laborer. It’s different from the Western world, because they're highly mechanized and highly industrialized. They don’t use 20% of the workforce that we use on-site,” he says.
In addition, schemes such as the National Rural Employment Guarantee Act (NREGA) have contributed to the shortfall of labor on construction sites, many say.
NREGA, which was launched by the central government in 2005 and hailed by the World Bank as a stellar example of rural development, offers 100 days of guaranteed work a year to each rural household. This means that workers who once devoted nine months of the year to working in the city are now spending more time at home in their villages and have less incentive to leave their families to spend laborious days on a construction site.
But even if the labor population remained the same, the demand and level of construction work has exploded in India over the past decade, with no way for the population to keep up.
The other big problem, according to Sandhir at RICS, is the lack of vocational and skills training in the country. “In other parts of the world, vocational training and skills are an important part of the overall education fabric, and what happens is that people with vocational skills end up making as much money or sometimes even more money than professionals,” he says. “But in India, that hasn’t happened.”
Finding a Solution
The solution to this massive labor shortfall problem, according to Mathur, is fairly simple and straightforward. “We have to delink our construction from very high-intensive laborious activities,” he says. “We have to move to more industrial products. For larger projects, I think it’s a given and staring us in the face that we have to move toward prefabrication, industrialization and mechanization.” Indians, he says, are far too attached to customized, handmade things, which, in the future, will be available only at a price.
But Vestian's Rao worries that automation on smaller-scale projects doesn’t work in a country like India. “When the average size of a facility is about a half-million square feet or one million sq ft, to set up the kind of infrastructure that we require adds humongous pressure on the initial investment from the construction standpoint,” he says.
Skills training is a solution that many companies are looking into, individually or with the help of the government. “The problem with India—and I’m talking purely labor—is that there’s nobody training them,” says Rao. “It’s all training on the ground. People work under someone else, [such as] a relative or friend, and then, over a period of time, they learn the trade. So the skill is not imparted in a professional manner in this country. Neither is there certification for an electrician or other such professionals.”
The first step, Rao says, would be for the government and the private sector to get together to come up with training platforms. And that, according to RICS’s Sandhir, is already beginning to happen. RICS, which accredits close to 600 university courses around the world in real estate and construction, has, to date, not been able to accredit even a single course in India, despite having been in the country for over five years. Instead, RICS is tackling the issue in a different way by taking a more hands-on approach and starting an initiative, called the RICS School of Built Environment, to provide interested students specialized education for the real estate and construction sectors.
“The industry has to come forward and say, 'We will support you if you have the skills. You will get employment,' ” he says. “The industry needs to offer skills-training initiatives and certifications, but they also need to give people an incentive for doing them. Only then can we begin to think about meeting the demand.”
