The construction sector can help lead the economic recovery – Here’s how

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Maikel Lieuw-Kie-Song, Technical Specialist, ILO Employment Policy Department

The construction sector may hold the key to kick-starting economies ravaged by the fallout from the COVID-19 pandemic.

Past crises have shown that, although households and private sector businesses may be reluctant to invest while the economic future is uncertain, governments can increase investments in infrastructure projects, particularly maintenance schemes because these usually involve simpler and quicker approval processes.

Investing in infrastructure can be among the first set of measures to kick-start economies because governments can directly stimulate demand and job creation, compensating for the lack of private sector and household spending. In most other sectors of the economy, the government is reliant on the private sector being willing to hire extra workers and cover their share of the costs.

As a focus for national economic recovery programmes construction has many advantages. It is labour-intensive and employs a lot of people – 7.6 per cent of the global workforce. It absorbs workers from other sectors relatively easily, and projects can target regions and towns where the post-COVID recession is hitting hardest.

There is also a good economic ‘trickle down’ effect from construction work. Local businesses benefit from large projects by supplying raw materials, transport, accommodation, food, and other goods and services.

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Washington State Dept of Transportation

Before COVID-19 struck, many construction workers were on short-term, project-based contracts, and so lost their incomes almost immediately. Those in or from developing countries, where the sector is highly informal, are likely to lack severance pay, unemployment insurance, or any other safety net. They need to get back to work as soon as possible.

Equally, many enterprises in the sector, or those which rely on it, are small or medium-sized and at serious risk of bankruptcy if business does not return soon.

The right infrastructure projects can support not just employment and business activity, they can also provide the foundations for the ‘build back better’ approach of inclusive and sustainable development that policy makers are talking about, if they include environmental objectives and improve access to basic services for the poor.

So, how do we engage this potential booster to get our economies and workforce going again? Clearly, the right government policies and programmes are needed – and quickly – so the construction sector can not only restart but protect its workers and prevent any virus spread as it does so. Here are some suggestions:

  • Investment can focus on existing infrastructure maintenance backlogs. Maintenance is usually more labour-intensive than other types of construction and can be approved more quickly.
  • Where there is mass unemployment and/or low wage costs, labour-intensive activities and local labour-based construction methods can be adopted.
  • Large projects should be balanced by smaller rural and social infrastructure investment (e.g., health care, waste management, water treatment, upgrading informal housing), because these engage local resources and businesses.
  • International labour standards offer already agreed, widely-accepted standards and systems that can ensure quick-start recovery projects and still protect the needs of vulnerable and informal workers and meet international standards for occupational safety and health, better social dialogue, and rights of workers to organize and be heard.
  • Green infrastructure should be prioritized, so we ‘build back better’. These should include both household-level projects (such as renewable energy systems) and national projects like transport adaptation and ecosystem restoration.
  • Economic stimulus initiatives should support the Sustainable Development Goals and Agenda 2030. Before the crisis, underinvestment in infrastructure related to Agenda 2030 was estimated at USD 6.9 trillion per annum. Recovery packages can help plug this gap. Where individual countries lack funds, debt relief and restructuring can provide support.

By Maikel Lieuw-Kie-Song, Technical Specialist, Employment Intensive Investment Programme, ILO Employment Policy Department

 

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