Will Cheap Labor in India Last Forever?
A global symbol of offshoring, India benefits from the massive availability of its workers, including throngs of tradesmen on the construction site. The growing Indian economy depends on the world's second-largest population—soon to become the world's largest, overtaking China, according to U.S. Census Bureau projections—to consume more products as its quality of life improves in this emerging market. This raises a question: Will cheap labor stick around as India's workforce moves up the economic ladder?
One factor is the steely bond between man and materials. Walk around a jobsite today in India, and you'll see a mix of skilled and unskilled work: Cutting rebar, welding hangers, stacking bricks. In India, most of these tasks revolve around the availability of cheap labor.
"In the states, you try your hardest to design something that has the least amount of labor involved," explains Grant R. Stevens, senior managing director and country co-head of Hines India. "Here, it is completely opposite: You try your hardest to design something that has the most amount of labor." In the U.S., labor can consume more than half the cost of a project; in India, it is less than 20%, construction experts say.
As a result, much of the materials going into a building are fabricated on-site. Take rebar as one example. In India, rebar ships to the jobsite in standard lengths of about 40 ft. Workers carry the rebar to a station, where it is cut down according to the shop drawings. From there, it moves to a bending station and then a welding station. At the end of the process, cuttings are thrown into giant piles and recycled.
At One Horizon Center, a 25-story speculative office-and-retail complex that Hines is building near New Delhi in the growing satellite city of Gurgaon, workers arrive at the jobsite on scooters, in auto-rickshaws and even on foot. They wear hardhats, but few don safety glasses, high-visibility vests or other protective gear commonly seen in the developed world.
"Safety is an issue," admits Harmeet Singh, who manages construction at One Horizon Center for Hines. The turbaned construction veteran walks about the jobsite with an air of authority, and when he sees something out of place, he forcefully asks for an answer. Just getting workers to wear steel-toed shoes is difficult, he says. On especially hot days, laborers are known to stay at home unless they are allowed to work in their sandals.
For the workers, their reward is around $4 a day for unskilled work, $7 a day for semi-skilled work and $10 a day for skilled work. This may increase as the quality of life improves. The Indian government, for example, has offered farm workers a standard wage to slow down the country's rapid urban migration. "What that's done has stopped the flow of labor that is coming into the cities," Stevens says. "There are fewer laborers, and it is difficult to get laborers on jobs."
As India continues to develop, contractors are likely to invest in more mechanical means, which could benefit manufacturing. But before that can happen on a grand scale, skills need to increase. "It could take five years. It could take 10 years," Stevens says. "The experience levels aren't there. It'll take a little bit of time."