How Basic Costs Affect the Construction Industry – An Analysis

It’s a fact that most industries in the past decades have been suffering from the effects of inflation and never-ending rise of production costs. The construction and engineering industry has not been spared the dilemma. Aside from dealing with shortage in labor and manpower, material costs are also taking a toll on the productivity of the construction industry.

The worker shortage

Fewer employees might translate to more profit for some industries, but this is not the case for the construction industry. According to James R. Bogonet of Bogonet Construction Associates Inc., a D.C. firm that specializes in building and renovating interior office space:

“I’ve had to go out and work weekends to keep a project on schedule. The construction industry is suffering a severe worker shortage that is helping drive up the cost of development, including wages and office rental rates.”

The trend is continuous, because as early as year 2000 more than 240,000 jobs related to the construction industry are glossed over for higher-paying jobs. It’s a case of double jeopardy- if the firms do not pay enough, they don’t get staffed. But they lose immense profit when they do pay higher salaries to construction workers. The problem is cyclical.

Prices are going up, up, up…

According to Engineering News-Record, an industry publication: “National construction costs are up 2.3 percent this year.”

The problem calls for more capital outlay on the part of the clients, because to handle for the backlog due to shortage of workers and even tighter deadlines because of being understaffed, it takes $125-$150 to construct a single square foot of office space in the prime areas of United States.

This figure exponentially rises when we’re talking about the largest buildings and skyscrapers that are either leased or rented out to individual office-space holders.

Subcontractors decline

Smaller outfits are being more selective because of the relative shortage of manpower in the construction business. According to David Dempsey, a senior vice president for Spaulding & Slye Colliers, a development and construction group in the District:

“Ten years ago, if you put out a bid for masonry work, you might get twenty some responses. Today, you’re lucky if you get six.”

As we can see here, the construction industry is experiencing a very tight labor market. In the event that such labor conditions exists, every cost rises to match the unceasing demand. On the other hand, when labor is plenty, the prices drop because of the distributive quality of supply and demand scales.

According to Andrew Craig, vice president of construction and design for Staubach Co., an international commercial real estate brokerage:

“There is so much demand for development in this area that the problem takes on more urgency. We have to be more strategic, more nimble. They (the clients) want to know, `Why am I paying $50,000 for something I paid $30,000 for last year?’ You have to help them understand what’s happening in the marketplace.”

Craig’s analysis is quite dynamic because it highlights a basic truth about all industries- that in the end, if the market is sluggish, everything topples to the ground.

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The True Value of Mechanical Watches Against Wearable Technology

Mechanical watches are associated with centuries-old tradition, elegance and luxury. In today’s post-modern society where we are confronted with wearable technology such as the smart watches, this distinction comes as the true value of this dinosaur technology.

Chronometers date back to the 1500s with the first pocket watch, the Nuremberg Egg being invented by Peter Henlein. However, there are debates to this claim which state that it was a 19th century invention. Nevertheless, there is history tied to wind-up timepieces.

Swiss watchmakers dominated the timekeeping industry until the mid 1970s when the Japanese introduced highly accurate quartz watches that were mass-produced at low-cost. By the early 1980s Switzerland was only producing 10 percent of the timepieces in the world. Two-thirds of watchmaking jobs in the country also disappeared. This was aptly called the Quartz Crisis in the industry.

Mechanical wristwatches did make a comeback in the late 1990s after the successful introduction of chronometers that used the quartz design. They were marketed on the value of fashion rather than on the accuracy of telling time. The industry banked on this success to re-introduce the old technology of the automatic chronometers. At which time they were presented as carefully crafted (and some even handcrafted) luxury items linked to tradition dating back to the 1500s. This was a re-definition of its value as they were historically perceived as accurate metronomes.

What helped the resurgence of these luxury items was the discovery that they were highly valued by collectors who strongly guarded tradition. When the industry was very fragile and was thought to collapse, these collectors started buying the wristwatches at auctions at record prices. This gave the message that there was underlying value to the ancient technology. In another instance, an old Zenith employee hid all the moulds needed to produce the horologes when other companies were disposing or scrapping theirs. These enthusiasts and the old employee are now seen in history as the guardians of tradition.

It was also necessary in the industry’s revival to redefine the competition. It wasn’t anymore, at this point, competing with quartz, but with horologes in its own league – which is the high-end market.

This is the same pattern that we have seen with the resurgence of the vinyl records or with fountain pens. Record collectors who valued them have facilitated their comeback and redefined competition for these collectibles apart from the downloadable music that this society now enjoys.

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