Construction industry grapples with labor shortages, rising costs: report

A new report has highlighted the unprecedented challenges being faced by Türkiye’s construction sector, long considered a driving force of the economy.

Titled “Construction Sector and Labor Market Dynamics in Türkiye,” the report was commissioned by the Real Estate Investors Association (GYODER) and independently conducted by Bahcesehir University’s Economic and Social Research Center (Betam).

It highlights deep-seated issues in the industry. While once a booming field, the sector now struggles with labor shortages, soaring costs, and an uncertain economic outlook, raising concerns about its future sustainability.

Volatile growth and unstable workforce threaten industry

Once a symbol of rapid urbanization and economic expansion, Türkiye’s construction sector has gone through a rollercoaster decade. Between 2010 and 2017, the industry flourished, fueled by ambitious development projects and easy access to credit. That success, however, was short-lived.

The 2018-2019 economic downturn hit hard, triggering a wave of layoffs and project cancellations. Though the sector rebounded slightly in 2023, largely due to post-earthquake reconstruction and urban renewal initiatives, underlying problems persist. Skilled labor is in short supply, inflation has driven up material costs, and firms are grappling with financial instability.

Construction workers are quitting—and few are willing to replace them

A mass exodus from the construction workforce is compounding the industry’s struggles. Job security remains a major issue, as a large portion of workers are employed on a temporary or daily wage basis. Unlike other sectors that offer stability and benefits, construction jobs provide little in the way of long-term security, pushing many workers to seek alternatives.

According to survey data, the construction industry ranks among the lowest in worker satisfaction, along with agriculture. The main grievances include unpredictable wages, hazardous working conditions, and a physically demanding environment. Younger generations, in particular, are steering clear of construction, preferring jobs that offer better stability and work-life balance. This has left companies scrambling to fill positions, further driving up labor costs.

Material costs soar as skilled labor flees abroad

It’s not just the workforce that’s dwindling—costs are surging at an alarming rate. Inflation has sent the prices of critical construction materials like cement, steel, and insulation skyrocketing. Meanwhile, many experienced Turkish construction workers are choosing to work abroad, particularly in Europe and Central Asia, where wages are significantly higher.

The combination of labor shortages and expensive materials is making it increasingly difficult for projects to stay on budget, forcing some developers to cut corners or delay construction altogether.

Migrant workers, gender imbalance define sector’s labor market

With local workers in short supply, construction firms have turned to migrant labor to fill the gaps. While this helps address immediate workforce needs, it also raises concerns about wages, job security, and the working conditions of foreign workers. Many migrants are employed informally, often without proper safety measures or labor rights protections, further complicating the industry’s employment landscape.

The sector is also overwhelmingly male-dominated, with women making up just 5% of the workforce in Türkiye as of 2022. This is far below European averages, where female participation ranges from 7% to 14%. Social norms, workplace culture, and a lack of incentives for women in construction contribute to this imbalance. Without targeted policies to encourage female participation, the industry is missing out on a potential workforce that could help alleviate labor shortages.

Post-earthquake construction boom adds pressure to struggling industry

The Feb. 6, 2023 earthquakes devastated parts of Türkiye, leaving an estimated 800,000 homes in need of rebuilding. This has created a sudden surge in demand for construction workers and materials, further straining an industry already dealing with shortages. Urban renewal projects, especially in high-risk areas, are now more critical than ever, but developers remain hesitant.

Many of the buildings most in need of reconstruction are in low-income areas, where profitability is a major concern. Without stronger government incentives, these projects risk stagnation, leaving thousands without proper housing.

What needs to change?

Experts suggest that urgent policy reforms and strategic investments are needed to stabilize the industry.

Stricter regulations on wages, job security, and workplace safety could attract more workers back to the field, while investments in skills training may help address the shortage of qualified labor and improve productivity. Ensuring compliance with safety standards and fair wages could reduce worker dissatisfaction and turnover rates.

Additionally, offering tax incentives and workplace reforms to encourage women in construction could help diversify the workforce. Advancements in prefabrication, automation, and modular construction methods could lessen reliance on manual labor. Meanwhile, financial incentives for developers in earthquake-prone and low-income areas could accelerate much-needed reconstruction efforts.

Can construction industry recover?

Türkiye’s construction sector remains vital to the economy, but its current trajectory is unsustainable. Rising costs, a shrinking workforce, and ongoing economic instability make it difficult for firms to plan for the future. Without decisive action from policymakers and industry leaders, these issues could deepen, putting vital infrastructure and housing projects at risk.