New structures are always necessary, but the steep and rapid climb of inflation is making it difficult for the building industry to construct anything. It’s impacting everyone, including those outside the industry who want to build homes or businesses.

How Does Inflation Impact Labor?

Labor makes up around half of all construction costs, so inflation heavily affects employers. They must factor this in the budget, but predicting the market when prices fluctuate is challenging.

They’re faced with projects that go over budget if they don’t do it precisely, which also risks the wages of contractors and employees because they can’t get paid when there’s not enough profit. Many people risk losing their jobs because inflation is rising so quickly.

How Does Inflation Impact Construction?

Building resources have been steadily and quickly increasing in price because of inflation. It was higher in 2022 than in 41 years and the industry only expects it to grow.

The cost of individual materials has also been skyrocketing outside of regular inflation. For example, a particular wood necessary for most buildings increased by around 650% in some cases at the beginning of 2020.

New homes and businesses are necessary, but such high prices are preventing many people from affording to build them. In addition, many construction companies have to save money by using inferior materials or rushing projects, ultimately impacting the quality of buildings.

How Can Construction Groups Avoid the Effects of Inflation?

The effects of inflation are avoidable if construction companies anticipate future costs and reduce current ones.


Laws and regulations can minimize the impacts of inflation because they provide ways to get around it. For example, construction businesses can fuel their machines with red diesel instead of regular to get a tax break as long as they don’t operate them on public roads. They can use local and federal financial loopholes to save money.


Companies should regularly review their bids to stay ahead of inflation. It’s better to price them slightly higher than they regularly would to account for any increased inflation costs.


Labor is a significant contributor to expenses, so the building industry must find ways to limit it and save money. Every business should consider inflation when agreeing on future contracts on top of reviewing and changing current ones.


While competing with similar and nearby companies in price is usually good for business, they should base their bids on the profit margin projected inflation gives them. They can still secure projects by emphasizing their talent, quality, skill or efficiency.

Bulk Materials

Since many of the issues surrounding the building industry come from the supply chain, it’s sensible to order in bulk to limit its effects. It also lowers prices because they won’t have to delay projects during shipping issues.


Inflation varies, so steep increases make it challenging to predict what projects will cost accurately. Managers can change their schedules to reduce the workload and better understand prices. A few projects at once will take a shorter time, giving them a better idea of how to budget upcoming work. It may also save money because they’ll get more done.


Since inflation is quickly raising the price of construction materials, it’s wise for the industry to consider alternatives. For example, clay and mud are inexpensive to install — much cheaper than brick or concrete — because they’re widely available and don’t require expensive machines.

Many things are becoming more expensive because suppliers assume companies must use traditional building techniques and resources. Alternatives are often more affordable and have unique styles of architecture builders can take advantage of to appeal to clients.

Inflation and the Building Industry

It’s challenging for the building industry to keep up with inflation because it’s at an all-time high and makes everything — from labor to construction materials — more expensive. Construction businesses must save money and reduce their costs to make up for it so they can afford to operate and people can afford to contract them.


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