CONSTRUCTION CONTRACTING
Higher worker wages won’t increase the cost of construction, because most of the money spent in construction goes to everything but the workers. Here’s how it works:
DEVELOPER
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Finances the construction and design of a project
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Generally conducts bidding process to hire a general contractor
Construction Manager
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Optional, but normally hired directly by developer
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Tasked with estimating costs & hiring a general contractor
General Contractor
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Hired by construction manager or developer
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Paid by developer
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Responsible for overseeing a construction project
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Develops a construction budget, seeks out subcontractors
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Main point of contact between developer and subcontractor
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Makes payments to subcontractors
Subcontractor
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Hired and paid by the general contractor
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Responsible for providing labor and supplies
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Carpentry, drywall, electrical HVAC, structural and framing, etc are all examples of specialized labor that is subcontracted for construction projects
LABOR BROKERS
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Hired and paid by general contractor
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Functions as a temporary staffing entity that provides a labor force for the construction project
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Can underpay workers, fail to take out tax deductions, fail to keep appropriate records, commit fraud, etc
Materials / SupplieS
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Sourced and purchased by subcontractor
SUB-Subcontractor
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Hired and paid by the subcontractor to help complete specialized tasks for the construction project
Sources:
https://www.procore.com/library/types-of-subcontractors-construction
https://www.procore.com/library/general-contractor-definition
https://www.jacksonlewis.com/insights/your-subcontractor-actually-labor-broker
Payroll tax evasion and workers comp fraud can occur through shell companies appearing as subcontractors