First, unless one is looking at modular or manufactured homes/buildings, it is difficult to see where https://www.hocbench.com/a-quick-rundown-of/ automation and computerization can be applied in construction, unlike high volume manufacturing or services such as finance/accounting, engineering, legal, etc. All these estimates must be taken with a grain of salt, as it’s difficult to accurately measure construction inputs and outputs. Some task-level estimates show similar trends of stagnant or declining productivity over time, others show sluggish to modest growth depending on the collection of tasks and the time period considered. Productivity metrics for the entire construction sector consistently show productivity either staying the same or declining over time, in contrast to other sectors like manufacturing and to the economy overall.
The charts below show changes in construction labor productivity, measured as gross value add per labor hour, for 45 different countries. But if other countries show stagnant or declining construction productivity, that suggests the challenges may be due to broader trends, or to the nature of the process of construction itself. If other countries show substantial construction productivity improvements, that suggests that the US’s productivity challenges are something specific to the US. Looking at published installation rates for several dozen construction tasks between 1985 and 2023 implies that, as with other measures, construction productivity has shown little to no increase. Overall task-level productivity analysis shows significant variation in productivity trends.
According to an analysis by McKinsey & Company, construction productivity lags behind overall economic productivity and experienced a marked decline from 2020 to 2022. Looking closely at the regional ratings of the factors (see Table 3), the availability of skilled workers continues to show a high impact in all regions. As shown in Table 2, overall, the availability of skilled workers ranks the highest in terms of its impact on productivity, with 46% of respondents confirming its importance globally. In the last set of questions, respondents were asked to rate the impact of different factors on labour productivity. Similarly, in APAC, more than half of respondents expressed optimistic views on the productivity trend for the next 12 months. Adding to the upbeat outlook, only 8% of respondents expect productivity to fall, while only 19% saw decreasing productivity in the past 12 months.
Limited gains in industry innovation in recent decades
Discussions of US construction productivity often reference this Goolsbee and Syverson paper, or the data behind it. The graph below, for instance, shows trends in US construction productivity by using total construction spending as a measure of output, and total hours worked in the construction sector as a measure of input. Economists and researchers measure construction productivity in a variety of different ways. If productivity doesn’t improve, we can’t expect construction costs to fall and things like houses, roads, and bridges to get any cheaper.
Mismeasurement in real construction output
Direct measurement of construction productivity calculated by dividing the units of work completed by the number of hours worked. Geographically, the MEA region features more high-impact factors than the rest of the world, which suggests more potential opportunities for labour productivity improvements in the region. Meanwhile, at the other end of the spectrum, 48% deem construction equipment and tools to have a low impact. Figure 8 provides the construction productivity responses of the Americas. There are signs showing productivity improvements, with a larger proportion of responses indicating increasing productivity, significant or modest, https://goodmanner.info/2019/07/11/a-10-point-plan-for-homes-without-being-overwhelmed-2/ in the next 12 months as opposed to the past 12 months.
Challenges with measuring construction productivity
It’s also worth noting that this hours per square foot figure is also virtually the https://business-soulwork.com/where-to-implement-green-technologies-for-a-better-tomorrow/ same as the number of hours per square foot calculated by the BLS in their 1964 and 1972 studies. A NIST analysis of this database from 2000 to 2007 noted a decline in project-level productivity, measured in output in dollars per labor-hour. These sorts of metrics are much less common, as it’s rare to get detailed project-level productivity data from builders, but are still seen occasionally. Construction subsector productivity estimates thus generally show stagnant or declining construction productivity, though with significant variation.
Questions and Answers
- Chart 5 depicts the trends in output, hours worked, and labor productivity for single-family residential construction (NAICS x).
- Peng’s analysis of the underperformance finds that technological changes, regulation, and measurement issues have all likely played a role.
- Sector-wide measures of US construction productivity thus tell a consistent story of stagnant productivity growth, differing only in how bad the problem appears.
- However, compared to other parts of the world, the UK&I has more respondents, indicating a pause in labour productivity improvement for the past 12 months and the 12-month outlook.
- It has either stagnated or declined in these countries even as productivity in the wider economy has grown at a solid pace.
- As shown in Table 2, overall, the availability of skilled workers ranks the highest in terms of its impact on productivity, with 46% of respondents confirming its importance globally.
Europe also has growing optimism, with a larger share of respondents indicating increasing productivity compared to the past 12 months (see Figure 7). Productivity performance over the past 12 months shows a positive net balance across all regions, though with significant variation. Yet McKinsey’s 2024 research finds global construction productivity grew by just 0.4% annually between 2000 and 2022, compared with around 2% for the total economy (a total improvement of only 10% over more than two decades).
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Between 2019 and 2024, revisions to the UK KLEMS data resulted in a swing from showing positive construction productivity growth between 1996 and 2016 to those same years showing negative productivity growth. More generally, the accounting required for accurate sector or sub-sector construction productivity estimates is very difficult. It’s thus important to have some deflator that can capture changes in the actual value of buildings, not merely the prices of their inputs. Output is measured in dollars for both buildings — $300,000 for the first, $225,000 for the second — and the value of the deflator stays the same since input prices haven’t changed.
3 The past 12 months and the next 12 months
Figure 6 shows labour productivity in the MEA for the past 12 months and the next 12 months. There is an upward trend in productivity when comparing responses for the past 12 months with the next 12 months. Correspondingly, the MEA and UK&I have the highest and lowest relative importance index (RII) performance, respectively (see Table 1). The results are presented at the global level and in five regions (the United Kingdom and Ireland (UK&I), the Middle East and Africa (MEA), Asia Pacific (APAC), Europe, and the Americas). Rate the following factors impacting worker productivity in your business (high impact, moderate impact, low impact).
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Now suppose that building material prices stay flat, but we figure out a way to build an essentially identical building for $75,000 worth of materials and 750 hours worth of labor, which we sell for $225,000. In practice, this sort of disconnect between construction input prices and other measures of inflation appears rare — in Teicholz’s 2013 article, there was little difference in productivity trends using construction-specific deflators and the more general Consumer Price Index. But deflating by the consumer price index, which only rose 10% between the first and second buildings, would now make it appear that the second building was worth much more output than the identical first building.
