More information on these measures can be found in an article written by BLS economists in the Monthly Labor Review.
Without these potential mismeasurements, average annual labor productivity growth in the US construction industry from 1990 to 2024 would have been -0.3% rather than -1.0%, Peng writes. Similarly, official statistics use the residential housing price index as a deflator for nonresidential structures, which could also result in a drag on annual construction productivity growth. Rules restricting the size and height of new buildings also weigh on productivity growth, likely because they lead to inefficient investment decisions. Peng finds that delays in approvals tend to impose the largest drag on construction productivity growth.
Since 1965, labor productivity in US construction has been falling at an average pace of 0.6% per year, while productivity in the wider economy has been growing at about 1.6% per year. The report’s analysis shows regulatory changes lowered annual construction productivity growth by 0.7pp, offsetting boosts from technology and labor quality improvements. Most measures of construction productivity show at best very low levels of growth, far below what’s observed in the economy overall; many measures show declining productivity. Overall, it’s hard to be confident of any single metric of construction productivity, due to the numerous, difficult-to-resolve measurement issues at work. It’s possible these are real (though it seems unlikely that firms suddenly got 50% more productive, then 50% less productive, over just a few years), but it’s also possible these are fictional, at least partially the result of labor inputs not being properly accounted for. D’Amico et al. (2023) used “housing units per employee” as a measure of construction productivity, but this measure fails to take into account the fact that on average houses increased in size over https://real-apartment.com/production-of-quality-slings-here-you-will-find.html time.
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The trend of construction productivity in the United States failing to improve over time is indeed concerning. (This is a chapter of a longer report I’m working on that summarizes and expands the last several years of my work on construction productivity. I plan on publishing one chapter a month on the newsletter, and aim to have the full report done by the end of the year.) The global construction industry faces a productivity challenge that is as much about measurement as performance. No single intervention is seen as transformative by more than half of respondents.
By this analysis, 12 of 17 tasks improved in productivity between 1954 and 1985, and 15 of 17 tasks between 1985 and 2023 got more productive. 10 tasks got more productive over the period, 10 got less productive, and 20 tasks were unchanged. We can also use different versions of estimating guides to do our own analysis of productivity trends. They found that labor productivity declined for 30 tasks, was unchanged for 64 tasks, and improved for 107 tasks, with an average growth rate in labor productivity ranging from 0.8% to 1.8% depending on the estimating guide.
Firms tend to overestimate the impact of planned changes and underestimate external headwinds, and the pattern https://businesselevatepro.com/tag/industry here is consistent with that tendency. MEA rises to +54% (from +32%), the Americas jumps from +22% to +48%, and APAC moves from +9% to +38% (the largest gap of any region at 30 percentage points). Forward-looking net balances are higher than past performance in every region. Net balances (the share reporting an increase minus the share reporting a decrease) range from +32% in MEA to +9% in APAC, with Europe at +27%, the Americas at +22%, and the UK at +18%. The slightly higher adoption in the Americas and MEA may reflect more mature industry association frameworks or greater competitive pressure requiring external validation of performance claims.
- However, workers in residential construction don’t merely build new houses, they also renovate old houses.
- For one, modern homes are built to stricter building code standards than older homes; they will have greater fire resistance, greater ability to withstand high winds and earthquakes, and greater energy efficiency.
- Deflating output by the cost of building materials would show identical output for the first and second buildings — the price of the final building doubled, but so did the cost of the input materials.
- MEA rises to +54% (from +32%), the Americas jumps from +22% to +48%, and APAC moves from +9% to +38% (the largest gap of any region at 30 percentage points).
- Meanwhile, at the other end of the spectrum, 48% deem construction equipment and tools to have a low impact.
For one, modern homes are built to stricter building code standards than older homes; they will have greater fire resistance, greater ability to withstand high winds and earthquakes, and greater energy efficiency. Measures of housing sector productivity, for instance, can be distorted by failing to account for changes in what sort of housing gets built. This sort of shift in the output can also be at work in sub-sector measures of construction productivity. However, if the composition of things that are built in the country changes — if over time there are more homes built in Texas and fewer skyscrapers built in New York — this could distort productivity measures. Accurately measuring trends in construction productivity means accurately measuring both inputs and outputs over time. Many countries that at one point had substantially improving construction productivity (Western Europe, Korea, Taiwan) have seen it flatten out in recent years.
Recent performance
Overall, the report shows that the tightening of U.S. land use regulations has accounted for 40% of the gap in productivity growth between construction and the rest of the economy since 1965, and the lack of innovation and quality mismeasurement have each accounted for 20%. A recent academic study found properly accounting for quality improvement and several other measurement problems would raise measured annual construction productivity growth between 1990 and 2024 from the currently reported -1.0% to -0.3%. The report estimates that a 1% increase in country-level regulation intensity lowers construction productivity growth by 0.9pp when taking into account productivity factors such as investment intensity, labor quality, and other country-specific characteristics. In more recent decades, land use regulation changes explain most of the difference in construction productivity growth between the U.S. and similar industrialized countries. Between 1970 and 2024, productivity in the U.S. construction industry fell 30% while overall labor productivity more than doubled. A recent Goldman Sachs report explores why the U.S. construction industry has underproduced compared to other countries’ construction industries.
Challenges with measuring construction productivity
- We can look at trends in productivity — the amount of output we get for a given amount of input — at different levels, from the sector as a whole, to sub-sectors such as housing construction, to individual buildings, all the way down to individual construction tasks.
- An early version of Goolsbee and Syverson’s paper is what Ezra Klein is referring to in his 2023 New York Times column, and it’s referred to in a 2025 Federal Reserve Economic Brief examining productivity.
- A structured approach can help teams drive continuous improvement throughout the project.
- Accurately measuring trends in construction productivity means accurately measuring both inputs and outputs over time.
Other construction technologies that boost productivity — like building information modeling (BIM) or drones — provide additional precise data to assist planning, management and coordination among project teams. Clarity helps teams prioritize tasks effectively, allocate resources effectively and achieve objectives on schedule. Use historical data and analytics to establish realistic workflows, project timelines and resource allocation based on past performance. Early-stage planning reduces confusion and sets construction teams up for successful execution by providing clear direction and expectations. Here are some best practices that teams can target to make productivity gains that help the bottom line. Several construction industry issues impact productivity, ranging from workforce skills and motivation to the availability of materials and the effectiveness of project management techniques.