Professional Documents
Culture Documents
Productivity in The Construction Industry
Productivity in The Construction Industry
John OGrady
Prism Economics and Analysis
Prof. Brenda McCabe
Dept. of Civil Engineering
University of Toronto
Goals
Overall Goal:
Constructed products that are less costly to build and which
perform better in terms of durability and maintenance over
their life. This goal can be advanced by greater efficiency in the
construction process, better architectural and engineering
design, and the use of superior performing components
supplied by manufacturers.
Outline of Presentation
1.
A primer on productivity
2.
3.
4.
Measurement issues
5.
Part I
A Primer on Productivity
Productivity
Output
Resources Used
Productivity
Output
Resources Used
Productivity
Output
Resources Used
Productivity
Output
Resources Used
Productivity
Output
Labour Input
Productivity
Output
Capital Input
10
Productivity
Construction Output
Resources Used
11
Productivity
Construction Output
Resources Used
12
Productivity
Output
Resources Used
Productivity
Output
Resources Used
Hourly Compensation
Labour Productivity
14
Hourly Compensation
Labour Productivity
15
Capital Productivity =
Output
Capital Input
Output
=
Capital Services
16
Productivity
Output
Resources Used
17
Part II
Statistical Measures
of the Construction Industry
18
9.0%
8.0%
7.0%
6.0%
5.0%
4.0%
3.0%
2.0%
1.0%
19
61
19
64
19
67
19
70
19
73
19
76
19
79
19
82
19
85
19
88
19
91
19
94
19
97
20
00
20
03
0.0%
19
8.0%
7.0%
6.0%
5.0%
4.0%
3.0%
2.0%
1.0%
19
76
19
78
19
80
19
82
19
84
19
86
19
88
19
90
19
92
19
94
19
96
19
98
20
00
20
02
20
04
20
06
0.0%
20
10
8.5%
Share of Total
Com pensation
8.0%
Share of Hours
7.5%
7.0%
Share of Jobs
6.5%
6.0%
5.5%
20
07
20
06
20
05
20
04
20
03
20
02
20
01
20
00
19
99
19
98
5.0%
Civil/Engineered
31%
Other
1%
Repair
17%
ICI
17%
Residential
34%
Sector shares are important because they can have quite different
productivity trends. Civil construction is the most amenable to
mechanization. Repair is the least amenable.
Prism Economics and Analysis
22
11
45%
40%
Residential
35%
30%
Engineered/Civil
25%
20%
Repair
15%
10%
ICI
5%
19
61
19
65
19
69
19
73
19
77
19
81
19
85
19
89
19
93
19
97
20
01
20
05
0%
100-299
11%
300-499
3%
>500
11%
50-99
11%
0-4
17%
20-49
18%
5-19
29%
Firm s w ith few er than 20 em ployees, account for 46% of construction em ploym ent.
Statistics Canada, CANSIM 281-0041
24
12
40%
35%
30%
25%
20%
15%
10%
5%
20
07
20
05
20
03
20
01
19
99
19
97
19
95
19
93
19
91
19
89
19
87
0%
Part III
Productivity Trends
in the Construction Industry
26
13
All Industries
110.0
1987=100
100.0
Construction
90.0
80.0
70.0
19
87
19
89
19
91
19
93
19
95
19
97
19
99
20
01
20
03
20
05
20
07
60.0
27
1997=100
120.0
115.0
All Industries
110.0
Construction
105.0
100.0
95.0
19
97
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
90.0
28
14
1997=100
115.0
Construction
110.0
105.0
100.0
95.0
19
97
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
90.0
1997-2001:
2001-2003:
2004-2007:
All Industries
Construction
0.62%
1.42%
0.97%
1.37%
1.07%
30
15
31
Part IV
Measurement Issues
32
16
However, reliance on input-based price deflators can underestimate output and thereby under-estimate productivity growth.
This measurement error increases, the longer the time series
used. (Dacy and Gordon)
33
2.
3.
4.
When output price indices are used in place of input price indices,
the estimate of real output, and hence labour productivity, in US
construction increased by 40% between 1948 and 1965.
34
17
1997=100
115.0
Construction
110.0
105.0
100.0
95.0
19
97
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
90.0
35
36
18
1997=100
112.0
110.0
108.0
106.0
104.0
102.0
19
97
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
100.0
140.0
Construction
Index: 2002=100
130.0
Business Sector
120.0
Manufcturing
110.0
100.0
I2
0
III 0 2
20
0
I2 2
00
III 3
20
0
I2 3
00
III 4
20
0
I2 4
00
III 5
20
0
I2 5
00
III 6
20
0
I2 6
00
III 7
20
0
I2 7
00
8
90.0
After 2005, the boom in construction markets drove up labour costs (as
well as materials inputs). The more intense competitive pressures arising
from the higher dollar depressed labour cost increases in manufacturing,
but not in services.
38
Prism Economics and Analysis
19
Capital Productivity
Capital Productivity
104
102
Index: 2002=100
100
Construction
98
96
Manufacturing
94
Business Sector
92
90
88
86
2002
2003
2004
2005
2006
2007
Statistics Canada CANSIM 383-0021
2.32%
1.43%
40
20
2.
Average Annual
Labour Productivity
100
+0.8%
50
+1.2%
50
+1.8%
42
21
International Comparisons
Andrew Bernard and Charles Jones, Review of Economics and Statistics, 1996
Prism Economics and Analysis
43
International Comparisons
44
22
45
46
23
47
48
24
The most recent data (Slide 37) do not support such a strong conclusion,
when cyclical factors are taken into account.
Assertions of a systemic productivity problem are at odds with activitybased estimates of productivity growth, and also at odds with industry
perceptions.
Proponents of the systemic problem view under-estimate the significance
of measurement issues and the importance of pre-fabricated components.
In any event, the diversity of the construction industry militates against
sector-wide advances in productivity. A focus on sub-sectors and on
trades is more appropriate.
49
Part V
50
25
1.
The measurement issues are serious and preclude relying on longterm time series data to draw strong conclusions about systemic
trends.
2.
3.
The most current Statistics Canada data series (Slide 27: output
per hour for 1997-2007, using a chained dollars deflator) is a
reasonable depiction of recent trends that also coincides with
industry perceptions, especially in relation to cyclical influences.
4.
5.
51
2.
3.
4.
52
26