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Latest Tweets. Follow us. Finger, Diane C. Murray, Roland V. Olsen, John G. Prier, Robert J. Rothberg, Herman. Bulletin Washington, DC: U. Bureau of Labor Statistics, , pp. Topkis, Bernard H. Bureau of Labor Statistics. Government Printing Office, The focus of the construction-input-requirement program was to measure labor employment per unit of output or how much employment could be obtained for a given expenditure of output. Some of these studies examined how these requirements changed over time.
These estimates were considered useful in guiding macroeconomic policy. Information on labor-input requirements shows the amount of employment that increased expenditures in any field of construction can generate. At the time that the studies were conducted, reliable output price deflators were not available, so the work of the Office of Productivity and Technology on labor-input requirements was never converted into acceptable measures of productivity growth over time.
The entire construction-input-requirements program was abandoned in the early s because of budgetary pressures. As we noted earlier, the PPI program has started publishing deflators for a number of detailed additional portions of construction. The PPI also publishes deflators for contractor services, which includes electricians, plumbers including heating and air conditioning , roofers, and concrete contractors; however, each of these contractor deflators covers only nonresidential construction.
In this study, we used only one of these deflators for industrial construction. The many new deflators open up the possibility of covering additional construction industries. For example, warehouses, schools, offices, and healthcare buildings are all part of NAICS , commercial and institutional building construction. NAICS also includes many additional types of buildings, such as shopping centers, churches, and police stations.
Similarly, plumbing contractors, except residential, make up only one part of NAICS , plumbing, heating, and air conditioning contractors. Therefore, to obtain measures of output and labor input compatible with the new PPIs, we need to use the COC microdata to determine exactly which establishments specialize in the construction of warehouses or offices or which contractors specialize in nonresidential construction. Access to COC microdata also opens up the possibility of answering further questions about construction.
For example, it will be possible to examine the extent to which productivity varies across establishments within these construction industries and whether economies of scale play a role in this variation. The BLS productivity program hopes to continue this research effort and to determine whether it is possible to prepare reliable measures of multifactor productivity growth for selected industries in construction. However, any such plans are subject to the availability of resources. This article has presented measures of productivity growth in four industries in construction.
The results so far suggest that, contrary to earlier studies, productivity growth has typically been positive. This evidence contrasts sharply with the aggregate evidence, which indicates that productivity growth in construction, as a whole, has been negative or zero for half a century. There is good reason to doubt the aggregate estimates. Specifically, the deflators used to construct these estimates do not account for the broad range of construction activity. Our estimates, which use deflators that more closely match industry output, indicate that productivity in three of the four industries has been positive and robust over our sample period.
Further research on additional portions of construction, using COC microdata and the new PPIs, will help fill out the overall picture. We estimate self-employed worker hours as the number of self-employed workers multiplied by their average weekly hours. We estimate the number of self-employed workers as the number of partnerships multiplied by the number of partners per partnership plus the number of sole proprietors.
Tax Notes reports some industry detail on the number of partners per partnership. The average number of partners per partnership is approximately 2. For years before , we used the number of partners per partnership in each industry. The census industry codes used in the Current Population Survey provide no detail on specific construction industries. We benchmarked self-employment to the corresponding series for paid employees in each industry.
Two central decisions must be made in preparing such imputations. First, which series should we use to interpolate the different data elements between census years? Second, if the census data and the interpolating data series exhibit different 5-year growth rates between census years, how is this discrepancy resolved? The present subsection addresses these two issues. Census Bureau provides good information on the annual growth of output between census years.
In these circumstances, as explained in SRMPY , 73 we benchmarked our interpolating series to the actual COC data and assumed that one-fifth of the entire 5-year discrepancy occurs in each of the 5 years between actual census data. This assumption smooths out the annual discrepancy between our interpolating variable and the actual COC data.
This procedure is the same, except that benchmarking is not possible. For example, we used the Value Put in Place data to estimate the growth in construction output for , , , and Once the COC data have been published, benchmarking the extrapolated annual estimates to the actual data reported in the census will be possible as just described. We use similar procedures to interpolate and extrapolate employment from the COC, using the corresponding annual information from the BLS Current Employment Statistics program.
National Income and Product Accounts , February , provides information on the output price deflators used. In prior years, relatively little information was available on output price deflators in construction. However, beginning in , many new deflators became available, which the BEA immediately adopted.
The improved new deflators considerably improved the aggregate numbers for construction. Nevertheless, the aggregate numbers for construction still contain proxy deflators assumed correct for certain portions of construction. Measures based on deflators known to be appropriate for specific industries are therefore still preferable to the existing aggregate data.
The working paper version includes much more detail on how the estimates were prepared. The BLS establishes a building with standardized features, collects information on the cost of this standardized building from many builders, and gathers complementary information on profit margins beyond these costs.
Justin M. However, output and the corresponding inputs are often difficult to measure outside manufacturing and can produce productivity measures of inconsistent quality. Readers should be cautious in interpreting such data. Similarly, production in portions of the construction sector, such as in single-family housing or highways, is described as occurring in industries.
This matter is worth clarifying here because portions of the existing construction literature, such as Eddy M. Census Bureau called the section on construction the Census of Construction Industries and it has been referred to unofficially as the Census of Construction. Additions, alterations, or reconstruction and maintenance and repair conducted on residential housing primarily appear in residential remodelers, NAICS We do not include residential remodelers because a reliable output price deflator is not available for that industry.
Some elements of additions, alterations, or reconstruction and maintenance and repair are included as secondary products.
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These builders typically construct houses on their own account and eventually sell the house to a buyer. Operative builders were first separated from single-family and multifamily builders in , so the bridge tables for that year are appropriate. Over 95 percent of the revenue and employment of for-sale builders is allocated to single-family housing. Unlike the two housing industries, highways and industrial construction include additions, alterations, or reconstruction and maintenance and repair as well as new construction. Most other statistical agencies use this convention. For example, actual single-family homes are the primary product in single-family housing, whereas architectural drawings or roads are examples of secondary products.
Each COC contains detailed information on the value of primary and secondary products for each industry. In , secondary products accounted for 8 percent of production in single-family construction, 19 percent in multifamily construction, 13 percent in highways, and 29 percent in industrial construction. In any construction industry, secondary products include both output normally produced in other construction industries and all output outside construction. The COC treats subcontracting as a purchase of materials, similar to other materials purchases or expenditures on fuels and electricity.
Purchases from subcontractors are therefore appropriately included within gross output. Information on the value of business done is generally available for establishments with payroll in each industry.
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However, in some instances, the value of business done is not available for establishments without payroll. In these cases, business done is estimated for establishments without payroll through the procedures described in SRMPY See Sveikauskas et al. For the industries considered in this article, establishments without payroll typically account for a relatively small share of business done.
However, our database does not contain as much detail on the output price of secondary products in years before Information on some elements of labor input is similarly more limited before Because of this action, we can include data for an additional census year. Census Bureau reports several alternative price indexes for single-family residential construction.
The price index for houses under construction is used because it is more appropriate than the index for new single-family houses sold, which also reflects the value of the lot and certain other costs outside the bounds of construction. The U. Census Bureau prepares several alternative price indexes for houses under construction. As the U. Once each of these characteristics is valued, determining how much housing output has increased is easy because the characteristics of new houses have improved over time. In figure 1 of this present article, the light-blue line shows how the average quality of new single-family homes has improved over time.
The index now increases more rapidly than in version 1. The sharp adjustments suggest that the highways deflator is not as well established as the three other deflators we use, which are rarely substantially revised. Some of these categories, such as patching of road surfaces and guardrails, are likely to fall into the construction industry, and other elements will not. The Producer Price Index produces an index for the cost of maintenance and repair construction in nonresidential construction [series BMNR], but this includes many different forms of construction, such as highways, office buildings, and schools, in which the costs of maintenance and repair may be quite different.
The NHCCI deflator is in some respects not as comprehensive as the well-known single-family and multifamily deflators. First, the NHCCI does not contain hedonic analysis, the method through which the residential deflators adjust for quality improvements over time. Second, NHCCI deflators rely on the winning bids amount, not actual final payments, which may differ through subsequent change orders. These hours are minor in construction. To ensure that the estimates in the construction industries considered here are comparable, we do not include the cost of labor obtained through subcontractors.
The Survey of Construction data continue to show that permit-to-construction lags are greater for multifamily housing. As mentioned in endnote 5, hours always include the hours of partners and proprietors. Conversely, as housing declines, productivity declines are similarly exaggerated because many of the same unmeasured immigrants leave the industry. While such an interpretation seems likely, quantifying such effects is difficult because little is known about off-the-books workers. We hope to examine the shorter-term effect of undocumented immigrants, especially in housing, further in future work.
In a personal conversation with the authors, Ken Simonson, chief economist of the Associated General Contractors of America, suggested that in many areas of construction, crews of workers, especially concrete and wallboard installers, electricians, and plumbers, can work on either residential or nonresidential projects.
Simonson believes that many workers employed by and counted in nonresidential construction were drawn into housing during the boom and left housing in the ensuing collapse. Such unmeasured labor shifts could similarly exaggerate the cyclical variation observed in housing productivity, overstating productivity gains in the boom and also exaggerating productivity declines in the crash. Simonson emphasizes that these possibilities illustrate the importance of accurate information regarding the employees engaged in residential or nonresidential work.
The rapid productivity increase observed in multifamily housing in —15 also is an outlier.
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We suspected that this implied rapid productivity growth might partially reflect a shift toward more multifamily building in higher priced cities. However, an analysis of census data on housing permits in each metropolitan area, along with Bureau of Economic Analysis data on regional price parities for rents in metropolitan areas, showed that the average multifamily unit shifted to higher price areas over time, with average index values of Multifamily units did grow more quickly in high-priced areas, but this shift was only sufficient to increase implied productivity growth by 1 or 2 percent a year.
Nevertheless, such evidence is useful; it shows how observed productivity can vary solely because of shifts in the composition of output without any necessary changes in the underlying technical conditions under which output is produced. The anomalous behavior of multifamily housing during these years may also reflect increasing amounts of off-the-books workers. However, in the absence of more specific information, we cannot determine exactly what caused the rapid rate of productivity growth observed in new multifamily residential construction in recent years.
Therefore, we advise readers to view results for this industry over the last few years with some caution. In a sense, the housing-starts variable similarly adjusts for capacity-utilization effects. Our article Sveikauskas et al. However, this difference reflects an error in our earlier calculations. With the new corrected data, the —14 rate should have been 4.
Since we do not know exactly which materials each construction industry purchases, we are unable to measure sectoral output. Therefore, we measure output by gross output instead. The same problem often occurs in many services industries; measures of industry productivity growth in the services often have to be expressed in terms of gross output.
For the two additional industries, the periods examined are much briefer, —16 and —16, respectively. These additional series provide further insights and information about construction productivity.
Measuring productivity growth in construction
However, the reader should be aware that when the construction data are updated annually, BLS will emphasize the data series that measures the annual productivity growth of directly employed labor. Consistent data make productivity comparisons across industries much more reliable. SKMPY , section I, shows that the data for total construction suggest that labor productivity has been stagnant for many years. SRMPY includes information for each decade, which shows that such patterns are longstanding and do not merely reflect the difficulties the sector has experienced since Haas, John D.
Borcherding, and Paul M. Berndt and Jack E. Triplett, eds. However, no evidence has yet been presented for contractors. Two difficulties limit what can be said about productivity growth among contractors. First, the available evidence covers only the —12 period, during which, as the discussion of housing has demonstrated, rapid output declines can bring concomitant declines in productivity growth.
Second, the available Producer Price Index PPI deflators refer to only the nonresidential component of each contractor industry, whereas the existing productivity information covers each contractor industry, both residential and nonresidential. Nevertheless, in the spirit of full disclosure, this endnote applies the nonresidential deflator to each corresponding full contractor industry. The —12 estimates of annual productivity growth are then as follows:.
Annual output growth percent. Annual productivity growth percent. These results certainly suggest that productivity growth may have been negative in the important contractor industries. The problem is that no way exists to determine whether these negative productivity growth rates fundamentally reflect the sharp output declines that occurred during this period. In addition, we cannot yet measure productivity growth among the nonresidential contractors that match the new PPIs. Therefore, until data for further years become available and until productivity information for actual nonresidential contractors can be collected, no reliably accurate way exists to determine what productivity growth has been among contractors.
Single-family housing employs more hours than the other industries considered in the present article. Recall that almost all operative builders now called for-sale builders are eventually included in single-family housing. On the other hand, the balance of the evidence clearly shows that productivity growth has been positive, rather than negative or zero.
This point gives added credence to the lower, but still generally positive, estimates of productivity growth that include subcontractor labor. However, the available output price deflators reflect the gross value of a final construction product, rather than builder value added, so we cannot simply remove contractor services from our measures of gross output. If labor purchased from other firms, such as subcontractors, is more prevalent in construction than elsewhere, construction may be much less productive than the numbers for direct labor alone may indicate.
However, without actual information on labor subcontracting in many industries, we cannot determine how subcontracting affects productivity growth in construction relative to other sectors. We will only be able to measure productivity growth in certain portions of a few further NAICS industries. For information on more detailed data items, please submit an email to productivity bls. Department of Commerce, January However, there is no reason to believe that the self-employed or entrepreneurs, who often work long hours, work in the same proportions as production workers.
Data on subcontractor labor hours are interpolated between census years on the basis of employment. Leo Sveikauskas sveikauskas. Samuel Rowe rowe. Department of Labor. James D. Mildenberger mildenberger.
Mildenberger is a supervisory economist in the Office of Productivity and Technology, U. Jennifer Price price. Arthur Young a73bluejay aol. Arthur Young, now retired, was formerly an economist in the Office of Productivity and Technology, U. Employment expansion continues but at a slower pace , Monthly Labor Review , April Measuring quarterly labor productivity by industry , Monthly Labor Review , June Construction employment: a visual essay , Monthly Labor Review , November Measuring industry productivity growth This section describes the main data sources used to develop measures of productivity growth for each of the four industries considered.
Labor input Ideally, the data on inputs and output would come from the same source. View Chart Data. Determining subcontractor labor within each industry Many builders use specialized subcontractor labor, such as plumbers or carpenters, to supplement or replace their own labor force. Along with the labor-output ratios of 1, 2, and 3, we can write 0. Prior Office of Productivity and Technology work on construction Years ago, mainly in the s and s, the Office of Productivity and Technology conducted a number of studies on the construction sector.
References to this work include Ball, Robert. Notes 1 Michael J. About the Author Leo Sveikauskas sveikauskas. Notes: 1 Indicates significantly different from 0 at the percent level. Note: All data in this table report annual rates of labor productivity growth.