The output measures are the sales price and the input measures appear to only include construction (service examples are renting machinery and architectural services). Your examples are ratios of final value to input cost, what about taxes and fees (permits, etc)? (Services in KLEMS may include such frictions - I wasnt able to find details). That would appear to make productivity worse, less house value per input if you further subtract frictions.
I've seen estimates of around 25% of total costs coming from regulations (Laurie Goodman Urban Institute), although part of that is building code changes which is in your quality control.
Two thoughts... first, unless one is looking at modular or manufactured homes/buildings, it is difficult to see where automation and computerization can be applied in construction, unlike high volume manufacturing or services such as finance/accounting, engineering, legal, etc. It is much like teaching or haircutting; there are practical limits on productivity increases. Similarly, aside from plumbing which transitioned from iron pipe with threaded or lead/okum joints to soldered copper and finally pex and PVC, most tasks are similar now to those in the 60s (I'm surprised the measures don't reflect this). Pneumatic and battery tools helped, but not significantly.
Secondly, how does the quality and education of the construction workforce affect productivity? As someone that had experience with construction trades in the past 50 years, the basic skills such as literacy, math and simply pride of workmanship has declined. Immigrant labor has benefits, but formal vocational training and unionization also have benefits.
There's a mini-sector that may have fallen through the cracks. I'm talking about the self-employed subcontractor (UK White Van Man) who wants to get on site, do the work, then move on to the next job same day if possible. If it takes a day and a half rather than the targeted one day, the contractor's income has fallen by one third. Small contractors are ruthlessly focused on productivity and rapidly adopt every new technology that reduces time on site.
The general thrust of the article is dead center. A certain bridge that took two years to build will now take ten years to repair. Whiskey Tango Foxtrot.
It'd be interesting to look closely at an individual new construction material or technique that should be productivity enhancing and how that ties into these macro numbers. Something like using Pex pipe for plumbing should generate material labor savings but maybe not.
By and large, most buildings are still 'stick-built' although tools have changed and become powered. These are incremental time improvements. Industrialized construction has productivity improvement potential - unless it's just stick building under a roof. Building codes have impact, however they also impact industrial construction. Coordination is a significant influence - especially 'hand-off' between trades or even sections of a building. Materials, methods and tools all matter. I'm looking forward to some conclusions/speculations on productivity improvement potential.
As always thank you to Brian for doing the work of pulling this together into something coherent!
The capital costs are high enough for construction work that I can't help wondering whether what we're seeing here isn't an instance of the "synchronization tax" associated with bringing two different models of the future into alignment. https://www.symmetrybroken.com/the-synchronization-tax/ I'm a little like the hammer seeing everything as a nail at the moment, but I believe there are significant costs associated with achieving this kind of alignment. In many cases, these costs can be imposed asymmetrically, forcing transactions to close. In the case of construction, there are institutions that seem to push toward the costs being shared more symmetrically, and when there isn't enough overlap in the vision for the project, the costs may simply be too high.
Then there's also the "maintenance" cost compliance and shielding from future liability (insurance). I didn't see those show up at least directly in this analysis...
Maybe because we are still basically building the same structure, but making it more complicated (reference the change in amenities over time). And many improvements have reduced the skill levels required to perform the task (plumbing moved from steel to copper to plastic to PEX), while the average plumbing system grew more complex. Air nailing has reduced the skill level required to get speed, but cutting / positioning the parts hasn’t changed. Electrical labor required hasn’t changed a lot, but material costs have increased and electrical systems have become more complex. Weather related costs shouldn’t have changed much. Has a similar analysis been performed on manufactured housing?
Don't lenders have a rule about the ratio of land value to house value? Since many buyers are going to need bank loans, rising land prices almost require rising house prices. There's probably a builder rule of thumb saying such and such a lot price means the house gets granite kitchen counters, and granite counters require more labor and specialty skills than, let's say, Corian. There's probably a similar competition in multi-family homes and for office buildings where financing the investment entails fancier trim and more amenities to yield the necessary rents.
Maybe I am barking up the wrong tree, but I've been wondering if rising land costs have been hurting productivity metrics.
We need to go nano or pico, a level below task, and look at how much of each task is planning, approvals, set-up, and tidy-up versus mere execution now compared to 50 years ago. Organising, go-ahead approvals, tests, and certification, essentially transaction costs, may have risen a lot and come to dominate.
Also, a direct consequence of increased variety of building types is that even skilled, experienced workers are doing tasks for the very first time more often. A diversity tax.
The output measures are the sales price and the input measures appear to only include construction (service examples are renting machinery and architectural services). Your examples are ratios of final value to input cost, what about taxes and fees (permits, etc)? (Services in KLEMS may include such frictions - I wasnt able to find details). That would appear to make productivity worse, less house value per input if you further subtract frictions.
I've seen estimates of around 25% of total costs coming from regulations (Laurie Goodman Urban Institute), although part of that is building code changes which is in your quality control.
Two thoughts... first, unless one is looking at modular or manufactured homes/buildings, it is difficult to see where automation and computerization can be applied in construction, unlike high volume manufacturing or services such as finance/accounting, engineering, legal, etc. It is much like teaching or haircutting; there are practical limits on productivity increases. Similarly, aside from plumbing which transitioned from iron pipe with threaded or lead/okum joints to soldered copper and finally pex and PVC, most tasks are similar now to those in the 60s (I'm surprised the measures don't reflect this). Pneumatic and battery tools helped, but not significantly.
Secondly, how does the quality and education of the construction workforce affect productivity? As someone that had experience with construction trades in the past 50 years, the basic skills such as literacy, math and simply pride of workmanship has declined. Immigrant labor has benefits, but formal vocational training and unionization also have benefits.
Being paid by the job rather than by the hour might account for the difference.
Will future installments take these mountains of data and arrive at any conclusions beyond stagnating productivity?
Yes.
There's a mini-sector that may have fallen through the cracks. I'm talking about the self-employed subcontractor (UK White Van Man) who wants to get on site, do the work, then move on to the next job same day if possible. If it takes a day and a half rather than the targeted one day, the contractor's income has fallen by one third. Small contractors are ruthlessly focused on productivity and rapidly adopt every new technology that reduces time on site.
The general thrust of the article is dead center. A certain bridge that took two years to build will now take ten years to repair. Whiskey Tango Foxtrot.
It has always been the case that repair takes longer than new build.
Five times longer?
And the effect of building code changes on costs and construction times as well as the effect on trade education?
It'd be interesting to look closely at an individual new construction material or technique that should be productivity enhancing and how that ties into these macro numbers. Something like using Pex pipe for plumbing should generate material labor savings but maybe not.
By and large, most buildings are still 'stick-built' although tools have changed and become powered. These are incremental time improvements. Industrialized construction has productivity improvement potential - unless it's just stick building under a roof. Building codes have impact, however they also impact industrial construction. Coordination is a significant influence - especially 'hand-off' between trades or even sections of a building. Materials, methods and tools all matter. I'm looking forward to some conclusions/speculations on productivity improvement potential.
As always thank you to Brian for doing the work of pulling this together into something coherent!
The capital costs are high enough for construction work that I can't help wondering whether what we're seeing here isn't an instance of the "synchronization tax" associated with bringing two different models of the future into alignment. https://www.symmetrybroken.com/the-synchronization-tax/ I'm a little like the hammer seeing everything as a nail at the moment, but I believe there are significant costs associated with achieving this kind of alignment. In many cases, these costs can be imposed asymmetrically, forcing transactions to close. In the case of construction, there are institutions that seem to push toward the costs being shared more symmetrically, and when there isn't enough overlap in the vision for the project, the costs may simply be too high.
Then there's also the "maintenance" cost compliance and shielding from future liability (insurance). I didn't see those show up at least directly in this analysis...
Very excited for the why of it all
Maybe because we are still basically building the same structure, but making it more complicated (reference the change in amenities over time). And many improvements have reduced the skill levels required to perform the task (plumbing moved from steel to copper to plastic to PEX), while the average plumbing system grew more complex. Air nailing has reduced the skill level required to get speed, but cutting / positioning the parts hasn’t changed. Electrical labor required hasn’t changed a lot, but material costs have increased and electrical systems have become more complex. Weather related costs shouldn’t have changed much. Has a similar analysis been performed on manufactured housing?
Any international comparisons? Even rouge guesses would be interesting
Don't lenders have a rule about the ratio of land value to house value? Since many buyers are going to need bank loans, rising land prices almost require rising house prices. There's probably a builder rule of thumb saying such and such a lot price means the house gets granite kitchen counters, and granite counters require more labor and specialty skills than, let's say, Corian. There's probably a similar competition in multi-family homes and for office buildings where financing the investment entails fancier trim and more amenities to yield the necessary rents.
Maybe I am barking up the wrong tree, but I've been wondering if rising land costs have been hurting productivity metrics.
We need to go nano or pico, a level below task, and look at how much of each task is planning, approvals, set-up, and tidy-up versus mere execution now compared to 50 years ago. Organising, go-ahead approvals, tests, and certification, essentially transaction costs, may have risen a lot and come to dominate.
Also, a direct consequence of increased variety of building types is that even skilled, experienced workers are doing tasks for the very first time more often. A diversity tax.