Or are Census of Business definitions just making it look that way?
Since the late 1990s, researchers and analysts have debated whether labor productivity in the construction industry has declined or remained constant. This contrasts with manufacturing, where productivity has increased strongly. The traditional view is that labor productivity is the amount of value-added work carried out by a unit of labor — for example what a person produces yearly. Manufacturing has risen at a significant pace since the 1980s, thanks in part to automation of design and fabrication. Construction productivity, on the other hand, has been static or slightly declining.
A recent paper we authored provides a new insight into this situation. The paper, “Relative Productivity in the AEC Industries in the U.S. for On-site and Off-site Activities,” appears in the July 2008 issue of the Journal of Construction Engineering and Management. It shows that the negative trend is largely the result of how “construction” is defined by the Census of Business.
Our work grew out of the recognition that the designation “construction industry” is applied only to activities that are carried out on the construction site. All off-site prefabrication is considered manufacturing. As a result, custom off-site steel fabrication into shippable assemblies is classified as manufacturing, while any on-site work is deemed construction. Similarly, off-site curtain wall fabrication or precast concrete fabrication, even though made to order for a specific project, is treated in the Census of Business as manufacturing.
We reviewed production activities for industries with both off-site and on-site components and compared their productivity and changes in productivity over a 10-year period. For example, glass and window fabrication productivity, based on data published by the U.S. Census Bureau, has increased at a compound rate of 2.8 percent a year, while glass and window contractors’ productivity grew at an annual rate of 0.8 percent per year. In general, growth in an industry sector can come about through productivity increases, through growth in the number of employees, or both. The window fabrication industry grew by about 50 percent over the 10-year period studied, with 60 percent of that growth coming from productivity increases. Window contractors, on the other hand, grew by more than 100 percent. However, only 7 percent of that growth came from increased productivity; the rest came from employment growth.
Similar trends were seen in the steel fabrication sector. Productivity of off-site fabrication grew by 2.3 percent annually, while on-site steel erection productivity grew by 1.2 percent.
Similar comparisons were made of precast concrete, cast-in-place reinforced concrete, sheetrock installation, and elevators/escalators. In all cases, construction sectors whose work is primarily on-site had lower productivity than comparable sectors working off-site.
With the differences between on-site and off-site productivity, we expected also to see a shift to increased off-site fabrication. That is, the overall growth in off-site value-added activity should be greater than on-site value-added activities. However, the only significant trend of this kind was observed in steel fabrication. The value-added activity of off-site steel fabrication grew over the 10-year period by 20 percent, while that of on-site activity grew by 16 percent, meaning that a significantly larger percentage of industry growth was in the off-site sector.
The Census of Business statistics used for this study are reported at five-year intervals and take two years to be published. Therefore, the 2007 data will become available in 2009 or 2010. These will probably still be too early to reveal the structural changes being realized today from new automation opportunities arising from building information modeling. However, the 2012 Census of Construction should provide clear indicators of the effects of BIM on productivity in construction practices.
Our results show that because significant industries that are normally considered part of construction are not defined that way in the U.S. Census of Business, construction industry productivity growth is seriously under-estimated. To get a more accurate reading of construction productivity, we recommend including the value-added activity of prefabricated made-to-order building products as part of construction. These products have a much higher proportion of their value added through knowledge and information processing, such as the use of BIM, than building parts fabricated on-site. These products better reflect the productivity benefits of technology in construction.
