As one wise observer noted, if construction workers from a century ago were dropped on a job site today, they’d mostly feel right at home. This is certainly an overstatement, but the truth of the matter is that for many aspects of residential construction such as framing, tiling and finish carpentry, construction techniques haven’t changed a lot over the years. This no doubt has a lot to do with construction’s reputation as an industry with very low gains in productivity.

Productivity is defined as the value created in an hour of work, and the economic health of any industry is largely defined as how its level of productivity is improving. If factory workers increase their output from 100 to 110 widgets a day, their productivity has increased 10 percent. Factors that can improve productivity include automation, specialization and efficiency of operations. In the flooring industry, the ease of installing a product can dramatically influence worker productivity.

Construction has often been the poster child of a low productivity industry. A recent academic paper titled “The Strange and Awful Path of Productivity in the U.S. Construction Sector” points out that while labor productivity has doubled across the U.S. economy over the past 50 years, it has been falling or, at best, stagnant for the construction sector.

While productivity in the construction sector certainly could be improved, there are two mitigating factors regarding these longer-term trends. One is that the smaller scale of operations as well as changes to the regulatory environment have limited its ability to improve productivity. The second is that there are serious measurement problems in trying to determine the level of productivity in the industry.

Let’s start with the scale of operations. As population growth has slowed, so has the scale of construction projects. In the 1970s, we often built two million homes a year nationally, with large subdivisions and mobile and modular homes that could be constructed in a factory environment. Last decade, we didn’t even average a million homes a year, relying more on site-built infill homes. Construction workers can be much more productive working simultaneously on 10 tract homes than on a single upper-end custom home.

Additionally, there is much more emphasis regarding on-site safety standards and building regulations than there were 50 years ago. Workplace injuries have fallen dramatically over the past 50 years, but procedures to reduce accidents no doubt slow construction progress. Permitting, inspections and community input are necessary to ensure a positive project outcome, but they also diminish construction productivity.

A second issue is that we’re undoubtedly not measuring construction output properly. As construction activity has slowed in recent decades, a higher share of activity has been devoted to retrofitting and renovating existing buildings rather than building new ones. The Remodeling Futures Program at the Joint Center for Housing Studies at Harvard University estimates that half of residential expenditures are devoted to maintaining and upgrading existing homes as compared to building new ones. Yet, most of these projects don’t add additional space to the building stock, so their output is difficult to measure.

We’ve seen a similar trend in nonresidential building activity. The American Institute of Architects recently reported that more than half of revenue for work on nonresidential facilities at architecture firms comes from reconstruction projects. While updating and modernizing an aging building stock is a common goal for this retrofit activity, currently the most popular motivation is adaptive reuse or building conversion. The pandemic has greatly changed space needs in our economy, and property owners are looking for alternative uses for their buildings, which has pushed up reconstruction activity. So, the construction industry clearly has work to do in improving the productivity of its workforce. However, there are several complicating factors that make this improvement more challenging than it may appear.