by Bradley Parsons
Staff Writer
Ask an economist about productivity in the manufacturing or technology sectors and the result will likely be an exhaustive explanation backed up by computer models, charts and graphs.
Ask that same economist about productivity in construction and the only response will be a shrug of the shoulders.
Despite the best efforts of construction analysts, investors and industry leaders a reliable measurement of productivity-how much a worker produces in an hour-has been difficult to find. But after decades of uncertainty, Haskell Company President and CEO Preston Haskell thinks he might have found a clear measurement of growth in the industry.
Haskell presented his system at the recent Technology in Construction conference in Las Vegas. The feedback he’s received from industry leaders so far has convinced him that he’s at least on the right track. A reliable measurement for productivity would essentially give construction firms the ability to assess what’s working and what isn’t. It could help create a more efficient industry.
“If we can measure which segments are doing well and which are not doing well, at the end of the day we can be more profitable. Low productivity is typically associated with declining real wages while a more productive industry is usually more profitable,” he said.
Past attempts at measurement have been complicated by the large number of variables in the construction industry. It’s not enough to compare the amount of time it takes to build a house now versus 1965. The modern house could be more efficient, more resistant to fire, less expensive to maintain.
“It’s a very complex industry to attempt to measure,” said Haskell. “The differences in buildings are such that almost no two are alike and it’s hard to draw comparisons. There’s so many variables, so many adjustments.”
The measurement has proven difficult enough that the Bureau of Labor Statistics doesn’t even try. Unlike other key sectors of the economy, the
construction industry doesn’t have a productivity index.
That could change with Haskell’s system, which employs a two-tiered measurement approach. Haskell first compared the cost of a square foot of building construction to the same construction in 1967. Next, he looked
at improvements over the same period in labor productivity. In other words, how long it takes to install plumbing, electricity and air conditioning.
Both measurements found about a 33 percent increase in productivity since 1967. Haskell chose the time period because it had been used in other
studies and he wanted to compare results. It also covers his own tenure in the industry. He started the Haskell Company in 1965.
The results were about what Haskell expected, and so far seem to meet industry analysts’ expectations as well.
“Generally, I’ve received positive reactions. Nobody’s told me I’m
badly off-base. People agree that the measurements may be a bit imprecise, but the broad conclusions are valid and the methodology is competent,” said Haskell.
The study shows the construction industry increasing productivity
by about 1 percent per year. As Haskell expected, his study found that
his industry hasn’t gained as quickly as other parts of the economy. Non-agricultural productivity in the U.S. has grown by an average of 1.75 percent annually during the same time period.
Although construction tends to increase productivity at a slower rate, Haskell was heartened that his study dispelled prior predictions that the industry had actually lost ground in the last three decades.
That was the conclusion in 1999 following a study by economist
Paul Teicholz.
“I could see strictly on the basis of observation that the industry had benefited from technology, automation and improvement in materials.
Teicholz thinks productivity has declined when we can all look around us and see it’s improved. We just didn’t know how much,” said Haskell.