A comparison between growth in labour productivity in the construction industry and the economy

Abstract

The construction industry is commonly believed to have slow growth in labour productivity. This belief is partly due to the labour intensive nature of the construction process and partly due to the inherent difficulty the industry has in adopting labour saving technologies such as the production line technique due to the one-off nature of construction projects. The ‘fragmented’ structure of the industry and its apparent stagnant technological progress further strengthens this belief. However, on the other hand, it can also be argued that a ‘fragmented’ structure facilitates the division of labour and therefore enhances the productive efficiency of labour. Furthermore, the labour intensive nature of the construction process simply means that output (in value added terms) per unit of labour, at any point in time, is likely to be lower than that in the economy. This however does not necessarily imply that growth in labour productivity in the construction industry over time will be also lower than that of the economy. Whether labour productivity growth in the construction industry compares favourably with that in the economy is purely an empirical question which this paper attempts to investigate. It presents a simple method of estimating the relative labour productivity (RLP) trend of the construction industry (labour productivity of the construction industry relative to that of the economy) from national accounting data. The method is then used to derive the trend of RLP in Hong Kong's construction industry. The results do not support the common belief that labour productivity in the construction industry grows at a slower rate compared with that in the economy.