Construction Industry is Booming--Or Is It?

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Robison Wells
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Today, as I went to read the news to find something to blog about, I noticed half a dozen new articles about the booming construction industry.

From the Miami Herald: “The number of construction jobs statewide [in New Mexico] hit 46,000—the highest since the middle of 2009. The jump from February represents an increase in 3.4%, the best gain in the United States.”

From the Deseret News: “Despite the economic slowdown in 2007-2008, Utah’s construction industry has roared back. Doug Welling, president and CEO of Jacobsen Construction: ‘I’ve been working at Jacobsen Construction for 30 years and it’s the busiest I’ve ever seen.’”

Another from the Miami Herald: “Florida’s construction firms are looking to hire skilled workers—they just can’t find enough for their booming businesses. In a survey by Associated Builders and Contractors of Florida, 88 percent of construction firms said they plan to increase hiring. . . But 84% recognize they’re going to have difficulty finding enough workers.”

From the Columbian: “Construction industry struggles to fill positions. ‘What we have now as the market is getting going again is a whole crop of new guys coming into the market that don’t necessarily have the experience,’ housing developer Tim Drechsel said. ‘It’s tough to even find guys now . . .so getting them trained is a huge issue.’”

From City A.M.: “Skilled shortages threaten growth in the construction sector despite current conditions reaching the best level in [eleven years]. More than two thirds of respondents said they are concerned about the quality of available workers.”

So, we know the story. I’ve blogged here many times in recent months about the construction boom and the lack of qualified (and even unqualified) workers. But a recent article in The Atlantic points to a different culprit. In an article titled “The Housing Crisis is a Building Crisis,” author Richard Florida states “Construction industry productivity in the US is lower today than in it was in 1968—and it won’t pick up unless it can embrace modernization.”

The problem, Florida says, is not the booming economy and lack of workers. The problem is that global productivity has stagnated. “In the US, industries as varied as agriculture, retail and manufacturing have increased productivity 10-15 times in 1945, but the productivity of the construction industry has barely budged. This is a huge problem for housing costs and for employment.”

While the infrastructure and heavy industry market (which accounts for 38 percent of the industry) has generated productivity more than 100 times the industry average, residential and traditional construction lags at 20% below. The McKinsey Global Institute report, released in February of this year, calls for seven areas where the industry needs to modernize:

  • Reshape regulation and increase transparency
  • Rewire the contractual framework
  • Rethink design and engineering processes
  • Improve procurement and supply-chain management
  • Improve on-site execution
  • Infuse digital technology, new materials, and advanced automation
  • Reskill the workforce

The report says these changes would increase productivity 50-60%, and add $1.6 trillion in global economic output per year.

“In other words, the global housing and infrastructure crises are largely a product of a backward construction industry—and things won’t get better until we bring it into the 21st century.”

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