Labour Productivity in the New Zealand Construction Industry: A Thorough Investigation

Van Dai Tran,John E Tookey

doi:10.5130/ajceb.v11i1.1841

Van Dai Tran, John E Tookey

Open Access

https://doi.org/10.5130/ajceb.v11i1.1841

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Abstract

Productivity growth is strongly correlated to economic growth and increases in welfare. This fact also holds true at the industry level and is particularly true in the NZ construction industry, since productivity growth in this sector may have significant effects on the affordability of housing in the country. In recent years construction in NZ has been subjected to a series of reports that have either highlighted ‘failure’ to grow productivity or have exhorted the industry to improve its ‘poor performance’. However thus far little by way of analysis has gone into the productivity figures that have been quoted, nor has much been done to explain and justify if or why these figures are correct or incorrect.This research seeks to deconstruct construction productivity figures in NZ and explain the patterns over recent years of ‘poor performance’ in comparison with other industries. As such it will examine the nature of the NZ construction industry and analyse the historic statistics related to its labour productivity. This will provide an overall understanding of the sector as well as those extraneous factors that may have significant influences on the NZ construction sector.The research found that while factors influencing inputs of labour productivity measure such as labour and material costs remained stable, factors impacting the corresponding outputs such as house and land prices, value of work in Non-residential and Infrastructure construction grew significantly between 1997 and 2007. Given the positive skewing effect of standard economic indicators (inflation etc) on construction labour productivity figures, the relatively poor performance of construction is worrying for the industry. The paper concludes by demonstrating labour productivity in construction is significantly worse performing than previously suspected.

Highlights

Productivity addresses the question of how efficiently resources are used in the production of goods and services (Holzer & Nagel, 1984)
Productivity improvement is essential for the health of the whole sector, as it is seen as the only valid way to pay for increased standard of living (Heap, 1992)
In the context of the construction industry, productivity improvement is important because inadequate increases in productivity will mean shaper rises in construction costs, with adverse social implications and declining work for the industry (Ganesan, 1984)

Summary

Introduction

Productivity addresses the question of how efficiently resources are used in the production of goods and services (Holzer & Nagel, 1984). It is the key determinant of value, and all other factors that influence value (quality, service, price), of these goods and services. Productivity is one of the important factors that have significant impacts on economic growth, standard of living and increases in welfare (Heap, 1992; Sobhani, 2008; Black et al, 2003). Productivity improvement is essential for the health of the whole sector, as it is seen as the only valid way to pay for increased standard of living (Heap, 1992). Construction tasks are generally complex and inter-dependent such as those in major projects; and are hard to quantify when

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