Labour productivity in the New Zealand construction industry: A thorough investigation

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 improve 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. I 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.