“Productivity isn't everything, but, in the long run, it is almost everything. A country’s ability to improve its standard of living over time depends almost entirely on its ability to raise its output per worker."
Economic progress often hides in plain sight. We see it when prices fall or tasks that once took a day now take a minute. Over time these gains compound, reshaping how we live and what we can afford. But the opposite is possible; some industries grow more expensive and less efficient even as everything around it improves. When one of those industries sits at the center of housing supply, inflation, and economic growth, the consequences are serious.
Thinking about it from the 50,000-foot level, economic growth is a function of two simple inputs: how many hours people work and how productive they are during those hours. Historically, workers on average have become much more productive, driving the inflation-adjusted cost of goods down and allowing for greater specialization of labor, which has a reinforcing effect on productivity growth. Rich or poor, we all benefits from a century of extraordinary productivity growth.
This growth -- which is robust and consistent across so many economic categories, as shown in the graph below -- has eluded the construction industry entirely. Since the Bureau of Labor Statistics started tracking productivity in 1987, construction has averaged negative growth from that year to 2019. Yep, negative. Even assuming zero inflation, workers were building buildings and houses for less money in 1987 than they are today.
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