The Construction Productivity Puzzle: Why It’s So Hard (and Expensive) to Build in America
Published on by Tyler Noel in Construction
A recent Freakonomics Radio episode spotlighted a trend every owner, builder, and community feels: construction productivity has slid for decades even as other industries got faster and smarter. The ripple effects? Housing affordability, infrastructure timelines, and project budgets, yours included.
The productivity puzzle
Economists Austan Goolsbee and Chad Syverson estimate that construction worker productivity has fallen roughly 40% since 1970. That is the reverse of what we see in sectors like agriculture, manufacturing, and technology, where innovation and scale have delivered steady gains.
Construction accounts for about 4% of U.S. GDP, which means any long slide has real economic weight. When projects take longer or require more labor for the same output, costs rise for anyone who lives in a house, drives across a bridge, or works in an office building.
What’s driving the decline?
- Regulatory complexity: From minimum lot sizes to wetlands rules to long approvals, layers of regulation slow projects and limit economies of scale.
- Industry fragmentation: Nearly 600,000 firms have fewer than five employees, while only a tiny fraction have 1,000+ employees, which is the opposite of manufacturing’s large-scale model.
- Real risk, real caution: When safety, schedule, and millions of dollars are on the line, new tech isn’t adopted lightly. That caution is understandable, but it can stall progress.
Signs of progress
Even with headwinds, there are clear signs of forward movement. Modular and off-site construction place more work in factory environments where processes can be standardized, and quality control is easier to maintain. When sitework and production happen in parallel, overall schedules can compress. The approach isn’t right for every project, but when it fits, the gains can be meaningful.
Digital tools are also making a difference. Building Information Modeling (BIM) helps teams coordinate in three dimensions and catch conflicts earlier. Mobile field applications give superintendents and project managers real-time visibility into progress, material status, and change orders. Integrated platforms that connect the office and the field reduce rework, which is one of the largest and most expensive sources of waste on complex jobs.
There’s also value in looking abroad. Some countries have embraced industrialized building practices at a policy level. Singapore has set high off-site thresholds on government projects, and Sweden’s long history with panelized and modular methods has produced measurable productivity advantages in certain building types. No single playbook transfers perfectly, but the examples demonstrate that different models can work at scale.
What it means for construction leaders
- Plan for productivity: Track the right metrics, benchmark performance, and focus on bottlenecks you can actually move.
- Invest where it pays: Capital isn’t the issue; allocation is. Prioritize tools and processes that shorten schedules, reduce rework, and boost field-office coordination.
- Navigate approvals: Streamlined entitlement and compliance processes are now competitive advantages.
- Build the future workforce: Off-site methods open doors to new talent pools. Update hiring and training accordingly.
Financial and tax angles to consider
Operational improvements work best when the financial structure supports them. Longer timelines and complex billing cycles can strain cash if the plan isn’t realistic. Align payment terms with the actual work sequence. Protect margin with disciplined change order management. Watch retainage and be sure your forecasts reflect what’s happening in the field.
Innovation can also unlock valuable incentives. The shift toward modular and advanced construction technologies may qualify certain equipment and improvements for accelerated depreciation. Development and deployment of new processes or software can support research and development credits in many cases.
These incentives are powerful when they’re planned and documented well. They can offset a meaningful portion of up-front costs and shorten the payback period on productivity investments.
Looking ahead
We’re at an inflection point. The firms that thrive will rethink delivery models, adopt technology that actually gets used, and keep the bar high on safety and quality. For owners and advisors, the opportunity is to navigate the way ahead with clear data and practical steps, not buzzwords.
As always, we’re here to help. If you’re weighing modular vs. conventional delivery, exploring BIM or field tech, or evaluating credits and incentives, our team can help evaluate options and build a plan that fits your goals. Contact us today for a free consultation.
