4. Value Produced and Expended in Construction

An industry’s contribution to the Gross Domestic Product (GDP, see Glossary) is measured by its value added.¹ In 2015, the construction industry contributed $623.9 billion (4.1%) to the total GDP of the U.S. (chart 4a). While the number and percent of real value added dipped to a low point during the economic recession, it has climbed gradually since.

Value added prices (see Glossary) quantify changes in an industry’s cost and labor inputs, and reflect the productivity of capital and labor used by the industry. Compared with the overall private goods-producing industry (see Glossary) as measured by the value added price indices,² construction fell faster at the outset of the Great Recession (which began earlier for construction compared to the overall economy) and has grown at a similar pace but from a lower level in the subsequent recovery (chart 4b).

Despite fluctuations in construction value through several business cycles, payroll and fringe benefits in construction have declined as a proportion of the value of construction work done (see Glossary). From 1977 to 2012, the proportion allocated to compensation dropped 16% from 30.5% to 25.5% of overall construction value (chart 4c). The percentage of receipts directed towards compensation in the Construction of Buildings sector (NAICS 236) shrank from 18.7% to 13.4%, a decrease of more than 28% during this period. The Construction of Buildings sector also represented the smallest share of compensation among the three major construction sectors.

In 2012, materials (including components and supplies) comprised the largest proportion of expenses for construction payroll establishments, accounting for 28% of the total value of construction business done (chart 4d). Subcontracting was the second largest category at 25% (totaling $340 billion) of the dollar value produced by such establishments.³ Expenses on payroll and fringe benefits made up 20% and 5%, respectively. In addition, of the service expenses for payroll establishments (about $92 billion), roughly $3.9 billion was used to pay temporary staff and leased employees. Overall, 11.4% ($156.2 billion) of the value of construction business done was not categorized and may include profits.

As some types of establishments subcontract a large share of their work, their output may appear disproportionately high compared with their number of direct employees. For instance, Nonresidential Building Construction (NAICS 2362), which had 10% of overall payroll employees in construction, produced $314 billion or 23% of the value of construction work from payroll establishments in 2012, while 49% of the work produced by this sector was done by subcontractors.⁴

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