Thursday, 5 September 2019

Employment in the Australian Built Environment Sector

The built environment encompasses the entirety of the human built world. The built environment sector is the collection of industries responsible for producing, managing and maintaining those buildings and structures.

Employment and IVA per Employee

As a sector, the BES accounts for 19 percent of employment in Australia. Total employment in the BES increased steadily but not dramatically for a decade, reaching 2.1 million in 2017-18. Over that time, in the composition of employment across the BES the significant changes have been the rise in Professional, technical and scientific services from 10 to almost 12 percent (however, the current year estimates are usually revised), and the fall in manufacturing BES numbers from 9 to under 7 percent.

The significance of BES employment is not just the scale, nearly one in five employees, but also the distribution. Supply side industries contribute 63 percent of BES output and 71 percent of employment, due to the high labour intensity of Construction. The three Construction industries all have a low value of IVA per employee compared to income per employee, converting relatively low shares of revenue into value added of 19, 30 and 40 percent respectively. On the other hand, the demand side industries of property and real estate contribute 26 percent of BES output but have only 16 percent of employment, and convert 65 percent of income per employee into IVA.

Capital expenditure by firms is their purchases of buildings, structures, software and machinery, the known as gross fixed capital formation (GFCF), “gross” means the expenditure is measured without deducting the consumption of fixed capital (the wear and tear caused by its use in production). GFCF has two types of assets, material and intellectual, the latter includes mineral exploration; computer software and databases; and entertainment, literary and artistic originals. In the long run, investment measured by GFCF determines industry growth rates and their level of labour productivity.

Over time, annual GFCF becomes the capital stock of an industry, the quantity of assets used in production, and industries range from labour intensive to capital intensive. Capital intensity is typically measured as the ratio of fixed capital to labour, or of assets to revenue in a company’s accounts. Industries that are capital intensive like cement, water and sewerage, and real estate require large amounts of capital, and therefore high levels of GFCF. In the absence of capital stock data at this level, GFCF is an alternative measure of capital intensity across the BES. When GFCF per employee is compared to IVA per employee there is a close match, industries with high IVA per employee also have high expenditure on GFCF per employee.


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