Australian Built Environment: Output and Employment

 

Industries are groups of firms with common characteristics in products, services, production processes and logistics, subdivided by the SIC into a four-level structure. The highest level is alphabetically coded divisions such as Agriculture, forestry and fishing (A), Manufacturing (C) and Information and communication (J). The classification is then organized into two-digit subdivisions, three-digit groups, and four-digit classes. SIC codes are therefore two, three and four-digit numbers representing industries, defined as firms with shared characteristics.

The SIC definition of the construction industry captures the onsite activities of contractors and subcontractors, and this data on building and construction work is taken to represent the industry. However, onsite work brings together suppliers of services, materials, machinery and equipment, products, components and other inputs required to deliver the buildings and structures that make up the built environment. When enough firms share sufficient characteristics they are often described as an industry cluster or sector.

The data used here is provided in the Australian Bureau of Statistics annual publication Australian Industry (ABS 8155), produced using a combination of data from the annual Economic Activity Survey and Business Activity Statement data provided by the Australian Taxation Office. The data includes all operating business entities and Government owned or controlled Public Non-Financial Corporations. Australian Industry excludes the finance industry and public sectors, but includes non-profits in industries like health and education and government businesses providing water, sewerage and drainage services. The industries included account for around two-thirds of GDP and the data is presented at varying levels for industry divisions, subdivisions and classes. The most recent issue is for 2020-21.

There is data at the two digit subdivision level for the Construction services and Property operators and real estate services industries. For the subdivisions in Professional, scientific and technical services and Building cleaning, pest control and other services the data includes contributions from other classes outside the built environment. Therefore, for these industries the two digit subdivision estimates have to be weighted using the four digit class data for the built environment component. These proportions are released as supplementary tables and provide data at the class level. Professional, scientific and technical services were included in 2015-16, and in 2016-17 this data was provided for two divisions: Rental, hiring and real estate services, with subdivisions Rental and hiring services (except real estate), and Property operators and real estate services; and Administrative and support services, with subdivisions Administrative services and Building cleaning, pest control and other support services.

The data is not complete because some industries cannot be separated into the relevant classes from Australian Industry. For example, rental of heavy machinery and scaffolding (class 6631) is in subdivision 66 but the data is not available to separate it from the other classes. Also, services such as marketing, legal, insurance and financial are important inputs, but again are not identifiable. Government spending on infrastructure and investment in departments like health and education is included through supply industries, although any maintenance and work done internally will generally not be included. That also applies in industries like retailing and transport where some unknown proportion of work is done in-house.

There is also leakage around the boundaries of industry statistics: some glass is used in mirrors, some in car windscreens; textiles are used in buildings; architects design furniture; engineers repair machines as well as structures, and so on. Because Australian Industry uses tax and business register data, it is the self-classification of firms to SIC industry classes that fundamentally determines the structure and scope of that data. Needless to say, such classifications are not perfect, particularly in regard to large multi-unit or multi-divisional organisations. The data here includes sixteen industries that together form one of the largest and most important industrial sectors in the economy.

Table 1. Australian Built Environment Industries

Supply industries Demand industries              Maintenance industries

Quarrying             Residential property Water, sewerage and drainage

Building construction     Non-residential property Waste collection, and disposal

Heavy and civil engineering     Real estate services          Building and industrial cleaning

Construction services                 Building pest control services

Architectural services                 Gardening services

Surveying and mapping services

Engineering design and consulting

Manufacturing industries

Figure 1.

Table 2. Economic Contribution of Australian Built Environment Industries 2020-21

                                                Employment IVA $billion

Total Australian Built Environment Industries 2,228,000 282

Total Australia Employment and GDP              12,369,000 2,069,178

Built Environment share of Australia total          16.9% 13.6%

Sources: ABS 8155, ABS 5206, ABS 6202.

Figure 2.

Figure 3.

Figure 4.

Figure 5.

The IVA of the sixteen built environment industries contributed 13.6 percent to Australian GDP in 2018-19, within a long-run range between 13 and 15 percent of GDP since 2006-07. The sixteen built environment industries share of total employment was 16.9 percent, and its long-run range was between 16.5 and 17.5 percent of total employment.

Figure 6.

Figure 7.

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.