Japan shows America has no construction “worker shortage”, just a productivity problem

By Matthew C Klein May 19, 2017 6:30 AM EST

This story was shared from this site

If you didn’t know any better, you’d probably think Japan builds far fewer houses than America, if for no other reason than the fact that Japan’s population is less than 40 per cent the size of America’s. You would, however, be wrong:

Since 1992, America has built just 14 per cent more homes than Japan, despite the huge difference in population and the dramatic ageing of Japanese society. The chart below shows the ratio of the number of housing starts relative to the number of people in the prime home-buying age cohort of 25-54 in both countries:

With the brief exception of America’s housing bubble, Japan has consistently built more than twice as many houses per potential homebuyer as the US.

My colleague Robin Harding has elegantly explained that much of the robust demand for new housing can be attributed to the Japanese preference for tearing down and replacing old homes, with the expectation those too will be replaced in short order. He also noted that liberal land regulations have meant that the influx of younger people from the countryside to the big cities was easily accommodated with additional housing supply, unlike much of the Anglosphere.

Those who believe that demographics create binding constraints on economic activity are probably confused by this narrative. Just how did Japan manage to find enough construction workers to actually build all those new homes?

Being outside and lifting heavy objects is hard and generally not that remunerative. Surely an aging society without a reservoir of cheap (and often illegal) immigrant labour would have fewer builders as a share of the labour force than a relatively youthful and foreigner-friendly country such as the US. Unsurprisingly, there has been a glut of articles over the past few years warning of “labour shortages” due to the combination of

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