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Stephen Smith tells the story of how he lived in a walk-up building in New York City–that is, no elevator–which seemed like a good idea until he developed a health problem that made walking up stairs difficult.
For a while, he viewed it as just one of those inescapable problems. But then he visited relatives in Romania, and talked to a friend in Rome, and saw that small apartment buildings in other countries poorer than the United States often had one or more elevators. What was going on? Smith started a Center for Building in North America, and has a report out on “Elevators” (Center for Building in North America, May 2024). I found out about the report from a short overview essay he wrote for the New York Times (“The American Elevator Explains Why Housing Costs Have Skyrocketed,” July 8, 2024).
In case you don’t feel like reading 100+ pages of international comparisons of elevators, here are a few high points. Consider elevators per capita, as shown by the bars in this figure (the narrow lines show total elevators for each country):
One might hypothesize that the US has fewer elevators because it has more single-family homes, but this doesn’t come close to explaining the size of the differences. Smith writes:
Single-family houses aside, the United States has over 32 million apartments, while Spain has fewer than 13 million apartments but about the same number of elevators. The U.S. has 40 percent fewer elevators per capita than the Netherlands, despite 30 percent of the American housing stock being in multifamily dwellings (and 19 percent in buildings with at least 10 units), compared to a total multifamily housing share of just 21 percent in the Netherlands. New York City has roughly the same population as Switzerland and even more New Yorkers live in apartment buildings than Swiss residents do, but New York only has half the number of passenger elevators. No matter how you slice the numbers, America has fallen behind on elevators.
Why is that? Well, at the most basic level, elevators cost a lot more in the United States. Smith’s estimate is that it costs about “three times as much to install an elevator as developers in high-income peer countries in Europe and Asia.” This difference can be broken down into differences in the amount of labor needed and the cost of the components:
Labor is the major cost in installing and maintaining elevators, and basic rules of thumb suggest that it takes roughly twice as long to install an elevator in a new building in the United States as in Europe. In the U.S., the variable length portion of an installation requires around one week per floor of labor from a full-time, two-person crew, plus perhaps some extra time for fixed components that don’t vary according to height. In Western Europe, typically elevators are installed by the same crews at a rate of at least two stops per week.
In turn, the higher labor costs are driven by other factors. Elevators in smaller and mid-sized buildings other high-income countries commonly have smaller cabins, enough to hold someone with a wheelchair and another person pushing them, but not necessarily enough to roll a hospital gurney in and out.
Smith also emphasizes that the building code rule governing elevators vary across states, and across cities within states, making it hard for economies of scale in production to develop. In addition, competition among companies in the elevator industry is harder, because the best company to deal with a specialized elevator installed earlier is the company that installed it originally–and switching to another competitor would have high costs.
In addition: “The International Union of Elevator Constructors is one of the most powerful construction unions in North America, and it resists trends like preassembly and prefabrication, creating more work and causing further tightening in the labor market.” In contrast, many high-income countries across Europe have government-sponsored schools of technical education that provide a steady supply of elevator construction workers. Smith writes:
Contrary to stereotypes about organized labor in the United States as compared to Europe, the elevator sector in the U.S. is heavily unionized, and organized labor exerts much greater power over the process of installing and maintaining elevators. The binational International Union of Elevator Constructors (IUEC) represents most workers in the field in the United States and Canada. The union handles recruitment into the industry, makes a strong and successful effort to limit entry into the field, and limits the ability of firms to use new technology and factory production to streamline the installation and maintenance of elevators in North America. The result is higher compensation, more work for citizens and little opportunity for immigrants, and less efficient work overall, contributing to high final costs. The labor shortage is, paradoxically, somewhat of a self-reinforcing mechanism, strengthening the hand of the IUEC at the bargaining table to create more work through prohibitions on efficiencies in the installation process in particular.
In short, the Big Four elevator companies (Otis, Schindler, Thyssenkrupp, and KONE) have no reason to advocate for big changes in the market, nor does the dominant union. Instead, they have incentives to advocate for additional layers of building rules to be added at the state and city level.
The global trend in elevator regulation has been for countries outside of Europe to adopt European elevator safety norms – a trend which North America has so far resisted. There are not significant differences between the European and North American elevator safety rules (and in fact as far back as the 1980s, before a lot of global harmonization had occurred, more than three-quarters of the rules in national standards were already the same), but the mere existence of separate codes and standards, which are not interchangeable when it comes to manufacturer certification, drives up costs. The cost consequences of these variations in codes and standards come in two forms: costs driven by different certification processes and separate markets for parts, and costs driven by actual differences in products. In the first category, divergences in North America from global, European-based norms lead to a much smaller North American market for parts. This small North American elevator component market can be very profitable for those who manage to enter it, but entry is difficult for small- and mid-sized foreign firms given the greatly increased cost of and headaches involved in certifying parts to a unique set of rules that only apply to the United States and Canada, which make up a small share of the global elevator market. … Beyond the differences between North American and global standards, there is an unusual amount of intra-country variation in technical rules in the United States compared to nations abroad. This variation between U.S. states can lead to requirements and complexity that drive costs up even further.
There’s some irony in America’s elevator problem. Because of the Americans with Disabilities Act passed back in 1990, the US has far more ramps, automatic door openers, and accessibility in public buildings than is common in many other countries. But when it comes to medium-sized apartments, up to five and even six stories, buildings without elevators are common and accessibility concerns apparently go out the window in favor of rules set by Big Elevator and its union. After Smith’s dissection of the elevator market, one wonders what other elements of the high price of housing in the United States might be accounted for by rules and regulations operating unseen and unevaluated.
Timothy Taylor is an American economist. He is managing editor of the Journal of Economic Perspectives, a quarterly academic journal produced at Macalester College and published by the American Economic Association. Taylor received his Bachelor of Arts degree from Haverford College and a master's degree in economics from Stanford University. At Stanford, he was winner of the award for excellent teaching in a large class (more than 30 students) given by the Associated Students of Stanford University. At Minnesota, he was named a Distinguished Lecturer by the Department of Economics and voted Teacher of the Year by the master's degree students at the Hubert H. Humphrey Institute of Public Affairs. Taylor has been a guest speaker for groups of teachers of high school economics, visiting diplomats from eastern Europe, talk-radio shows, and community groups. From 1989 to 1997, Professor Taylor wrote an economics opinion column for the San Jose Mercury-News. He has published multiple lectures on economics through The Teaching Company. With Rudolph Penner and Isabel Sawhill, he is co-author of Updating America's Social Contract (2000), whose first chapter provided an early radical centrist perspective, "An Agenda for the Radical Middle". Taylor is also the author of The Instant Economist: Everything You Need to Know About How the Economy Works, published by the Penguin Group in 2012. The fourth edition of Taylor's Principles of Economics textbook was published by Textbook Media in 2017.
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