s the demand side. the supply side has been pushing in the same direction — towards tighter housing markets and more expensive shelter. u. s. housing supply has probably been more constrained lately than at any time since the end of world war ii. one estimate is that the current growth in the supply of new housing units is about 100, 000 less per year that would be needed to support trend increases in demand from household formation and replacement of depreciating units. 7 supply adjusts to changes in the economy more slowly than demand because of the time it takes to plan and build. with workers at home and supply bottlenecks, there were pandemic - related drops in the production and importation of many construction materials. these supply shortages contributed to skyrocketing input prices. in january 2022, lumber prices included in the producer price index were 92 percent higher than the 2019 average. even with increased materials costs, suppliers have been unable to keep up with demand. the volume of lumber now being sold is more than 150 percent higher than last august and is similarly larger than the average volume over the previous ten years. 8 labor is also a key input in home construction. the supply of construction labor, like other sectors, has been held down by pandemic - specific issues like early retirement. one measure of labor market tightness for the construction industry increased steadily from 2010 to 2019 and then in 2021 was more than double the level recorded during the construction boom of the mid - 2000s. 9 jim parrott and mark zandi, “ overcoming the nation ’ s daunting housing supply shortage, ” https : / / www. urban. org / research / publication / overcoming - nations - daunting - housing - supply - shortage see trading economics ( 2022 ), “ lumber, ” webpage, https : / / tradingeconomics. com / commodity / lumber. this measure of labor market tightness is the job openings rate divided by the unemployment rate. - 9local land use regulations have also played a role in constraining housing supply over the past several decades. probably not by accident, these regulations have tended to be more restrictive in areas with high housing demand. there has been a growing public debate about these restrictions on local home building, not just at the local level, but among governors and state legislatures. while some local regulations have been changed to allow more housing construction in high demand areas, the effects will take time, and it remains to be seen whether

as important as keeping unit labour costs under control. portugal ’ s apparent inability to compete as successfully as ireland is indeed largely attributable to relatively rigid product and market regulation ; insufficiently market - friendly policies ; relatively low levels of educational attainment, of r & d expenditure and of information technology use ; and not enough wage and price flexibility. these contrasting outcomes clearly demonstrate that joining the euro area does not on its own provide a guarantee of sustainable growth and that the full benefits of monetary union can only be enjoyed if a country adopts appropriate economic structures and policies. bridging the income gap with the euro area in a maltese context the pursuit of excellence implicit in the irish model requires in the first place a change in mindsets and behaviour that would allow us to arrive first at a common diagnosis of the obstacles to faster growth, and then at an equally consensual identification l. bini - smaghi, real and nominal convergence : policy challenges, speech delivered at the conference on european economic integration 2007 – currency and competitiveness, oesterreichische nationalbank, vienna, 20 november 2007. of the means to overcome them. the ability to achieve a social compact was incidentally another no less vital ingredient of the irish success story. in the absence of a consensus, however, strong leadership would be required in order to explain the need for hard measures to the population and to isolate vested interests standing in the way of the needed reforms. whatever the approach adopted, maximizing the benefits of malta ’ s participation in monetary union will require the removal of the remaining impediments to growth. in the public sector, fiscal consolidation must henceforth involve a greater emphasis on expenditure reduction, particularly in view of rising pressures caused by aging - related factors such as pension and health care costs, and on securing more “ value for money ” and greater accountability in the use of public funds. the provision of free public goods and services regardless of the beneficiary ’ s ability to pay needs to be reassessed as it leads to waste and to a higher tax burden, besides being inequitable. the same applies to subsidies, whether implicit or explicit. the resulting distortion of incentives and inefficiencies is both unsustainable and incompatible with the fiscal discipline required in a monetary union. an important contribution to enhancing the economy ’ s competitiveness can also be made by new forms of employment security and by further improvements in labour market flexibility. with regard to the former,