Comparative analysis of regional labor cost variations in China’s construction industry: Panel data modeling and analysis

Abstract

Labour cost estimation, control, and regulations are of great importance to the final success of construction project, and sustainable development of construction industry. Over the recent years, the affordability and availability of construction workforce, underpinned by rich labour resources across the Mainland China, has gradually become the history and exerted ripple effects on the construction manpower recruitment, cost management, and even industry development. However, little research has been found with focus on labour cost fluctuations at regional level in China. This study attempts to explore the major factors affecting regional construction labour cost variations over the past two decades, from 1995 to 2015. Panel data analysis, and time series econometric modelling, is thereby applied to identify critical determinants of construction labour cost fluctuations across three regions of different levels of economic development, i.e. underdeveloped west region, developing central region, and developed east region, within Mainland China's construction industry. Empirical results indicate that gross domestic product (GDP), unemployment rate, construction labour productivity, construction technical equipment ratio, and construction profit rate are five key factors determining the variations of unit labour cost in Mainland China's construction industry. GDP, construction labour productivity and unemployment rate are three common factors that affect regional construction labour cost; Besides, construction profit rate is found to be another dominant determinant of construction labour cost in west region, while construction technical equipment ratio acts as a significant but negative factor in central and east regions, with incremental effects towards construction unit labour cost from west region to central region, then east region. For the evolving construction market, these principal findings provide valuable insights for construction enterprises to formulate forward-looking market strategies, and for governments to fine tune economic policies.