Analyzing Inflation Transmission in Construction Labor Wages through Econometrics-Based Network Modeling

Wage changes in specific occupations often trigger shifts in other related occupations due to their interdependent nature and market dynamics. Recent global events and inflationary pressures have notably increased construction labor costs, yet research on how wages in construction occupations are affected remains limited. This study addresses this gap by first collecting construction wage data and performing Granger causality testing to identify significant interdependencies. Using the corresponding vector autoregressive coefficients, a network model was developed to map inflation transmission across various wages in the construction sector. A network analysis was conducted to identify occupations with high capacity to transmit or susceptibility to receive wage fluctuations. The results highlight how occupations performing earlier-stage tasks, such as construction laborers and carpenters, transmit wage fluctuations to occupations in later construction stages. Ultimately, this paper provides practitioners with valuable insights to proactively manage and plan for rising labor costs.