Impact of urbanization on perceived labor cost changes in manufacturing industries in Hebei of China

Abstract

The past five decades have witnessed unprecedented economic growth in China. One of the major elements that accelerated this rapid economic growth, especially in manufacturing sectors, is the relatively low labor cost of China. However, labor cost in manufacturing industries of China continues to rise in recent years. Therefore, this study was designed to investigate the rising labor cost from a new perspective based on urbanization as well as its impact on the change of labor cost. A sequential exploratory design as a mixed method was used. Initially, qualitative data were collected and analyzed, and the results were used to develop the survey questionnaire. The qualitative data comprised document reviews, interviews and expert opinion assessments on the components of the labor cost and the impact factors of urbanization on labor cost. Quantitative data were collected from a survey of 200 manufacturing industries in Hebei province. The results of the qualitative data analysis showed that the major components of labor cost consist of social insurance, wage, job training and welfare costs. Social insurance has the most and fastest rise in cost. In addition, six factors of urbanization proposed by the experts are policy factor, human capital investment factor, living costs factor, population factor, economic factor, and individual factor. However, based on the quantitative data analysis, only the first three factors are statistically significant. From the study, it is concluded that there are three implications: model development to address the theoretical contribution, recommendations for the government on policy making and living cost control, and proposals for the employers to minimize negative impact of increasing labor cost.