The Effects of Foreign Labor on Labor Productivity in Construction Industries

Abstract

The focus of this study is the demand for foreign labor in the construction industry. While labor productivity contributes significantly to the economic growth of the country but the trend has decreased over recent years. Hence, this paper aims to identify whether the increase in the labor force or other factor inputs contributes significantly to the labor capacity of construction projects in Malaysia. Results show the relationship between labor and other factors related to employment productivity in the construction industry of Malaysia from the year of 1986 to 2020. Factor inputs consist of variables such as capital, local labor, and foreign labor. The research objective is to identify the effects of labor force and other factor inputs on labor productivity. This study employs the Cobb-Douglas production function. The findings show that there is a significant relationship whereby the financial assets have a significant relationship, whilst the local and foreign workforce has a negative relationship in terms of their impact on labor productivity. These findings provide some scientific evidence for improving the project performance of the construction industry in Malaysia. It will be useful in identifying which factor inputs have a huge impact on construction labor productivity.