Quantifying Relationship between Pre-Disaster Construction Market Conditions and Post-Disaster Construction Labor Wage Fluctuations in the Gulf Coast Construction Industry

The United States is one of the top five countries in the world prone to natural hazards. Natural hazards could have a significant impact on the construction industry. In a large-scale disaster, labor cost fluctuation is known to be an important driving factor in the construction cost increases. Labor cost fluctuation could increase the reconstruction cost by 20 to 50 percent after a large-scale disaster. Although the effect of disaster's scale on construction cost has been determined in the literature, the role of construction market conditions on the post-disaster construction labor wage fluctuations has not been studied. The objective of this study is to quantify the relationship between pre-disaster construction market conditions and post-disaster construction labor wage fluctuations in the construction industry considering time dependency, using panel data models. Four commonly used construction market indicators are used within panel data models to explore this relationship. Historical county-level data of 532 counties impacted by weather-related disasters (flood, tornado, and storm) from 2014 to 2017 are collected to conduct the analysis. This study showed that there is a significant relationship between the construction employment level, construction contribution, and average weekly wage with post-disaster construction labor wage fluctuations. The results indicated that both, construction contribution, and average weekly wage have a negative effect on the labor wage increase after a natural disaster. This study helps construction companies, property owners, regulators, insurers, and cost engineers to have a better understanding of post-disaster construction cost variations aftermath of a natural disaster.