Analysis of Labor Resources Wastage in China’s Real Estate Brokerage: From the Perspective of Opportunity Costs

Abstract

Real estate brokerage has experienced the rapid growth over the past two decades in China, with a significant increase of employees. In particular, in the megacities like Beijing, the growth of employees exceeds the growth of real estate transaction volume. This may lead to the wastage of labor resources. In this regard, the optimal employee size (OES) in China’s real estate brokerage is proposed from the perspective of opportunity costs, which include both under-size and over-size costs. In the proposed OES models, a real estate brokerage firm makes the optimal decisions of number of employees by minimizing expected opportunity costs. In addition, an iterative algorithm is employed to obtain the optimal employee size in different scenarios. The result reveals that high profit gained from the business does attract more employees than what is needed. By addressing various scenarios based on the game model, it is found that asymmetric competition, the increase of market participants, and demand fluctuations also contribute to the labor resources wastage in real estate brokerage industry. The theoretical analysis results are verified by taking Beijing as the case study. Finally, suggestions for reducing labor resources wastage in real estate brokerage of China are provided.