This audio is automatically generated. Please let us know if you have any comments.
Dive brief:
- Construction wage growth slowed in 2025, as contractors pulled back from aggressive compensation strategies amid market uncertainty, according to a report by accounting and tax advisory firm Baker Tilly.
- However, wage growth projections to 2026 and a growing number of companies offering merit pay and cash incentives hint at expectations for increased construction project volume and more labor demand next year, the report concludes.
- Meanwhile, the impact of President Donald Trump’s immigration policy It could not only affect the supply of construction workers, but also the demand for some projects, according to the report.
Diving knowledge:
the strict repression of immigration policy under the Trump administration has resulted in broader enforcement, prosecution and mass deportations, which is just beginning to have an impact on workforce and projects.
“By mid-2025, net immigration had fallen significantly, and this shift is likely to have profound effects on both the supply of construction workers and the demand for many types of structures: housing, schools, shops, and more,” the report says.
The report surveyed 267 companies in Washington state, Idaho, Montana, Oregon, California, Arizona and Texas, as well as 25 companies in other unlisted regions. The report, published on Tuesday, comes from accounting firm Moss Adams, which merged with Baker Tilly this year
In many of the states surveyed, immigrants made up a significant portion of craft workers, the report found. In California and Texas, more than half of all artisans were immigrants, while 38% of artisans in Arizona were immigrants.
Between August 2023 and August 2024, construction employment rose 2.5%, the report said, outpacing the 1.2% growth in total nonfarm payroll employment. By August 2025, however, employment growth had slowed to 0.7% annually, slower than overall employment.
These data indicate stabilization of wage growth, the authors said. After years of wage increases driven by labor shortages and inflation, the pace of wage growth began to moderate in 2024 and continued to decline in 2025. The report theorizes that the tight labor market is beginning to stabilize.
The majority of companies surveyed, 65%, indicated that they did not change their pay strategy from 2024 to 2025.
Amidst this stabilization, some compensation strategies declined in use from last year. For example, wage increases based on cost-of-living adjustments decreased by 7% compared to 2024; the number of companies that said they used these adjustments to attract and retain talent also fell by 3%. This year, 79% of companies surveyed offered paid vacation to all employees, down 7% from a year ago.
“Many companies continue to take a more cautious approach to compensation amid market uncertainty,” Brian Kassalen, principal and construction industry leader at Baker Tilly, said in the statement. “Aggressive compensation strategies have slowed over the past year, indicating that contractors are not looking to attract talent as much as previous years suggested.”
Looking ahead, the authors suggest that construction employers take a “more holistic view of workforce planning.”
“Compensation is only one piece of a broader strategy that should also consider culture, employee engagement and long-term incentives,” the authors wrote.
One example the authors encouraged more employees to use was a deferred compensation benefit, or delaying payment until a later date, sometimes until retirement, such as through a 401(k) plan. Doing so defers income tax until the funds are distributed.
“In particular, deferred compensation remains an underutilized but powerful tool for retention and succession planning,” the authors wrote, “especially when targeting key leaders such as key project managers and executives.”
