What's Happening?
A report from accounting and tax advisory firm Baker Tilly indicates that construction salary growth slowed in 2025 as contractors pulled back from aggressive compensation strategies due to market uncertainty.
Despite this slowdown, projections for wage growth in 2026 and an increase in merit pay and cash incentives suggest expectations for a rise in construction project volume and labor demand. The report also highlights the impact of President Trump's immigration policy, which could affect the supply of construction workers and demand for certain projects. The report surveyed 267 firms across several states, revealing that immigrants constitute a significant portion of craft workers, particularly in California and Texas.
Why It's Important?
The slowdown in construction salary growth reflects broader economic uncertainties and the impact of immigration policies on the labor market. As immigration enforcement intensifies, the availability of construction workers may decrease, potentially affecting project timelines and costs. This situation could lead to increased competition for skilled labor, driving up wages and influencing project budgets. Companies may need to adopt more comprehensive workforce planning strategies, including deferred compensation benefits, to retain key personnel and ensure project continuity. The evolving compensation strategies indicate a shift towards stabilizing the job market and adapting to changing economic conditions.
What's Next?
Construction firms are likely to continue adjusting their compensation strategies to align with market conditions and labor availability. As immigration policies evolve, companies may face challenges in maintaining a stable workforce, prompting them to explore alternative recruitment and retention strategies. The report suggests that employers should adopt a holistic approach to workforce planning, considering factors such as culture, employee engagement, and long-term incentives. Deferred compensation plans may become more prevalent as a tool for retention and succession planning, particularly for essential project managers and executives.
Beyond the Headlines
The broader implications of these developments include potential shifts in the construction industry's workforce demographics and project planning strategies. As companies navigate the complexities of immigration policy and market uncertainty, they may need to innovate in workforce management and project execution. The emphasis on deferred compensation and holistic workforce planning could lead to long-term changes in how construction firms attract and retain talent, ultimately impacting industry standards and practices.
