Dive Brief:
- Construction salary growth slowed in 2025 as contractors pulled back from aggressive compensation strategies amid market uncertainty, according to a report from accounting and tax advisory firm Baker Tilly.
- Nonetheless, wage growth projections for 2026 and a rising number of companies offering merit pay and cash incentives hint at expectations for an increase in construction project volume and more labor demand in the coming year, the report concluded.
- Meanwhile, the impact from President Donald Trump’s immigration policy could not only impact the supply of construction workers, but also demand for some projects, the report said.
Dive Insight:
The strict immigration policy crackdown under Trump’s administration has led to broader enforcement, processing and mass deportations, which is only just beginning to have an impact on staffing and projects.
“By mid-2025, net immigration had fallen significantly, and this turnabout is likely to have profound effects on both the supply of construction workers and the demand for many types of structures—housing, schools, stores, and more,” the report reads.
The report surveyed 267 firms from Washington state, Idaho, Montana, Oregon, California, Arizona and Texas, as well as 25 firms from other, unlisted regions. The report, released Tuesday, originated from accounting firm Moss Adams, which merged with Baker Tilly this year.
In many of the surveyed states, immigrants made up a major share of craft workers, the report found. In California and Texas, over half of all craft workers were immigrants, while 38% of craft workers in Arizona were immigrants.
Between August 2023 and August 2024, construction employment increased 2.5%, per the report, 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.
That data hints at stabilization in wage growth, the authors said. After years of wage increases driven by labor shortages and inflation, the pace of salary growth began moderating in 2024 and continued to ease in 2025. The report theorizes that the tight labor market is beginning to stabilize.
The majority of surveyed firms, 65%, indicated they did not change their salary strategy from 2024 to 2025.
Amid that stabilization, some compensation strategies decreased in use from last year. For example, pay bumps based on cost-of-living adjustments declined 7% compared with 2024; the number of companies that said they used such adjustments to attract and retain talent also fell 3%. This year, 79% of surveyed companies offered paid holidays to all employees, a 7% decrease from a year ago.
“Many companies are continuing to take a more cautious approach to compensation amid market uncertainty,” said Brian Kassalen, principal and construction industry leader at Baker Tilly, in the release. “Aggressive compensation strategies have slowed down in the past year, signaling that contractors are not looking to attract talent as much as previous years suggested.”
Going forward, the authors suggest that construction employers take a more “holistic view of workforce planning.”
“Compensation is just one piece of a broader strategy that should also account for 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 via a 401(k) plan. Doing so postpones income tax until the funds are doled out.
“In particular, deferred compensation remains an underutilized yet powerful tool for retention and succession planning,” the authors wrote, “especially when targeted toward key leaders such as essential project managers and executives.”
