Construction wage growth is easing, and for once that’s a sign of health, not trouble. Employer compensation costs in the industry rose 3.2% year over year in the first quarter of 2026, down from 4.0% at the end of 2025. Pay is still climbing. It’s just climbing slower.
What the construction wage data shows
Average hourly earnings for all construction employees hit $40.97 as of April, with production and nonsupervisory workers at $38.73. The deceleration matters because runaway pay growth is usually a symptom of a market that can’t find people at any price. When raises cool toward a steadier 3% to 4%, it generally means the bidding war for bodies has lost some heat.
The union premium tells a similar story. Union workers still out-earn nonunion peers by roughly 40%, but that gap has narrowed from about 46% a year ago. Nonunion wages are catching up as contractors compete across the board.
The shortage didn’t go anywhere
None of this means the labor crunch is solved. The industry still pegs its 2026 need at around 499,000 additional workers, and the demographic math, an aging workforce and thin replacement pipeline, hasn’t changed. Tighter immigration enforcement is squeezing crews further, a pressure we covered when the labor shortage deepened earlier this year.
So contractors are shifting tactics. Less reliance on eye-popping base-pay jumps, more on bonuses, retention plans, and training their own people instead of poaching them.
Cooling wage growth isn’t the labor problem ending. It’s the market learning to live with it.