Construction workers are seeing the largest pay gains in the U.S. labor market, but there’s a catch. It isn’t by staying put.

New data from ADP Research shows that in January, construction workers who changed employers earned a 6.6% pay premium compared to job-stayers: the highest of any industry. The finding highlights an increasingly competitive labor environment across the trades, where skilled workers (particularly in plumbing, HVAC and electrical) hold significant leverage.

While wage growth has been a consistent topic across industries in recent years, construction’s position at the top of the list signals something deeper: a structural imbalance between labor supply and demand that continues to reshape how contractors hire, retain and develop talent.

Tightening labor pool meets rising demand

At the core of the issue is a shrinking pipeline of experienced workers. “Construction’s industry-high wage premium is likely driven partially by a skilled labor pipeline that hasn’t been able to keep up with demand,” says Kit Dickinson, industry executive at ADP.

That imbalance is being accelerated by demographic shifts. As seasoned tradespeople retire or leave the workforce, the industry is left competing for a smaller pool of experienced labor. ADP Research data shows that the median age across key trades—including HVAC technicians, electricians, plumbers and carpenters—has dropped by as much as five years since 2020.

At first glance, a younger workforce might suggest renewed interest in the trades. But in practice, it also reflects a loss of institutional knowledge and a growing gap in high-skill, high-experience roles.

“With so many experienced workers retiring, there’s more competition for the remaining skilled workforce,” Dickinson explains. “That competition is showing up directly in wage growth.” For contractors, that means higher labor costs not just at the entry level, but especially for licensed and experienced professionals who can keep projects moving.

For plumbing and mechanical contractors, the implications are particularly significant. Unlike some segments of construction, these trades rely heavily on specialized skills, licensing requirements and technical expertise that can take years to develop. That makes replacing talent especially difficult and costly.

“The talent landscape for specialized workers in plumbing and construction is likely to see continued heightened competition as skilled workers become increasingly rare,” Dickinson says. In practical terms, this means contractors are often competing not just with local firms, but with larger regional or national players, private equity-backed companies and even adjacent industries seeking similar skill sets. And, with job-switching delivering higher pay increases than staying put, workers have a clear financial incentive to explore new opportunities.

While higher wages can help attract talent, Dickinson emphasizes that retention will depend just as much — if not more — on internal development. “Employers should use this moment to look internally,” he says. “Audit where skills gaps exist and invest in upskilling to help junior employees grow into more advanced roles.”

That opportunity is significant. According to ADP Research, only 25% of North American construction workers feel confident they have the skills to advance in their careers. For contractors, that represents both a challenge and a strategic advantage. Companies that invest in training programs, mentorship and career pathways may be able to reduce reliance on external hiring while building a more stable, engaged workforce.

For plumbing and mechanical firms, that could include:

• Structured apprenticeship programs

• Cross-training across service and installation roles

• Leadership development for foremen and project managers

In a market where experienced talent is scarce, developing it internally might be the most sustainable long-term approach.

Compensation is evolving beyond base pay

While wages remain a central factor, Dickinson notes that compensation alone is no longer enough to differentiate employers. “As part of building a multigenerational workforce, employers should assess their benefits programs to meet the needs of different groups,” he says.

Today’s workforce spans a wide range of priorities. Younger employees may place higher value on:

• Flexible schedules

• Mental health resources

• Work-life balance

• Meanwhile, more tenured workers often prioritize:

• Retirement benefits such as 401(k) matching

• Comprehensive health insurance

• Long-term stability

“For plumbing and mechanical organizations to stay competitive in a hot labor market, getting benefits right will be a key strategy,” Dickinson adds. This shift towards total rewards packages rather than base wages alone is becoming increasingly important as companies compete for both new entrants and experienced professionals.

While the 6.6% job-switching premium is a headline figure, broader wage trends reinforce the same story. ADP reports that year-over-year wage growth across construction reached 4.7% in February 2026, with skilled trades already outpacing national averages in recent years.

However, wage growth is not evenly distributed.

“Workers with specialized or critical skills may hold more leverage in pay discussions,” Dickinson says. “When those positions remain unfilled, entire projects can stall.” This places a premium on roles like licensed plumbers and HVAC technicians. When these positions are vacant, the ripple effects can include delayed timelines, increased costs and strained customer relationships—further intensifying competition for qualified workers.

Retention strategies move to the forefront

If job-switching continues to deliver higher pay gains than internal raises, contractors will likely face increasing pressure to rethink retention strategies. “Employers that treat this moment as a temporary trend will miss a significant opportunity to prepare their workplaces for the future,” Dickinson warns. Instead, he points to the need for a more comprehensive approach to compensation and engagement.

“One place to start is by ensuring their organization is keeping pace from a pay point of view through compensation benchmarking tools,” Dickinson said. “This may include retooling total compensation to include things like profit-sharing agreements, equipment stipends, and modular benefit programs.”

But beyond compensation, Dickinson emphasizes the importance of culture.

“For today’s workforce, retention is more than just an HR strategy,” he says. “The qualities that make people stay must be built into your culture by investing in your existing workforce to create a foundation for future growth.”

That includes clear communication, career development opportunities and a sense of long-term investment in employees, not just short-term pay adjustments.

The data suggests that construction’s wage growth — and the premium tied to job switching — is not a short-lived spike, but part of a broader transformation in the labor market. Demographic changes, evolving worker expectations and sustained demand for skilled labor are converging to create a new competitive landscape; one where workers have more choice and mobility than ever before. For plumbing and mechanical contractors, that means competing on multiple fronts: pay and benefits, training and advancement opportunities and workplace culture and stability.

In this environment, simply matching wages may not be enough.

The firms that succeed will be those that take a more holistic approach; investing in people not just to fill immediate roles, but to build a workforce capable of growing with the business. In a market where switching jobs delivers the biggest rewards, the challenge for contractors is clear: create enough value internally that workers see a future worth staying for.